In order to invest, you will need to have money—at least, in most circumstances. With wages being stagnant while everything increases in price, it's hard to actually amass enough money to invest. That's why it's so important to save money any way you can.
Most of us already know how to save money on groceries, or how to trim the fat on bills. That alone isn't always enough to help you build a good nest egg, though. In many cases, the best way to get ahead is to stop wasting your money on goods, services, and investments that really aren't working for you.
Not sure what to trim? Here are some of the biggest culprits you might not have realized are a total waste of cash.
One of the biggest expenses you're wasting your money on is bank fees. Banks love to charge fees for everything from checking to overdraft. What you might not realize is that you don't always need to pay those fees.
In some cases, such as with overdraft, you can actually opt-out of them when you sign up for a new account. That being said, choosing a bank that offers low fees is crucial. Here's how to stop letting the bank eat up your paycheck:
- Switch banks. If you keep getting hammered by bank fees, it might be a good idea to close your bank account and transfer your money over to a new bank. Obviously, you will need to vet your new bank to make sure they won't charge you the same fees.
- Opt out of "Overdraft Protection." Banks are legally required to ask for your permission before they hit you with an overdraft fee on many occasions.
- Use bank-owned ATMs exclusively. Most banks will not charge people fees if they use their own ATMs. No ATM fees means you save money.
- Talk to your banker about how you can avoid fees. Knowledge is power here.
Unclaimed 401(k) Matches
Most companies will offer a 401(k) matching program, and that's a huge deal. When companies are willing to match your 401(k) contributions, that gives you the chance to redeem what would be a 200 percent return on investment.
If you are not maxing out your 401(k) when you have a matching program, you're wasting money. Instead of only wasting your money though, you're wasting the free money your company is offering up. Not a good thing!
Extended Warranties and Insurance Overkill
Trust me when I say that I love insurance. Insurance can make or break your ability to handle a personal tragedy, and I'm proof of that. However, too much of a good thing isn't really good at all.
This is particularly true if you're backing assets that are investments, such as fine art, real estate, or collectibles. A little bit of insurance that would cover the majority of the price of those assets could be a lifesaver if they get harmed or destroyed.
If you are paying more money for insurance or warranty fees then it would take to fix or replace your items, then you're wasting money on protection. You really don't need that much! A little bit of insurance goes a long way.
Credit Card Interest
A common question among investors is whether they should invest or pay down debt. Truth be told, debt repayment is an investment. The difference though, is that it's an investment in your future.
By carrying a balance on your cards, you're wasting money on interest payments you really shouldn't be making. Much like investments, credit card debt also compounds, making your problem worse and worse as your balance increases.
Ergo, the best thing you can usually do is eliminate debt.
Airline Fees and Travel Expenses
If you have a credit card with perks, chances are that you are wasting money on airline fees and other travel expenses. This waste of money can easily cause you to lose out on hundreds of dollars per year.
Most credit cards, including many of the best credit cards for students, have perks that allow you to shave money off travel expenses—or get free airline tickets altogether.
Before you go on your next trip, read up on your credit card's perks. You might find that the benefits they offer could allow you to save extra cash during your trip.
Your New Car
As much as it may pain car aficionados to hear, you're probably wasting money on your new car. You really don't need a new car; a used car will do just as well in most cases.
New cars go through heavy depreciation in their first year, and take about seven years to pay off on average. When you factor in the fact that the average American spends around $31,000 for a new car, and that most Americans finance, it's easy to see why it could be a waste of money.
You do not want to end up with a ton of debt. If you were to put the money you'd spend on a new car into a retirement account, that money could easily lead up to as much as half a million dollars. So, why buy that new car? You could retire in style.
Personal Finance Software
If you have recently bought up personal finance software, kudos! It's a sign that you are now working towards your goal of being financially independent. That being said, you probably shouldn't have bought that software.
Tons of free apps and software kits exist to help you make better financial decisions. While we're not going to fully say that you're wasting money with that software, it would have been way more frugal to look for a free option like Mint instead.
If you have extremely complex tax returns, ignore this and skip over to the next point. Sometimes, tax preparation is best done by a professional and it's okay to realize when it's too much.
However, if you have a simple W-9 or a W-2 form, you probably don't fall into that category. Tax preparation for simple situations doesn't require a professional, and in most cases, can be done on your own using the IRS's own e-file route.
A single W-2 tax filing can easily cost $200 or more. That's a lot of money you're wasting on having someone else do something you personally could do in a pinch.
This is a big issue with investors, who will often hire accountants to handle tax loss harvesting credits. Truth be told, some apps for micro-investing, such as Betterment, offer tax harvesting benefits as an extra perk. So, why do you really need an accountant for your investments, if you can just DIY it?
Financial Planner Fees
Most people go to a financial planner to help them guide their retirement investments, give them advice on how to better their financial standing, and make better decisions on their portfolios. It sounds great, but wait!
You have to pay your financial planner. They also might point you towards investments that aren't really in your best interest. In many cases, you're better off just doing the planning on your own. So, why waste money on a planner you don't really need?
If you're reading this and are an avid investor, then you probably already are aware that most investment vehicles will have fees associated with them. While you can't eliminate investing fees altogether, you can cut down on them.
In order to stop wasting your money on investing fees, you're going to need to look at the fees you're paying first. Once you see the fees, you can figure out whether you should switch brokerages, exit the mutual fund, or even just sell off those ETFs in favor of a better choice.