When it comes to building savings, financial hacks and shortcuts can sound like an answer to a prayer. Who doesn’t want to save more with almost no effort? There’s no shortage of ‘easy wins’ for stretching a dollar from automating expenses to using rewards programs, but not all savings tips are as good as they sound. In fact, some so-called ‘smart’ hacks can leave you with less money in the bank. The very strategies that you think will help you build wealth can backfire and bleed your savings dry.
With a little understanding, and a bit of know how, these financial hacks can become a blessing instead of a curse. We’ll look at a few of the most popular money saving tricks that might be causing more damage than good. After all, sometimes, the best financial moves are the ones that take time.
Heavily Relying on Cashback Credit Cards
Cashback credit cards sound like a no brainer— Use your card, you get a percentage back of your spending. They can also make you spend more than you would’ve otherwise spent — just to ‘earn’ rewards. It turns out consumers who use reward credit cards end up spending more, eroding any cashback benefits. The truth is that those rewards are nothing more than a trap to ensure that you remain in debt, if you aren’t disciplined enough to pay off your balance in full each month.
Subscription Boxes and Services Over Subscribing
Subscription services for clothes and meal kits seem like a great way to save money, but there are lots of subscription services out there, and they can add up quickly. Many of these subscriptions have auto renew and it’s easy to forget that you are actually paying for them. Many people have underestimated how much they spend on these recurring charges. If you’re not careful, you could be spending money every month on services you never use, eating into your hard-earned savings.
Buying in Bulk Without a Plan
It doesn’t take a genius to know that purchasing in bulk is a great way to save when you’re a family. However, if you’re not careful, you could be wasting food or products you bought in surplus. Food and beauty products have expiration dates and often result in waste. If you don’t have a plan for when and how you’re going to use these items, then bulk buying can actually be more expensive than just buying what you need.
Always Going for the Cheapest Option
Savvy money saving advice means going for the cheapest option until quality prevails over price. Cheap products tend to wear out faster, which means you’ll probably spend more than you would on a quality product. Investing in quality is actually good for your wallet for items such as shoes, electronics, or even kitchen appliances, because you won’t need to replace them as frequently.
Earning Bonuses by Signing Up for Multiple Bank Accounts
Bank bonuses to open a new account are often called “free money.” Juggling all those accounts can be just too much and will result in maintenance fees, missing minimum balance requirements, and overdrafts; all of which sucks away from your savings. Also, having too many accounts for your money to be spread out across can complicate the handling of finances.
Following Everything You See on the Internet Regarding Every Frugal Living Tip
There are frugal tips all over the internet, but not every tip will work for your lifestyle or financial situation. Sometimes, extreme frugality can deprive you of the means to sustain it. Let’s say you never go to social events because you want to save some dollars, that seems like a smart idea, but it could make you unhappy. Instead, choose frugality tactics that actually help your financial and personal life, and don’t blindly follow every piece of advice.
Using Store Credit Cards for “Exclusive” Discounts
Promises of discounts and exclusives sales lure you into your store credit cards. Yet their high interest rates mean if you carry a balance, you’ll likely pay more in interest than you saved on that initial discount. The Federal Reserve reports that retail credit cards often carry interest rates over 20 percent, which means that if you can’t pay your balance in full, the ‘savings’ are just a mirage.
Investing in Trends Rather Than Sound Financial Strategies
Everyone wants to be on the next big thing bandwagon, but chasing after investment trends as cryptocurrencies or hot stocks can be a disaster if you don’t have an idea what you are doing. Investments that are trendy and volatile are not necessarily mutually exclusive. Putting your savings in untested, speculative investment may result in huge losses. Sticking to a steady investment plan — diversifying among stocks, bonds, real estate and cash assets — is often a duller, but safer, way to grow wealth.
Purchasing Cheap, Below Par Insurance
A budget friendly insurance plan sounds like a way to save, but low-quality coverage can actually end up costing you more down the road. No matter if it’s health, auto or home insurance, going with insufficient coverage can get you uncovered when you actually need it. It costs a lot less to invest in adequate coverage is peace of mind and financial protection.
Always Chasing Sales and Discounts
Sales and discounts are, in a way, financial wins, but if you’re buying things you don’t need just because they’re on sale, you’re not actually saving money. Impulse purchases do stack up quickly, and visits to sales shopping can end up with a closet full of unused items. If you’ve been offered a discount, ask yourself whether you would have bought it at full price. If you’re not, it’s probably not a real “saving” for you.
Using Savings Apps Without Checking on Your Spending
While savings apps and cashback apps can make it easy to see where you spend, they can also lead to a false sense of security when it comes to saving. If you’re relying entirely on an app, make sure you’re paying attention to where your money is actually going to prevent spending too much. When it comes to budgeting tools, they are really helpful, but they aren’t meant to replace your regular check ins on your goals and habits.
Financial Education vs Financial Hacks
Shortcuts are easy but long term savings need more than that. These hacks will only take you so far without a budgeting foundation. Financial literacy means making good decisions and those with financial literacy are able to perform than those who use only short term tricks. Learning a little about budgeting, investing, debt and such can be more secure even than a temporary hack.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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