Financial experts often stress the importance of making the right financial decisions. However, it is equally important to know what financial mistakes to avoid. Too often people make financial mistakes that cost them valuable time and money. These financial blunders can go a long way towards taking you off the path to financial success. Be sure to avoid the following financial blunders that may be costing you more money than you realize.
1. Spending too much money on small stuff
Most people sacrifice their financial future by spending way too much money on the wrong things. Too much money is wasted on depreciating assets. Depreciating assets are the things that you buy that will only decrease in value over time. Everyone knows that big ticket items like mcmansions and luxury cars eat up your money. But small items like expensive watches, clothes, and shoes will leave your closet full and your bank account empty.
2. Wasting money on get rick quick schemes
Have you ever been approached by a friend or family member who guaranteed you that they had a way for you to get rich? Did they invite you to a meeting and say they couldn’t tell you what it was about until you showed up? Avoid these so called money making opportunities like the plague. Many people throw away thousands of dollars on get rich quick multi level marketing schemes. They always involve paying an up front fee and recruiting new members. Too many people end up learning the hard way that if it sounds too good to be true then it most likely is.
3. Buying extended warranties
Retailers like Best Buy, Sears, and Walmart offer warranties on just about any electronics product that you buy. While warranties are useful for big ticket items like big screen TV’s and laptops; they are totally unnecessary for other items like DVD players and home telephones. It’s easier to just pay to replace most household items if they break then to pay $40 for a warranty on a $100 item.
4. Paying too much in taxes
Many people look forward to getting a tax refund from the government on April 15th. Did you know that getting an income tax refund from the government is a sign of poor financial management? Paying too much in taxes is like giving an interest free loan that you are lending to the government. That money could be used to fund your retirement account or earning interest in a CD or high yielding savings account.
5. Buying unnecessary insurances.
Basic travel insurance, wedding insurance, and life insurance for children are all largely unnecessary items. Medical insurance, homeowners insurance, and many credit cards offer the exact same protection as travel insurance. Wedding insurance may sound like a good idea but the chances of it ever being useful are minute. Skip buying life insurance for the kids. Life insurance is only necessary for individuals whose income is depended upon by other people. The money saved by skipping these policies can be used to help pay for your vacation, finance your wedding, and pay for your kids college education.