CNN is offering a compilation of the ten biggest money wasters. These items would be obvious to most loyal Consumerism Commentary readers, yet it would not be out of the question to disagree with some of these money-wasters in some circumstances.
ATM fees. You shouldn’t be surprised that banks will charge multiple fees for the same transaction. If you use an ATM that isn’t operated by the bank that houses your account, the ATM owners will often charge for the transaction — as much as $5, Chase’s new ATM fee — and your bank could charge you for the transaction as well. This is why, even though I strongly recommend high-yield savings accounts that are often operated by online-only banks, it doesn’t hurt to have your primary checking account at a bank that has convenient ATM locations. While many online-only and some traditional banks will reimburse you for ATM fees charged by another banks, receiving this reimbursement could be a hassle.
I visit an ATM about once every two weeks. For me, I save $130 a year by not patronizing an ATM that charges $5. According to the source quoted by CNN, many people could stand to save $500 a year by ensuring they visit free ATMs.
Lottery tickets. For the most part, people who play the lottery tend to have a lower socio-economic status, perhaps those who think that winning the lottery is the only hope of financial freedom. The odds are stacked against winning a lottery jackpot, and if the money used to buy lottery tickets was set aside in an interest-bearing account, there is a better chance for strong finances later in life. That doesn’t stop office pools from buying lottery tickets when the jackpot is sufficiently high, however, and in some cases, income from lotteries run by states can be put to some good.
According to CNN’s source, typical lottery participants spend $520 to $1,040 a year on tickets. Another downside to lottery tickets: buying lottery tickets on your credit card can reduce your credit score.
Gourmet coffee. I’m not a coffee drinker, but I can understand why people pay $1,000 a year in order to help wake themselves at a certain time. The obvious resolution would be to save money by switching from the more expensive brands to coffee you brew yourself. This is the basis of David Bach’s Latte Factor, which illustrates how incremental savings can lead to significant increases over time.
Cigarettes. How much money you could save by quitting smoking depends on how much you smoke and how much it costs to buy each pack. In New York, a heavy smoker could save a whopping $13,000 a year! That’s just on the cost of buying the cigarettes; if you quit smoking, doctors say you will live a healthier life and a reduced risk of cancer, so being a non-smoker will result in lower health care bills over your lifetime, as well as lower life insurance premiums in some cases.
Infomercial impulse buys. According to CNN’s source, most infomercial purchases go unused. It’s not just infomercials — any impulse purchase or anything you buy that you end up not using is an unnecessary cost. I have some kitchen appliances that I have not yet used, though I hope to some day. I didn’t buy these from infomercials, but the result is the same. One way to beat this is to stop yourself from making the purchase without a night — or perhaps a week or a month — to think about it. I ended up not purchasing many things I thought I needed, after deciding to wait some time before completing the purchase.
Brand-name groceries. In many cases store-brand or generic items are of the same quality as brand-name items in the grocery store. I’m not a fan of all generic items. For example, I prefer Cotonelle over store-brand toilet paper, because I have yet to find a satisfying alternative. But rather than blindly go with name brands, I buy cheaper alternatives to discover where I am willing to compromise — if any compromise is necessary — to get buy with a lower price.
Eating out. This is a category of spending I’ve struggled with. (See my comment about unused kitchen appliances above.) For the most part, I have only myself to feed, and the healthier groceries are designed for multiple servings. As a result, I either overeat or buy the less-healthy options. I’ve improved my habits a bit, but this is something I still struggle with. Furthermore, when I spend time with my girlfriend, we often find it easier to go out to eat rather than cook for ourselves.
CNN also mentions bars and alcohol in this category. While I’m not interested in bar-hopping, the wine I may buy with dinner is often much more expensive than buying wine from a store. It’s not uncommon to pay $12 a glass when an entire bottle of wine that is just as good costs half as much.
Unused gym memberships. I haven’t yet fallen into this trap, but I know many who have. For about a month, I was getting the exercise I needed by running every other day, but as the weather turned cold, I let this habit slip. Now I plan to go back to my previous state of activity, and I’ve considered joining a gym in addition. I haven’t pulled the trigger because I haven’t been able to convince myself that I would use the membership to its fullest extent. This is similar to my experience with Netflix; I joined the subscription service to receive movies by mail after a referral from a friend, but I didn’t have the time to watch movies or TV series as often as I thought I would.
Daily internet deals. CNN comes out on my side of the argument regarding social coupons and group coupons. There are some cases where the deals work out well. In fact, I used one with my girlfriend’s family this past weekend to see a movie that didn’t interest me. But the key to these deals is that you pay up front for the deal and claim the items — in this case, movie tickets — later. Many people never claim the items even though they’ve already paid for the deal. And, as I’ve mentioned before, sometimes the deals aren’t that great in the first place.
Bundled cable or phone services. The reason these waste money is because you often result in paying for a service you don’t need. It starts innocently with bundled old-fashioned phone service, where you would have to buy dozens of features you didn’t need just to get voice mail service or call-waiting; now, the communications companies want you to buy voice, television and cable services together in order to qualify for the best prices. With cell phones, chances are you’re paying for minutes you’ll never use, so it helps to downgrade your plan to one that fits your actual usage patterns. If you don’t need smartphone features and don’t talk much, pre-paid plans could end up saving you money, but many middle class households don’t consider them because they’re marketed towards lower income families.