Accepting initial offers. Many sellers of goods are willing to negotiate because they want your money as much as you want the product. In “Confessions of a serial haggler,” I explained how I’ve gotten discounts on cable service, hotels, doctor bills, and more. It never hurts to ask.
Buying a bigger home than you need. In 2001, Americans spent about 12% of their income on “residential and transportation energy,” but this year they’re projected to spend almost 20%. Living in a big house with unused rooms or bigger rooms than you need is like driving a stretch limo: You’re buying energy for unused space. A bigger house means more furniture, higher maintenance, higher taxes, and more time spent taking care of it. When home prices were rising, there was some logic to leveraging potential profits by buying the biggest. Now, that extra space is nothing but a cash drain.
Paying interest. This should go without saying, but too few people get it. Borrowing money to live beyond your means makes lenders richer and you poorer. Using credit cards can be smart — unless you can’t afford to pay your balances in full every month. The only time you should ever pay interest: if what you’re buying has a decent chance of rising in value at a higher rate than the interest you’re paying to own it.
Eating out too much. We recently wrote that Americans eat out about every third day, and offered some tips to save. But even if you drink water and take home half the meal, the cost per person is higher than cooking at home. Cut back on the dining and you’ll keep a few more dollars — and maybe lose a few pounds.
Keeping unhealthy habits. Smoking a pack of cigarettes a day at $6 each costs more than $2,000 a year. The U.S. government estimates the actual cost is closer to $10.47 per pack, once you add in the medical expenses smokers will face, including insurance costs. Excessive drinking is also an expensive and destructive pastime, as is gambling. There are plenty of healthier and cheaper ways to use free time:
Paying for freebies. Why do we pay for things we could get gratis? From TV to travel — even housing — creativity and flexibility can often replace money.
Turning down free money. if your employer is offering matching money for participating in your company’s 401k or other retirement plan, and you’re not participating to the extent necessary to get the full match, you’re literally refusing free money. You’re also ignoring an opportunity to get a tax deduction and grow your retirement savings tax-deferred. (Are you saving enough for retirement? )
Paying too much for insurance. You have a fender-bender and do $500 of damage to your car. Would you report it to your insurance company? If you answered “no” due to the justifiable fear of a rate hike, then let’s hope you don’t have a $250 deductible. If you do, you’re wasting money on higher premiums than necessary. Raising your deductible from $250 to $1,000 could save you 10% to 20%.