10 Hidden Costs That Hurt Your Wallet
When we see two places selling the same products at different prices, it is trivial to figure out which one costs less. But there are hidden costs, such as the time and money it takes to get to the store, that determine which decision is truly the less-expensive route. Sometimes our choices include costs that we don't even know about but are paying for anyway. Here are ten that you can take note of.
1. Over-Insuring Yourself
When was the last time you looked at how much money you are paying towards insurance for the coverage you are getting? Most people are happy to be eligible for company-sponsored insurance plans (in fact, many work just because of it), but could you actually save money by buying your own individual plan? The coverage is probably better with your employer's plan, but can you raise the deductible and pay a lower monthly fee? (See also: Financial IQ Test: How Healthy Is Your Health Care Plan?)
2. Hanging Around People Who Are Materialistic
Whether it's pure peer pressure or just another form of advertising, having friends who are materialistic won't be helping your savings goals. It may seem unreasonable for me to suggest finding friends purely based on spending habits, but if your children had friends who were bad influences, what would your suggestion be?
3. Buying in Bulk
You might regularly encounter advice to get the bigger package, but in reality, the bulk pack is often the least economical choice. A great example of this is medicine. If you won't be consuming 200 pills before a bottle expires, why buy the biggest container?
4. Eating Everything on Your Plate
The reason why restaurants make these huge plates is that it gives the illusion of value. After all, you can always take what's left on the plate to go. But in reality, the more food that's in front of you, the more you probably will consume. And the more you consume, the more you need to consume because your body is used to the volume of intake, not to mention that you will probably be overweight, which adds another set of financial problems down the road due to poor health.
5. Getting the Plan That Covers The Worst Case Scenario
We touched on this with health insurance, but the theory works everywhere. Do you have a cell phone and never use all of its minutes because you don't want to ever go over your limit? If you pay a lower monthly fee on your cell phone plan, could you still come out ahead by paying the occasional minutes that you go over? For example, if you are saving $10 a month because you opted for the less-expensive plan, paying the twice-a-year $8 overage charge is definitely worth it.
6. Being Unreasonably Loyal
Is your loyalty costing you? It's one thing to be loyal to your employer who gave you a job when you needed it most, but it's another to be using the same high-cost product just because you've always used it. Don't let all this loyalty talk become an excuse for your laziness. New products, services, and companies spring up all the time. Experimenting can actually be fun, and it could also be cost-effective as you find newer, better, and cheaper alternatives.
7. Thinking Spending Will Help Stop the Urge to Spend More
"When you see fire, shoot water at it" is a reasonable thought when it comes to spending, but in reality, the more you buy, the more you want to buy. In order to truly spend less, you need to see the beauty of frugal living.
8. Trying to Maximize Your Opportunities
I have to confess here, as I'm a maximizer too. That's why I know about the dangers of this. Are there times when you believed you should sell a stock, but you didn't just because it had a nice run and you didn't want to miss out on future gains? Have you seen the duration of those 0% balance transfer credit cards increase lately, and you have been waiting because you want to get the best deal? Often you end up waiting too long, and you miss the opportunity completely. The stock you wanted to sell might drop in value, or the credit card offer is no longer available.
Sometimes it's better to take advantage as soon as a deal is worth the effort. When you think that way, it's not a question of whether you got the best deal, but how often you can find deals that benefit you.
9. Being Cheap
The less you pay, the more you keep. However, being cheap limits you in so many ways. The person who is truly cheap will never have that many friends, and the colleague who is cheap will never be able to get things done as efficiently as the person who everyone likes. Be generous, and it can help you socially, professional, and financially.
There is a fine line between being cheap and living frugally. It's one thing to take advantage of corporations by using coupons for example, but it's completely different if you take advantage of your friends.
10. Valuing Your Time Too Much
A common argument for not taking advantage of an opportunity or doing a task is that it's not worth the time. But how much is your time worth, anyway? Most people try to calculate their effective hourly wage, but in reality, that's not a good number to use because they aren't able to command the same rate if they work longer.
Plus those people are only going to sit in front of the TV if they aren't taking that opportunity and earning $0. Is there a side project you've been thinking about but have always thought it wasn't worth your time? It might only be a small financial reward, but anything helps, right?