How to Spot a Money Waster
by Kristin Colella
What a Waste
You may pride yourself on your haggling skills or your sixth sense for sniffing out a great deal, but even the savviest of shoppers can fall prey to a "money waster" something you keep on buying that just isn't worth your hard-earned dollars.
Sometimes it's those candy bars and celebrity magazines you throw in your cart at the grocery store checkout, while other times it's that product that needs endless repairs. Money wasters are different for each person, but there are some red flags everyone can watch out for that could indicate a product or service is sucking you dry.
Read on for our tips on how to spot a money waster in your own life.
1. You're Only Buying It Because It's on Sale
Who doesn't experience that rush of excitement when they see a 20%-off tag on a fantastic pair of jeans, or a buy one, get one free sign next to a rack of new jackets?
But before you whip out your wallet, first ask yourself if you would still buy the item if it wasn't discounted.
In general, "it's a money waster to buy anything you might use in the future just because it's on sale," says Pete D'Arruda, president of Capital Financial Advisory Group in Cary, N.C.
The same goes for coupons. If you wouldn't be interested in a product or service if you didn't have a coupon for it, it probably isn't worth wasting your money.
2. It's an Impulse Buy
Picture this: You're standing on the grocery store checkout line and you feel a sudden desire to toss the new issue of People or that pack of citrus-berry gum in your cart. But when it comes to impulse purchases, it's best to resist that urge to splurge, say our experts.
"Supermarkets and retailers strategically place items at checkout to capitalize on patrons' impulse behavior," says Kendal Perez, bargain expert and blogger for HassleFreeSavings.com. "Candy, sodas and magazines are the main staples at grocery stores, but my local TJMaxx now places things like socks, stationery and dog treats near cashier stations to encourage additional shopping."
To avoid buying things on a whim that you really don't need, always shop with a list and stick to it, suggests Andrea Woroch, a consumer and money-saving expert for Kinoli Inc., a network of websites intended to help consumers save money while shopping online.
Of course, if you don't mind spending a little bit each week on items that cost just a few dollars, at least try to avoid making bigger impulse purchases that can really add up.
Jennifer Lazarus of Lazarus Financial Planning in Durham, N.C., suggests taking time to think the purchase over to make sure you really want and need it.
"Sleep on it for a week, then come back to purchase it if you still feel strongly about it," she says.
3. Reviews Are Mostly Negative
Whether you're deciding which smartphone to buy or exploring different restaurants to try out on date night, it's a good idea to read reviews to get a feel for whether a product or service really lives up to its hype.
"Some of the best money a consumer can spend is for a subscription to Consumer Reports," says Rick Kahler, president of Kahler Financial Group in Rapid City, S.D. "Other tools are online reviews, which I use frequently. I find the online reviews of restaurants and lodging establishments via Yelp, Urbanspoon and TripAdvisor especially useful."
Of course, when it comes to online reviews, you have to take what you read with a grain of salt, since they could be written by someone within the company (yielding an artificially positive review), or by someone at a competing company who might unfairly disparage another business.
4. The Maintenance Costs Are Too High
It's easy to get wooed by a low price tag, but before buying a product, always consider whether it will require a lot of maintenance or routine cleaning that could negate the savings.
D'Arruda brings up the example of clothing that must be dry-cleaned after each use. It might not be worth buying the item if you could purchase a similar piece of clothing that's machine-washable even if it costs a little more upfront.
Maintenance costs also come into play with secondhand purchases such as used cars and computers. Always do your homework first, and if you think you'll be pouring too much money into repairs for a product, you might want to pass on it.
5. You Could Get It Cheaper Somewhere Else
If there's a golden rule for being a smart consumer, it's to shop around as much as possible to get the very best price on a product or service. Failing to comparison shop could very well mean you're paying more than you have to.
"We can [often] save hundreds of dollars on purchases just by comparing prices, especially large purchases like travel," says Sarah Platte, consumer savings expert for PromotionalCodes.com. "For example, a recent search for a flight from New York to Los Angeles on multiple airlines showed a difference in price of $300 from one airline to another."
Platte also had an experience in which some simple price comparison shopping helped her save big on tuxedoes for the men in her wedding last year.
First, she went to a men's shop to rent tuxedoes, and was told each tux would cost $150. Feeling that was a bit high, she decided to do some online research to see if she could find a better deal.
In the end, she was able to find a similar tuxedo for just $30 to buy a whopping $120 less than it was to rent. While that's a bit of an extreme case, it illustrates the benefits of comparison shopping.
6. The Cost Per Wear Is Too High
When it comes to clothing and accessories, it's a good idea to determine the cost per wear, or in other words, how much you'll be paying each time you wear the product.
To calculate the cost per wear, just divide the purchase price by the number of times you think you'll wear it.
"If you buy a dress for $200 that you only wear once, there isn't much value," Woroch says.
However, if you buy a handbag for $200 that you will wear multiple times per week in a season, then the purchase is more worthwhile.
7. You Don't Have Time for It
Another question to ask yourself before paying for a product or service is whether you realistically have time to use it.
"Money spent on something that goes unused is money wasted no matter how valuable or beneficial the expense," says J. Landon Loveall, founder of Cumberland Wealth Planners in Thompson Station, Tenn.
For instance, don't pay for that gym membership if you aren't going to have time to hit the gym after work or on weekends, and there's no sense in buying a pair of skis, camping equipment or season tickets to the local amusement park if your schedule doesn't leave time for these things.
8. It's an Unnecessary Add-On
If you're on a budget, you might not need all the extra features you may be tacking on to your favorite services and subscriptions.
John Gugle of Alpha Financial Advisors in Charlotte, N.C., says he's "blown away" by how much money many people shell out to pay for cable or satellite packages. And when it comes to cellphone plans, "people often pay for too many minutes based on their usage patterns or have features on their cell plan that they do not need," he says.
Gugle suggests keeping tabs on your budget on an ongoing basis to see if your bills have risen over time due to unnecessary add-ons.
"Ask yourself, do I really need all of those extras? Do I really need 500 channels?" he says.
9. It Has Too Many Fees
If a service is hitting you with fees left and right, it could be a red flag that it's time to get rid of it. Take big banks, for example.
"I know banks have to get their money somehow, but it just seems like people are getting 'fee-ed' to death," Gugle says. "So a lot of people have been looking into community banks, credit unions and other non-traditional banks to get away from all the fees."
Similarly, if you're constantly paying a high ATM fee because your own bank's ATM machines are far from where you live or work, it might be time to consider switching to a different bank.
Some airlines also charge a low base fare, but tack on extra fees for many things that would normally be included.
For instance, Spirit Airlines charges for carry-on bags, beverages and snacks, among other things.
10. You're Paying for Convenience (That You Really Don't Need)
We often pay a good deal of money to make our lives easier, but if you're paying for convenience that you really don't need, consider finding ways to cut those extra expenses out of your life.
For instance, why pay for beverages from a coffee shop each day when you can brew your own at home for a fraction of the price? Prepackaged, pre-chopped and other types of prepared foods can also be a money waster.
"I understand that busy people want something they can transfer immediately to the dinner table, but taking the time over the weekend to chop produce, package snacks and grill a whole chicken will save families big bucks," Perez says.
Of course, sometimes it does make sense to pay for convenience.
"I have someone prune all of my shrubs because I don't know what I'm doing, they'd all die on me," quips Gugle. "Some things I am willing to pay for because someone else has expertise."
March 23, 2012