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Things to Never Spend Your Money on

8 April 2021

Author: Lote Steina

As we highlighted in a previous blog post, there are things such as personal development, health, or time-saving services that you can splurge your money on fairly guilt free. However, since everything in this world has to be in balance, there are also things that you should do your best to avoid or eliminate from your budget.

If you want to be able to splurge on the good things or just save enough money to make some of your major goals a reality, you should do your best to avoid these things.

Gambling

Whether you are gambling online or in person, it is a pretty bad financial call. The reason is that in almost all cases the system is rigged against you. Now this isn’t a conspiracy theory or anything like that – it’s capitalism at its most basic. Gambling is a mind-bendingly profitable business. Most business owners are not interested in altruistically losing money or building their entire business model solely around fortune. So the odds are always stacked against you. Even in a regular card game between friends the odds of winning wouldn’t be endorsed as a sound financial decision by any conventional financial advisor.

Nevertheless, most of us are wired to trust the gambling institution because of culture and biology. The entertainment, gambling, sports, and a whole lot of other industries have carefully fostered a narrative of a handful of fortunate and happy winners while erasing the endless stories of those who have been driven into financial ruin. Biology also works against us as risk-taking is part of human nature. Indeed, it has long worked in our favor being a driver of innovation, creativity, and entrepreneurship.

Those gambling lose anywhere from a few hundred up to a thousand dollars a year. That’s just a fact. Of course, there is a slight chance that you will be among the lucky few, but statistically speaking it is close to impossible that anyone reading this is likely to make more money off of gambling than losing.

So how to avoid this scourge? If we as human beings indeed crave the process, cut out the problematic part – money. There are plenty of online services that offer casino games (slots, card games etc.) without any financial inputs. Just find a game and compete with others for points or other digital rewards, be it online or offline. Now the online realm is never safe as you may still be enticed to make in-game or online purchases, but you will still be better off than losing hundreds of dollars.

Lottery tickets

Lottery tickets are very much like gambling. However, there is a reason why they could potentially be even more harmful. While gambling often leads to a sudden and drastic loss of money, lottery tickets tear down your wealth slowly, piece by piece. The bad thing is that buying lottery tickets does not feel so harmful and a lack of a major financial shock makes it a habit difficult to kick.

The main reason not to indulge in the lottery habit is that you are very unlikely to win your money back. Sure, you may get the occasional token prize, but even the odds of winning small amounts of money are tiny. As for the big prizes, we all know the comparisons – you are more likely to be struck by lightning twice than win the lottery.

So when it comes to your lottery money it’s best to invest it in something that is more likely to earn you money (like stocks or real estate). And I know – some of you will argue that the lottery is a form of entertainment. I would counter by saying that it’s better to get a real experience, service, or thing for your money instead of a perpetual and unrealizable dream.

Credit card fees

I’m not going to lie – this is a bit of a mystery to me. Not the fact that credit cards have fees, but the fact that anyone would even want a credit card to begin with. Yes, I know it can be a useful tool to build up your credit and creditworthiness. However, more often than not it is just there to enable people to make poor financial decisions.

This is not to say that going into your overdraft is a universally bad idea. Just like with every loan, if you acquire an asset that will increase your productivity or lead to more profits over time, using your credit card may not be a bad idea. For instance, you need a new laptop for your side gig, but your payday will only be in two weeks. If you figure out that in those two weeks you’ll make $200 with that laptop and the total credit card fees will only amount to $20, it is probably a good choice to borrow a little. In addition, overdrafts can be life savers (literally) in case of emergencies.

However, people usually don’t use credit cards for the aforementioned reasons. People mostly go into overdraft to buy stuff that loses a big part if not all of its value after just a few uses. Whether it is a new coat, a gaming system, new headphones, or anything else that is not a necessity (food, medical expenses, transportation costs etc.), it’s just something you should never do. Even if the fees seem fairly low, don’t forget that they add up over a longer time period. Plus, if you become complacent and careless, you will keep on going into overdraft month after month missing your repayments and seeing those initially small fees rise quite drastically.

If you are a keen user of overdraft, do a little math and see how much it costs you over a year. Then think about what else that money could have been used for (depending on your credit card habits this could range from a fancy dinner to a new TV). My two pieces of advice to avoid the perils of the credit card are pretty simple –

1) careful monthly budgeting to minimize the use of your credit card or

2) just parting ways with it altogether and getting a simple debit card (like me).

Food and snacks at airports or gas stations

While due to the pandemic our travelling adventures have been postponed, it will not stay that way forever. And with all that pent-up desire, we will be back in our travel shoes as soon as the opportunity arises. The problem is that when it comes to travelling or just daily trips we rarely plan our meals ahead. Now I understand that travelling is often synonymous with vacation and we want to limit planning and maximize relaxing. However, bear in mind that not buying or preparing snacks or small meals beforehand and giving in to the temptation on the road will be a fairly sizable expense.

Gas station food usually sells for a significant markup while food at airports can easily go for double the usual rate. This is down to two reasons. First, gas stations or airport food venues can often use their monopoly position to charge higher fees. Second, small and far-away venues have neither the scale, nor are they easy to supply to ensure lower prices. It all ends up in us, the unprepared travelers, spending loads of extra money on sandwiches, candy bars, or water that we could have brought with us ourselves. What’s even worse is that we tend to end up spending that money on products that are more likely to be lower quality.

Clothes you only wear once

Many of us have bought clothes that we’ve only worn once or, worst case scenario, have never even put on. It goes without saying that it is neither great for the environment, nor your finances. I’m really not going to delve into this too deeply as this is self-explanatory. But to just get my point across more clearly – a pair of jeans that cost $30 and which you use 100 times cost you $0.3 per use. A $50 dress you buy for a single occasion costs $50 per use. Compare the “per use” figures and the difference is staggering.

Branded products

Now this requires a bit of critical thinking as not all branded products are a bad choice. We buy certain of these products for their reliability, quality, performance, and customer support. For instance, although they can cost a lot, we know that Apple or Samsung products will serve their owners well.

What I am talking about here are the products that do not differ in quality, material, performance, or even design from their counterparts, but cost more just because of a label. We all know these products – expensive beverage brands and food products, building materials, furniture, vehicles, and pretty much everything else. So, whenever you visit a department store, a pharmacy, or an apparel store look for store and generic brands, not the expensive alternatives. You can do your research – most of the time the ingredients, parts, or materials will be the same.

Whenever you have to make a big purchase (electronics, cars etc.), do your research and opt for the cheaper option if the brand reviews are good. Take the example of cars – why buy a Mercedes or Lexus if you can get a Toyota or Nissan. The latter are not just cheaper to buy, but also to fix and maintain.

The talk of branded products symbolizing status and taste may be somewhat true. However, if there are cheaper and equally good alternatives out there, constantly going for the more expensive stuff may also very well end up showcasing financial ineptitude and poor research skills.

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Life doesen't have a do-over.
Commit to it! BePrime!
Life doesen't have a do-over.
Commit to it! BePrime!