Stock investing for dummies
Now that people all over the nation have come out of their Powerball-induced haze, there’s one thought that millions are sharing: I just wasted my money.
But as easy as it is to pick on lottery players for paying the “stupid tax,” they’re not the only ones flushing money down the drain: chances are, you’re doing it too. But like it’s name implies, most of us are too stupid to realize how we’re wasting money.
Here are some common ways we all throw our hard-earned money out the window.
Buying Name Brand
Most of us stick to generic prescriptions at the pharmacy, but struggle to apply that mentality to other products. Whether it’s cereal, medicine or office supplies, buying generic instead of name brand is an easy way to save money, and the product you’re getting probably isn’t very different.
Try switching your name-brand buys to generic to see if you notice a difference. You might not even be able to tell, and trying doesn’t hurt. You can do this experiment with paper supplies, food – even your kid’s toys.
Paying High Fees
Some fees are easier to spot and reduce than others. ATMs notify you when you’re about to pay a fee, but what other fees are you paying without realizing it?
Many people pay high fees for their retirement accounts. Choose a 401k or IRA fund that has an expense ratio of less than 1% – that’s a good average to hit.
If you pay fees every time you withdraw cash from the ATM, try picking a bank or credit union that will refund them. The flip side is to choose a company with more ATMs available, like Chase or Bank of America.
Having a Large Tax Refund
Many people think of their tax return as a lottery – you never know what you’re going to get. But the IRS has a simple system that determines whether you get a refund or whether you owe – and it’s a system you can learn.
It’s called withholding and it’s what you determine when you fill out a W4 at the beginning of every job. On the W4, you state how many exemptions you want. Each exemption you take tells your employer to take less money out of your paycheck for taxes. People who take too many exemptions end up owing; those who take too few pay more than they should in taxes and end up getting a refund.
Why is it bad to have a large tax refund? Because that’s money you’re unable to access until you file a return. Instead of investing that money in a 401k or putting it toward an HSA, you’re giving the government an interest-free loan. It may seem nice to get a big check every year, but that excitement dies down once you realize it was your money to begin with.
Buying Small Servings
Whether you’re getting individual cans of Diet Coke at the gas station or buying oatmeal that comes in packets, you’re likely paying too much. Buying in bulk can frequently save you money – that’s why stores like Costco and Sam’s Club are so popular.
When we pay for something, we’re paying not only for the item, but also for the packaging, shipping and manufacturing. Buying in bulk is cheaper because there are fewer materials spent in producing one large item as opposed to five smaller ones.
Try shopping at the bulk section of your grocery store, joining your local membership-based store or shopping wholesale. Make sure not to buy anything you won’t be able to use before it goes bad – that will just be another waste.
Buying New Instead of Used
Too often people buy something new when they could save by purchasing it used. Cars the most famous example – you lose 10% of their value once you drive a new car off the dealership.
An automobile isn’t the only thing you should buy used. Books, DVDs, video games and clothes can all be bought used for a fraction of the cost, and are often indistinguishable from when they were new.
For what you’d spend on a full-priced suit from Banana Republic, you could find a designer version at a consignment store. Thrift stores frequently hold gently used garments from the same stores you frequent, and in many cases you could get those used clothes tailored while still coming in under the original cost.
Buying Anything At the Gas Station – Besides Gas
If you’re filling up the tank, stay outside unless you need to use the restroom. Anything you buy at the gas station is hugely marked up. Whether it’s energy drinks or junk food, the convenience store is full of tempting purchases that are almost always wasteful.
Choose a gas station near a grocery store if you’re hungry – that way, you can stop inside for a quick snack. You’ll likely save more than 10% by choosing a different shopping destination.
What else would you add to the list?
Photo Credit: stoupa / 123RF Stock Photo
– stock investing for dummies