It’s no secret that managing money is difficult and everywhere you turn, there’s more advice telling you the best way to save & spend. But how do you know what’s actually good for your wallet? What’s a real trick—and what’s something that’s going to cost you more? That’s where we come in. Here are twelve financial “tricks” that are anything but smart.
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Credit Card Rewards
Getting cashback or travel points just for spending sounds like a dream come true. However, paying more simply to get these rewards certainly isn’t worth it, especially if you’re carrying a balance & paying interest. Essentially, you’re just paying more to collect those points and this can work out to be more than the savings you’re making from them.
Leasing New Cars
Leasing a new car every few years means you don’t have to pay for servicing. But that’s a yearly expense rather than a monthly one. Leasing keeps you in a cycle of payments without ever owning the car. If buying a car & keeping it for years after it’s paid off, you’ll have more financial freedom in the long run.
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Sticking With the Same Auto Insurance
Speaking of cars, many people stick with the same auto insurance year after year without checking for discounts because they think it’ll be cheaper. And sometimes it is because your insurer will give you a discount. However, you shouldn’t rely on this. Shopping around is a better idea because other companies may be willing to give you competitive offers that far exceed any perks from your current insurance.
Underinsuring Your Home and Belongings
While paying for too little insurance might save money in the short term, it could cost you dearly if you need to make a claim. Of course, that doesn’t mean you should go overboard and pay for coverage that you don’t need. You need to make sure you’re completely covered for any genuine issues.
Using High-Interest Savings Accounts for Long-Term Savings
Many people keep their long-term savings in a regular savings account because they think it is safe and it makes it easier to withdraw. And that’s true plus you won’t have as many bank fees to pay. Yet you’re also missing out on potential earnings from higher-yield investments. You should invest a portion of your savings in stocks, bonds & mutual funds while also having liquid savings for emergencies.
Zero-Percent Financing Offers
Zero-percent financing offers for big purchases can seem like a great deal—but you have to be disciplined with them. If you don’t pay off the balance within the promotional period, the company can retroactively apply the interest rates. This will turn what seemed like a smart move into an expensive mistake.
Investing In Stocks On The Rise
Choosing to invest in funds or stocks based solely on their past performance is a trap many people fall for. They think that because the investment did well in the past, it’s guaranteed to do well in the future. But no! You should diversify your investments and do some thorough research before committing. Better yet, speak with a financial advisor to mitigate any risks.
Choosing Low Deductibles for Auto and Home Insurance
Going for low deductibles on auto and home insurance is a safer choice since it reduces what you’ll pay out-of-pocket in case of a claim. However, this means higher monthly premiums—and these cost you dearly. If you’re someone who rarely makes a claim, it’s better to choose a higher deductible. It’ll save a lot of money in the long run.
Buying Timeshares as Vacation Investments
In theory, timeshares are a cost-effective way to guarantee vacation time as you won’t have to pay an upfront cost to stay somewhere. Yet there are so many other fees to pay, like the initial purchase price & annual maintenance fees. Don’t forget about the challenge of exchanging weeks or locations. For most people, booking similar accommodations annually without a long-term commitment is a lot cheaper.
Investing in Trendy Items for Resale
Buying limited edition or trendy items as an investment is quite risky. Some people do it thinking they’ll increase in value over time and that’s true—in some cases. Most of the time, though, these items become less valuable, leaving you with a collection that’s difficult to sell without taking a loss. It may be better to stick with traditional investments.
Waiting for Sales to Make Necessary Purchases
Delaying necessary purchases until items go on sale will only ever backfire. There’s no guarantee that the time you need the item, it will have a discount—so if it doesn’t, you might need to pay more out of urgency or settle for a less suitable alternative. You also miss out on using the item all this time. That doesn’t mean you shouldn’t wait for a sale but don’t hang around forever!
Consolidating Debt Without Changing Spending Habits
For some people, debt consolidation is a quick fix for high-interest debt. This involves combining multiple debts into one loan with a lower interest rate. Yes, it does reduce your monthly payments—but you’re not addressing the spending habits that caused the debt in the first place! This may cause you to accumulate new debt on top of the consolidation loan, which is even worse for your financial health.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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