7 Dumb Money-Saving Moves That Seem Smart

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Dumb money
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Here at Money Talks News, we spend a lot of time suggesting ways to save on every purchase, put money away for a rainy day and build a nest egg for retirement.

So, we appreciate that our readers are zealous about saving. But sometimes, what appears to be a smart money-saving effort can backfire. Following are some ways to avoid dumb mistakes that look smart at first glance.

1. Socking away more than you can afford

Man stacking coins at eye-level.
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It’s easy to invest in your 401(k), and that’s generally a great idea. As we have often written, if your employer will match your contribution up to a certain level, you should try to contribute at least to that level — or you’ll be leaving free money on the table.

But in your enthusiasm, don’t deprive yourself of enough cash to cover expenses. Once your money is in your 401(k) — or term CDs, an IRA or similar investments — you usually can’t get it out without paying a penalty. In the event of an emergency, you might have to cover the unpleasant surprise with a credit card. Or, you might be forced into making a late payment or bouncing a check. All of those are expensive ways to do business.

So, be realistic about your budget, and create an emergency fund that you can access without cost. Then, make consistent contributions to your retirement fund and other longer-term investments.

2. Getting crazy about couponing

Pile of coupons.
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There are more ways than ever to save with coupons and cash-back websites. We often write about these options, like Coupons.com, Rakuten (formerly called Ebates), Mr.Rebates, Groupon and Living Social.

Using these tools can save you a bundle over time, and we do encourage you to use them — but not to buy things you don’t need.

The same goes for buying items in bulk. It can save you money, but only if you will readily use the items you buy. So, before you pounce on a discount, ask yourself whether you really need to make the purchase at all.

3. Keeping a high health insurance deductible

Middle aged man looking out window, with pensive expression.
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Taking on a high health insurance deductible can lower your monthly premiums and qualify you for a health savings account. For many policyholders, this is the right approach, particularly if you are healthy.

However, people with a high deductible often are reluctant to seek care when they are sick or injured because they fear substantial out-of-pocket costs. So, don’t automatically opt for the cheapest monthly premium and its accompanying high deductible. Consider your current health and any issues that you may need to address in the coming year.

A high deductible can reduce your premium, but you might end up paying even more in out-of-pocket costs if you see the doctor often or require other ongoing health services.

4. Skipping some types of insurance

Upset man by smashed car.
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We’ve told you about the many insurance products that aren’t worth your money. But there are many others that are vital for your financial security.

Everyone knows you should have auto and homeowners insurance. But other types of insurance — such as rental insurance, life insurance and disability insurance — also can be critical to your financial well-being.

Saving a few bucks by not buying disability insurance seems wise — until you are injured and cannot work. Know your financial situation, then insure yourself accordingly.

5. Leasing a car

Hands signing paperwork, with keys and a credit card.
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Many drivers like to have a new car every two to three years. And leasing a car is generally cheaper than buying a new one every few years. But there are a number of ways that leasing can end up costing you more money.

If the car is returned in less-than-pristine condition or has been driven more than the agreed-upon miles, you may face sizable penalties and fees. Carefully read and analyze the lease agreement before you commit.

6. Transferring balances to a 0% interest credit card

Credit cards close up.
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Are you deeply in debt? If so, it can be tempting to transfer your debt from a high-interest card to another card offering a 0% deal.

This can be a good way to save money, but there are drawbacks. For starters, you will typically pay a transfer fee on the amount you are moving to the new card. And, if you don’t pay off the balance on the new card by the time the 0% interest expires — say, 12 months — you will again be saddled with interest.

Perhaps you will also keep spending with the card, adding to the balance you transferred. You may face other pitfalls, too, including penalties if you miss a payment. In short, it’s easy to transfer the money to a new card but end up in worse financial shape than when you started.

7. Signing up for a long-term health club membership

Aerobic exercise class.
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Wanting to exercise is a good thing. However, it’s easy to let your enthusiasm get the best of you. If you sign a long-term gym contract to save money, will you really continue to work out throughout the entire length of the agreement? If not, you’ve potentially just made a costly error.

Before committing, find out if you can obtain a free trial or special short-term rate. It will probably be higher than a per-month rate in a long-term contract, but it’s worth the cost for the short term. Ultimately, if you decide to join as a long-term member, the Federal Trade Commission suggests you carefully read the fine print on cancellation policies, extra costs and written guarantees.

What missteps have you made when trying to save money? Share with us in comments below or on our Facebook page.

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