So far in this series on wasting money, we have looked at how people may overpay for housing, interest, transportation, food, clothing and entertainment. In this last part, we will look at a few more areas in which we may pay more than necessary–taxes, insurance, not obtaining bids for services, and not negotiating for large purchases.
While you may already be astute in these areas, sharing good financial practices like these with your children and/or grandchildren can be part of your legacy, as you help them prepare to be prudent and responsible beneficiaries. And, for tax management and risk management (via insurance coverage), your legal and advisory team can produce integrated tools to assist you in keeping more of your money within the family than having it leak out unnecessarily.
The Key Takeaways
o Any time you pay more for something than you have to, money is wasted.
o Reviewing tax deductions and insurance coverage, comparison shopping, bidding out services and repairs, and negotiating–these take time, but they can help save significantly.
o Any time you save money, you are being financially responsible and will find more money for the expenses in life that are really important to you.
Where People Waste Money…And Actions to Consider
1. Taxes. Take every deduction to which you are entitled. Even if a professional prepares your tax returns, it is a good idea to become familiar with allowable deductions. For example, charitable deductions, even small ones, add up–if you volunteer, keep track of your mileage and financial contributions; fill out the form when you make clothing and household donations; and instead of dropping cash into the offering box at your place of worship, write a check or set up automatic payments. Of course, if you have significant charitable interests, trust-based strategies offer you cost effectiveness and a disciplined structure.
2. Insurance. Review your policies every year. Property values change, and it’s important to not over- (or under-) insure. For example, an older car may not need collision insurance. Increasing deductibles will save on premiums. Bundling various policies (home, autos, personal liability, jewelry) under one insurer will probably earn you discounts and save time.
3. Not getting bids when hiring workers. Asking friends and neighbors for references is a good start, but it is also important to get at least three estimates. And remember, the lowest price is not always the best value.
4. Not periodically rebidding current products and services. Being loyal is commendable, but not if it causes you to pay more than necessary. If you are able to find a lower price, your current provider may match it to keep you as a customer.
5. Not negotiating for large purchases. We all know there is profit margin built into pricing, and there is usually a larger margin on expensive items. Some vendors actually expect to negotiate. Learning how to negotiate fairly and respectfully will frequently save you some money.
What You Need to Know
It’s easy to get caught up in the current culture of instant gratification and impulse spending. We could all benefit from slowing down a bit and becoming better consumers. Taking the time to evaluate purchases and comparison shop will not only help avoid overspending and wasting money, but it results in satisfaction from being responsible and efficient with money.
More Actions to Consider
o Evaluate how you may be overspending in these areas. Commit to following through on some of these suggestions and note how much money you save.
o Think where you could use that extra money. Would you like to pay off some debt, or save for a family vacation, car, home, college, or charitable gift?
o Start to prioritize spending and set some money-saving goals. Creating a budget and monitoring spending on a regular basis will help avoid wasting money and start meeting goals you set. (For more on this, read the previous blogs on budgeting and setting spending priorities.)