The first step to improving your financial health is identifying areas where money is wasted. This doesn’t mean driving your family crazy nitpicking on every little expenditure. But, it wouldn't be wise to overlook some common areas where most families overspend or lose money. Learn from their mistakes and you could have enough money racked up to save more retirement, get debt-free sooner, or even take a much-needed vacation.
1. Extended Warranties
Why spend extra to make sure an electronic appliance or gadget works as it was intended to? Especially when the extended warranty costs nearly as much as fixing or sometimes replacing it. The fact is consumer electronics are actually growing cheaper, since manufacturers are shifting facilities to cheaper locations to stay competitive on prices. Consumers are accustomed to inexpensive cell phones, stereos and television sets, and they'll push back if prices go higher. So, these companies increase their profits by selling expensive extended warranties.
Most products come with a manufacturer's 12-month warranty. So, next time a salesperson tries to sell you an extended warranty carefully considered whether or not it's really worth the cost.
2. Luxury Items or Services
Everyone has that “one and only” vice they know costs too much. You tell yourself you have to have it or you’ll go crazy. The fact is you should give it up now, so you can enjoy it later in life when you’re reaping the rewards of retiring with zero debt and financial independence.If you’re having trouble giving up wine, cigars, professional manicures and pedicures, facials, or whatever your personal luxury might be, find a way to replace it with a cheap alternative. For example, you could buy a nice nail care kit and learn to use it. Or reduce how often you splurge on your little luxury rather than doing away with it entirely. Instead of getting a massage once a month go every other month and set that cash aside for your savings.
3. Paying For Low Deductibles
Increase the deductibles on your auto and home insurance. You’ll pay less money each month, and odds are you’ll save more in the long run even if you make a claim at some point. Be sure to save the extra money in case it is needed. If it’s not used towards a future deductible, the interest you earn on the money you've saved will help pay for retirement, or fund your children’s education.
4. Mismanaging Your Taxes
It's not uncommon for people to pay more than necessary on their taxes. In reality, by paying taxes you give the government a loan that’s paid back without any interest. There are a number of factors that determine how much, if any, of that loan you'll get back. Get help from your HR department to make sure the correct amount is allocated. If you’re self-employed or a small-business owner, save all your receipts to claim all of your business expenses.
5. Unnecessary Transportation Upgrades
Ironically, this is one big way that people get into debt in the first place. Statistics show that people spend 15% more when using credit cards, and often this means getting the nicer, more expensive option when paying for transportation. Nine times out of ten the cheaper option is going to get the job done just as well. This is true when flying in a plane, getting a rental car, taking the subway instead of a cab, etc. Just get there the cheapest way you can, and reap the rewards later.
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