Many of us are trying to be smart with our money these days but you may be spending money on things you don't need. We found five common money traps that drain your money and often give you nothing in return.
Throwing money away isn't anyone's goal yet it happens all of the time according to financial adviser Roger Dunham. He says, "Take your dollars and put them in a place where they have the potential to have significant growth." Dunham says that is the definition of an investment but that what some people think is a great investment these days may not be the best option.
A mutual fund pools money together from thousands of small investors and then its manager buys stocks, bonds or other securities with it. However, Dunham says mutual funds can be expensive and most people do not get a bill each month for the fees attached to it. Therefore, they can lose track of their finances.
Money trap number two is rental car insurance. When you rent a car you more than likely will be approached with the option to buy it. If you already have full coverage auto-insurance John Wiscaver with State Farm, says you may want to say no. Wiscaver says, "If you have an auto policy you typically don't need those additional coverages." Wiscaver emphasizes if you do not know what your car insurance covers you may want to ask about your policy before renting a car.
Also, when it comes to electronics, many places offer extended warranties. Experts suggest one thing, make sure its a good deal. Roger Goins works with computers all of the time. He says, "Almost always stay away from them. They are almost always over-priced for what they're covering." He has plenty of experience buying and selling equipment. He has bought extended warranties before and says, "What they offered in terms of warranty service ended up coming with service charges and add-on costs and I ended up with something that was outdated anyway." Goins suggests just saving the money to invest in another TV or computer down the road. He adds, "The money you spent on the warranty would go a long way in replacing it when the time comes."
The fourth money mistake is relying on overdraft protection too often. It is easier said than done, but many banks charge high fees for each transaction made that results in an overdraft. Anna Christie has been in the situation before. She says, "I think its awful and I hate wasting money on it. If you are already overdrawn in your account.. its just not fair."
And finally, mortgage insurance can be another trap. Dunham says do your research. He says, "Often times those who buy a home are under the impression you have to buy mortgage insurance but they don't. For many of them they are more in favor of the lender than the borrower." Read the fine print or you could be wasting cash. Dunham says, "Be sure to read it all and make sure you know how those benefits are made because most of those who are informed will not buy that sort of insurance."
For many folks its a time that every dollar counts. When in doubt ask questions so you don't buy something you don't need or already have.
