The Three Silliest Money Traps – And How to Fix Them

The money traps I’m about to list are not earth-shattering secrets, nor do they contain any particularly sophisticated financial techniques. In fact, it’s precisely because they’re so simple and commonplace that I feel they must be stopped stat. Why should we continue to let these silly, daily money goofs drain our wallets?

The Problem: Recurring online fees billed to your card

Who hasn’t been guilty of this? A few years ago, for example, I was searching for a new job and decided to spruce up my resume by using a “free” online service. The catch, of course, was that I needed to input my credit card and cancel within 30 days for it to be truly free.

But human beings goof up (or get plain lazy) and forget to cancel these subscriptions. In my case, it cost me $35 a month. The worst part is that I didn’t even catch it until four months later, when I was almost $150 in the hole. Yep, that’s a month’s worth of $5/day savings down the drain for nothing.

The Solution:Sure, the simplest solution is to never, EVER use your credit card for anything other than immediate, one-off purchases. (Remember that magazine subscription or skin care product you ordered at an amazingly low introductory rate? How about when you forgot to cancel it on time and the price suddenly spiked?)

But, again, we’re merely human. To prevent such a mistake, try doing one or both of the following:

Set a calendar or budget reminder for one payment period BEFORE the free/special price period ends. You’ll usually need at least one payment cycle’s worth of advance notice to have it stopped on time.

You can also try calling your credit card company and asking them to authorize a maximum spend of only as much as you intend to pay. Not all card companies will agree, but it’s a very effective backstop.

The Problem: ATM Fees

Yes, we all know using other banks’ ATM machines are a real financial “duh!” moment. But that doesn’t stop us from doing it occasionally (or even often) out of convenience. If you do this a few times per month, it can cost hundreds of dollars per year.

The Solution:

You can do a few simple things to minimize this occurrence — I actually recommend doing them all.

First, if you don’t already have a debit card, get one — you can often use it in lieu of cash, thereby minimizing your need for paper dollars.

Next, many grocery and drug stores allow you to get cash back on purchases. Although you’re usually limited to $40 at a time, it adds up if you shop for food and essentials regularly. In fact, I rarely use ATMs anymore thanks to this.

Finally, get in the habit of withdrawing more cash at a time when you are at your bank or ATM. If the thought of carrying around tons of twenties sounds unappealing, try storing some at home until needed or asking for larger bills (and later breaking them).

The Problem: Small Impulse Buys

You know the drill – you’re in the check-out lane and get tempted by whatever kick-knack is in front of you. Or, you’re at the drug store and end up buying cheap cosmetics and toiletries you don’t really need. Though these things aren’t expensive, if you engage in the habit regularly, it can drain you of hundreds –or thousands — of dollars per year.

The Solution:

The psychology behind impulse buys is simple: It provides your brain’s reward centers with a quick, easy thrill. Subvert that impulse in the following ways.

One of my favorite techniques is giving myself an alternative reward that doesn’t cost any extra money. When I’m tempted by an impulse buy at the drugstore, for example, I’ll spritz some perfume from a tester on my wrist or pop a piece of gum or mint. Both increase my brain’s feelings of happiness or satiation and blunt my impulsiveness.

Other tricks include having recent impulse buys on you — such as that cheap lipstick you recently bought – as a way to remind yourself that you don’t need anything else. Or, try walking as quickly through the store as possible in order to minimize extra purchases. The extra rush will keep you focused and you’ll be moving too fast to notice impulse buys, anyhow.

 

Do you have any ideas on stopping your silly money mistakes? Share them in our comments section below!

 

 

 

 

 

 

 

 

 

 

How to Save Money: The Definitive Guide – Part 2

freeimage-10752841-webHi everybody. We’re back with the second part of our multi-week series “How to Save Money: The Definitive Guide.” As you may remember, we aim to encourage people to be creative in how they think about managing their biggest monthly expenses. Last week in Part 1, we addressed housing costs and transportation costs and suggested downsizing, sharing and/or renting as moderate ways to reduce costs without necessarily doing without the things you want. Over the coming weeks we will continue to explore those ideas over the next few weeks as they relate to other common large monthly expenses: groceries, utilities, telephone or smart phone service, internet service and entertainment options like cable, movies, books, etc.

What You Eat and Drink

Americans spend a lot of money on food. The US Bureau of Labor Statistics estimates that the average consumer (a 49-year old that makes about $63,000 a year) spent about $2,620 a year eating outside the home and about $3,838 eating at home in 2011. That comes to about $538 a month or about $124 a week. More recently, a 2012 Gallup survey found that its sample spent an average of $151 a week on food, though the median  of the sample was $125.

As you can imagine, eating out is usually way more expensive than eating at home–unless you’re risking your health on too many fast food “value” menus. As a consequence, I try to avoid eating out more than a few times a week, but that does not always work for my home or social lives. (Janet prefers restaurants over home-cooking.) I also get a lot of personal satisfaction from preparing food myself at home and I’m on a healthy diet right now that is best maintained through home-cooked meals, so I am doubly eager to do it. However, we’ve learned a few strategies to help reduce the overall cost of eating out. You can find them in Janet’s recent post called 6 Easy Hacks for Saving on Fine Dining.

There are other cost considerations when eating out or at home. Animal proteins–meats–are expensive, and seafoods (including shellfish) tend to be the most expensive of them. GE Miller over at 20SomethingFinance began saving thousands of dollars each year when he and his wife gave up meat entirely. However, if you want to reduce your spending on meats without giving them up completely, skip expensive meats like seafood, beef and lamb–especially in restaurants where these particular meats usually carry large mark-ups over wholesale prices. If you still want your lobster or fish or steak though, you’ll find that you can prepare them much more cheaply and healthily at home.

As for alcohol: While home-brew tends to be a very expensive hobby, the idea of drinking at home instead of at restaurants is sound enough. Restaurants and bars charge so much money for booze. It reminds me why everyone in college was so sensible about “pre-gaming” before going out! If you want to save money then, buy good stuff at the store to drink at home and only drink swill at bars and restaurants if you must (and ideally on special).

Joking aside though, when it comes to reducing food and drink costs, a little planning, a little sharing and a little avoidance can go a long way toward saving you money. If you plan your grocery shopping so that you can make multiple meals (including leftovers) with the ingredients you buy, and you share the costs of the food with friends and loved-ones who join you, you can save thousands of dollars each year and even have a lot of fun making meals to enjoy together. (It helps too if you avoid the most expensive meats and ingredients.) And, if you’re the type who plans far ahead or who buys the same groceries each week or month, you also might want to consider a bulk subscription option through your local Community-Supported Agriculture (CSA) or Amazon Subscribe & Save.

Stay Tuned for Part 3 Next Week

As you can see, there’s a lot to consider when trying to save money on this major regular expense. There’s more to come though, as we address other common large monthly expenses including home utilities, telecommunications and entertainment in future posts. Until then, keep fighting the frugal fight.

How do you save money on food? Share your tips, strategies and experiences in our Community Forum!