By Kelly Griese
Wednesday, October 7, 2020
As our regular readers probably know, the MoneyWise Matters weekly blog grew out of a quarterly e-magazine we used to publish. All of our previous issue are still available here. This week, we’re bringing you one of our more popular articles from the e-magazine.
You may consider yourself the most money-conscious person you know. But there are many money-draining habits that sneak up on us. Review these six things like unnecessary insurance, credit card interest fees, and extended warranties to help you conserve your hard-earned cash.
1) ATM Fees
Paying an ATM fee feels like you’re buying your own money. Sure, it may be more convenient to get cash out at the closest ATM rather than go to the ATM registered with your bank, but small fees can add up. Many banks offer checking accounts and debit cards that reimburse your ATM fees. More than ever, banks are competing for your business by offering more ATM locations or other ways to make their company more user friendly. Investopedia provides this list of the top ten checking accounts with no ATM fees.
Being under or over-insured can be the source of money slipping through your fingers. While it may seem like you are saving money by buying only the minimum required insurance, when you actually need that insurance you could be put in a financial crisis. Not having enough coverage for a medical, auto, or homeowner’s insurance claim could result in you being responsible for big bills that your insurance won’t cover. If you opt to save money upfront by paying less for your insurance premiums, be prepared to pay more out-of-pocket later to cover deductibles, co-pays, and other added expenses. You might want to consider putting the savings from a lower premium in an account set aside specifically for this kind of unexpected expense.
That said, be careful not to be lured into purchasing insurance you might not need or may not be able to use. Some examples of this include pet insurance, flight insurance, rental car insurance, and even wedding insurance. Be sure to read the fine print on all these offerings. It may seem like a good idea to ensure a pet or travel plans, but the terms of the coverage don’t always work as you would imagine, and you may be stuck paying for emergency vet bills or flight change fees after all.
3) Leaving 401(k) Money on the Table
There are a lot of different opinions on how to save and invest for retirement. But there is one thing almost all people agree on, and that is if your company offers to match your contributions to a 401(k) or 403(b), you should take advantage of it! The company contribution match represents “free money,” and you shouldn’t leave it out there unclaimed.
4) Buying a Brand New Car
You may be tempted to get the latest model, with all the newest safety features and all the bells and whistles, but keep in mind that vehicles almost always depreciate. According to CarFax, the value of a new car can drop by more than 20 percent after the first 12 months of ownership. Vehicles typically lose another 10 percent of their value annually for four years after that. This means a new car can be worth as little as 40 percent of its original purchase price after just five years.
5) Extended Warranties
They sound like a good idea, but extended warranties are often just a waste of money. Many products are made well enough to outlive the warranty, and most extended warranties have so much fine print that it voids almost all issues imaginable. Also, most credit card companies include extended warranties as a perk. Why pay for a service you already have?
6) Low Credit Score
Multiple things can attribute to a lower credit score, but a lower score certainly equals higher interest rates. Credit card debt, student loan debt, and any other form of borrowed money can mark you as “high risk” to lenders. With a low credit score, you still may be able to get a loan, but you are likely to pay a lot more for it. A low credit score can affect your ability to get the apartment you desire and even a job. Many places of employment check their candidates’ credit scores before hiring. You may be throwing away money on high-interest rates and hurting your employment options if you don’t maintain a good credit score.
It’s no secret that letting any one of these money wasters drain your wallet means you’ll have that much less for the things you really want or need. Take charge of your financial life. Pay attention to the little details and treat yourself to a more secure future.
The MoneyWise Matters blog has a wealth of information about managing money and avoiding fraud. You can look through the complete archive here.