You probably want to stretch your dollars and save more, and you look for quick tricks to do so. It’s easy to fall for all the latest financial tips with so many “money hacks” out there. Unfortunately, some of those hacks that sound too good to be true are. They can build your bad habits that are hard to break instead of building your savings.
These popular hacks can sometimes cost you more in the long run, by encouraging overspending or by neglecting the basics of smart money management. Below are some of the biggest money saving tips that could actually be doing you more harm than good.
Store Credit Cards for “Instant Savings”
That store credit card that entices shoppers with offers of instant discounts can end up costing you a lot. Store cards often come with interest rates of over 25% and can soon add up if you don’t clear the balance right away. People are also tempted to buy more than they need, with that 15% off not really being that valuable.
Buying in Bulk to Save Money
One common hack is to stock up at warehouse clubs, but it’s all too easy to overestimate how much of what you actually need. When you buy produce, dairy, and pantry staples in bulk, they often go to waste. To avoid wasting food and money, stick to only buying what you’ll realistically use.
Giving up All Small Luxuries
Maybe skipping your coffee or weekly treat will be a simple way to save money. Cutting every single luxury can lead to ‘frugality fatigue,’ which means you’re more likely to overspend later. Don’t cut them out entirely, but set a budget for how much you are going to spend. Small luxuries can fit into a balanced budget, according to financial advisor David Bach, as long as you put larger savings goals first.
Signing Up for Free Trials
Free trials are harmless until they auto renew into expensive subscriptions you didn’t plan for. Companies count on many people forgetting to cancel. If you tend to forget things, don’t sign up for free trials at all, or at least set a reminder to cancel before the trial ends.
Buy Now, Pay Later Plans
“Buy now, pay later” plans have become incredibly popular — but they often lead you to overspend on things you otherwise wouldn’t. These plans are convenient, but they also hide the risk of racking up debt if you make a few purchases this way. Recently the Consumer Financial Protection Bureau warned that these services can result in late fees and damage your credit if not handled correctly. You should stick to buying only what you can afford upfront to get out of the debt spiral.
Using Coupons for All Purchases
Coupons are a great tool, but they’re a trap that encourages you to buy things you don’t need. Hunting around for discounts on things you didn’t plan to buy can end up costing more than you save. To avoid this trap, use coupons for only things you’d planned to buy anyway.
Saving Money by Buying Cheap Products
When the bargain bin seems tempting, consider that cheap products tend to wear out faster and have to be replaced more often. There are always cheaper things out there, but it does pay to spend a little bit more upfront on quality products.
Credit Card Minimum Payments
While paying the minimum on credit card balance may seem like a way to have money in your pocket by paying only the minimum on credit cards, it’s a quick way to get into more debt. Interest will pile up and you will pay much more in the long run. Experts who help people manage money advise paying the entire balance whenever possible to avoid interest charges and to pay back debt faster. If you can’t pay it all, pay more than the minimum to make progress.
Chasing Loyalty Rewards
Overspending can be encouraged by loyalty rewards programs if you’re trying to ‘earn’ discounts or points. The savings are negated by the fact that many people spend more than they intended to get a few extra perks. Only join these programs if you would spend the money anyway, regardless of the reward.
Buying Expensive Organics
Many people believe that organic foods and products are always healthier, and they’re often more expensive. Not all organic items are worth the price, though. Organic only for certain produce, and save money by buying the regular versions of others.
Tracking Every Expense Using Apps
While expense tracking apps can help you keep track of your spending, over reliance can be counter productive. It’s so easy to get caught up in tracking that people lose sight of their bigger financial goals. At times, it is better to simply create a budget plan than to examine every single expense. Suze Orman, financial advisor, advises to focus on the big ticket items, and your total spending goals, but not micromanaging every dollar that goes in and out.
Generic Everything
Choosing wisely, generics can save you money. Some generic products are just as good as brand names, but some will cut corners on quality, leaving you spending more in the long run. Not all items such as over the counter medication or electronic items can achieve the same results. Be selective about generics, only opting to save where it won’t matter that much.
Borrowing From Retirement Accounts
While dipping into your 401(k) or IRA might seem like a convenient short term solution, it’s rarely a good idea. Withdrawals from retirement accounts before retirement age carries taxes and penalties, and you also forgo compound growth. Unless it’s a dire emergency, don’t touch retirement funds.
Simply Obsessing With Cutting Costs
Saving is important, but limiting yourself to cutting costs without looking to increase your income can be limiting. You can only save so much, but there’s no limit to what you can potentially make. Instead of focusing on the small savings you can make throughout your day, think about how to boost your income (maybe some freelance work or smart investing).
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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