20 Ways to Waste Your Money…According to Who?
A couple of days ago, Kiplinger Online ran an editorial called “20 Ways to Waste Your Money” which outlines a variety of ways in which people “waste” money. My question is, these are “wastes” according to whose ideals and beliefs? There are obviously people who have enough money to spend on anything they want, and those who don’t have the money to buy anything extra above the absolute necessities. But what about the people who fall in the middle, who make a moderate amount of money and with proper planning can afford to make the purchases that the article “wastes”? I am not going to run through the whole list, but rather, I am just going to touch on a couple of the points which I agree and disagree with the most.
To start, the first point on the list of how to waste money is to “Buy new instead of used“. I could not disagree more about this suggestion. For starters, when buying used there is no guaranty of a warranty should anything go wrong. Secondly, unless it is something being purchased directly from the original owner, and a person whom you know personally, there is no way to tell what the real history of an item is, as it can even be third- or fourth-hand. In the case of a car, electronic equipment, clothing, and furniture for example, you can never know just how well the items were cared for, and what conditions they were kept in. What would happen if the car breaks down, the clothing falls apart in the washer, the furniture collapses under you, or the electronics short out? You are essentially out of luck since you will have no true recourse other than an attempt to take the seller to small claims court, and even then it might not be worth the legal fees, not to mention the time required. New items, however, will be covered by the selling store’s/dealer’s limited-time return policy, followed by the guaranteed manufacturer’s warranty since you have the original receipt showing the purchase from an authorized reseller.
Another item I take issue with is point nine, “Buy brand-name instead of generic”. In some cases, as in many pantry food items, and lower-end clothing items there is no real value attained by purchasing brand names, especially since many of those products such as cereals, athletic sneakers, pastas, and lower-end garments are produced in the same factories and simply labeled differently. However, when it comes to electronics, computer equipment, better-quality clothing, etc. there is a true and recognizable difference in quality. In these cases, the materials used in the productions are often-times of superior quality and offer longer lasting life in addition to better performance, and longer lasting. In addition, with outlet stores, and specialty retailers such as Marshalls and TJ Maxx, you can find name-brand items at a significant discount to the manufacturer suggested retail price (MSRP), and sometimes the name-brands can be found at lower prices than the generic or “knock-off versions.
The first points which I agree with are the second and fourth ones which suggest “Carry a credit-card balance“ and “Pay to use an ATM“as being major no-no’s. I won’t go into much detail, as these are rather common guidelines for anyone to follow, regardless of income or tax bracket. There is simply no reason to pay more than you have to in order to make a purchase. The only time I can disagree with paying for ATM access is if you have an account which reimburses you for foreign ATM withdrawals.
The biggest point I agree with is number seventeen “Give Uncle Sam an interest-free loan“, and which is something I preach to clients all of the time. Basically, by allowing yourself to pay in a substantially higher amount in federal income taxes with each paycheck, you are not only robbing yourself of the valuable spending power that having the money throughout the year will give you, but more importantly, you are giving up the earning power that comes along with that as well. The way I explain it to clients, is removing the government from the equation and replacing it with a stranger and asking Would you ever hand over any sum of money on loan without having the borrower pay you interest in order to borrow the funds?” I would say that 99% of the people I pose the question to say “no”, however they always qualify it by adding something along the lines of equating the tax refund to forced savings. My view–if you want “forced savings” set up a savings account and have a set percentage or fixed amount automatically transferred from either your paycheck directly or from the account where the paycheck gets deposited to. Out of sight, out of mind.
I’m sure that many people would both agree and disagree, just as I do with this article, and some of its major points. However, as I have written in the past in articles such as “Financial advice is not a one size fits all proposition” not everyone’s views can apply to all people, or even a large subsection of the population. Everyone needs to evaluate their own situation and make the decisions that best fit their own circumstances and budget.
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