Stop Making These 10 Dumb Money Moves

You’re no dummy, right?

Then you need to stop making dumb money moves. The chances are good that you are making at least a couple.

Read on to learn about some of the dumb, but common, money moves people make every day — and how to avoid them.

1. Carrying a credit card balance when you have money in the bank

Credit cards are powerful tools and can give you some pretty nifty rewards, but it’s dumb, dumb, dumb to carry a balance. It’s even dumber to carry a balance when you have a lot of money in the bank.

Your savings account is making about what, 0.1% interest? And your credit card interest rate is probably at least 10% to 20%, right? It makes no sense to leave money languishing in savings when it could be helping you avoid spending on credit card interest.

Of course, be careful to leave yourself an emergency cushion before tapping those savings.

Here’s help:

• “9 Tips for Starting an Emergency Fund Today” explains how to set and reach an emergency fund goal.
• Confused about how to straighten out your finances? “4 Steps to Prepare for an Income Emergency” tells how to set priorities, especially amid financial stress.
• Find lower credit card rates and higher savings and CD rates at the Money Talks News Solution Center.

2. Going into debt for purchases that lose value

Buying a house with a mortgage can be a smart financial move under the right circumstances. Why? Because you can often count on the home appreciating (gaining value) over time.

But think about your credit card debt. What did you buy with that money? Do you still have those purchases? If so, could you sell them for what you paid?

Rather than take on debt and outlandish interest payments for items that quickly become worthless, save up and pay cash instead.

Here’s help:

• Cut unnecessary to spend free up cash. Here are “21 Items to Cut From Your Budget That You Won’t Even Miss.”
• Avoid debt by getting a handle on spending. We like this tool: “An Easy Way to Track Your Spending and Build Your Savings.”

3. Buying new when you could buy used

Speaking of spending and debt, let’s talk about buying new stuff all the time. This dumb money move can cost you oodles of cash.

Certainly, there are some things we don’t recommend buying used. But for almost everything else, from clothes to cars, you can usually find used versions nearly as good as new but for a fraction of the price.

Here’s help:

• Read “You Should Never Buy These 12 Things New.”

4. Spending on stuff you rarely use

A lot of hard-earned money flies out the window when we buy new goods that we use just once or twice a year.

A few examples: Power tools for an impulse weekend project, sports equipment and fancy one-use wedding or party outfits. Instead, see if you’re better off renting. Not only may you find that it is cheaper, but you won’t get stuck maintaining and storing your purchases for years on end.

Or, share a purchase with others. See if your neighbors want to go in together on a lawn mower and garden tools. Keep them in a communal shed for all to share.

Here’s help:

• Check out these “8 Things You Should Rent Instead of Buying.”

5. Forgetting trial subscriptions and returns

I’ll raise my hand and admit this is a dumb money move I continue to make.

Once, when I was part of a wedding party, I couldn’t make it to a local store to buy some clothes I needed. I ended up purchasing online. Knowing time was short, I bought two sizes with the intention of returning whatever didn’t fit. That sounded good, in theory. In practice, the unneeded item is still sitting in my breezeway, and the return window has closed.

Likewise, it’s easy but expensive to forget to cancel trial subscriptions and other recurring expenses.

Don’t get caught napping. Make a note on your calendar to cancel before charges start and watch for recurring charges on bank and credit card monthly statements. Cancel those you don’t use.

Here’s help:

• Stop ignoring “9 Small Expenses That Are Bleeding Your Budget Dry.”

6. Missing out on a 401(k) match

One report finds that 1 in 3 workers pass up this free boost to their retirement. An employer’s match is free money that your company will deposit in your retirement account. The catch: You have to put money there, too.

Call your company’s human resources people if you aren’t sure whether your company offers a 401(k) match. That’s also where to learn the minimum amount you must save for retirement to claim your employer’s match.

Here’s help:

• Learn how to claim and max your employer’s match: “Ignoring This Retirement Number Costs Savers Thousands.”
• Getting started: “7 Keys to Stress-Free Retirement Investing.”

7. Forgetting to set up a safety net

It’s dumb to go through life without a safety net.

You need a Plan B so you can spring into action in case you lose your job, your car engine dies or your child breaks an arm.

One excellent Plan B is money in the bank. It feels great to know you’re covered if something goes wrong.

Here’s help:

• Learn “How to Build Your Savings In 3 Easy Steps.”
• These insurance and financial products can strengthen a safety net: “10 Tools You Need for Financial Stability.”

8. Paying extra for low deductibles

Raising the deductibles on your insurance policies is a great way to save some cash.

For one example, the Insurance Information Institute reports that raising your auto insurance deductible from $200 to $500 could save anywhere from 15% to 30% on your premium. Opt for a $1,000 deductible, and you could save 40%.

However, this strategy only works well if you have money in the bank to cover the deductible when you need to make a claim.

Caution: People with chronic or serious health concerns may want to steer clear of medical insurance plans with super high deductibles. In this case, it may be better to pay a higher monthly premium than try to meet a deductible that could — for bronze plans on the government exchange, for instance — be extremely high.

Here’s help:

• Check out these “New Ways to Save Money on Insurance of Every Kind.”

9. Signing contracts you don’t understand

I hear about this mistake most often when it comes to mortgages. People agree to adjustable-rate mortgages and then seem surprised when the interest rate goes up. Or, they’re shocked to learn they haven’t made a dent on the principal balance after paying on an interest-only loan for a year.

People also borrow student loans, buy life insurance and investments, and lease vehicles without fully realizing what they’re getting themselves into. The simple fact is that signing contracts you don’t understand can be an expensive mistake.

Here’s help:

• The Los Angeles County Consumer & Business Affairs office tells how to read and sign a contract.
• The Consumer Financial Protection Bureau demystifies mortgage loan estimates and purchase contracts.

10. Living without a money plan

This bad money move often can be directly or indirectly linked to most other mistakes we describe above.

You may think writing down financial goals and creating a budget is boring, difficult or depressing. Not to mince words, but I think it’s dumb to use those excuses to avoid trying.

If you’re not sure where to start setting goals and budgeting, we’ve got plenty of resources for you at Money Talks News.

Here’s help:

• Stop by the Money Talks News Solutions Center and learn more about our budgeting partner YNAB (You Need A Budget).