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10 ways Americans waste money

Saving money isn't as hard as it seems. Step one? Stop needlessly blowing it.

By Stacy Johnson Sep 26, 2011 12:01PM

This post comes from Stacy Johnson at partner site Money Talks News.

 

According to a new report from the Census Bureau, in 2010 the average American household income was $49,445. Adjusted for inflation, that's about where it was 15 years ago. Even more depressing: The 2010 poverty rate in the U.S. is more than 15% -- the highest since 1993 -- which translates into 46 million souls.

 

Suffice it to say that for many Americans money is in short supply, which makes it all the more important to preserve the cash that comes our way. In the video below, I cover a sampling of ways Americans waste money. Check it out, then read on for more.

You just saw five ways to blow money. Now let's recap, add more, and take the list to 10:

  1. Buying new. Getting something in the original packaging often means paying twice the price. This mistake is most costly when it comes to cars, but it applies to many things: furniture, clothing, textbooks, etc. So whenever practical, skip the stores and showrooms and choose thrift stores, yard sales, eBay and Craigslist.
  2. Accepting initial offers. Many sellers of goods are willing to negotiate because they want your money as much as you want the product. In "Confessions of a serial haggler," I explained how I've gotten discounts on cable service, hotels, doctor bills, and more. It never hurts to ask.
  3. Buying brand names. People are finally wising up to this one; generics have been gaining market share since 2006. While prescription drugs have the biggest price tags vs. generics, the dollars add up at the grocery store too. In many cases, the only difference between generic and brand name is price. Can you really tell the difference between name-brand and generic when it comes to water, cleaning supplies, or spices?
  4. Buying a bigger home than you need. In 2001, Americans spent about 12% of their income on "residential and transportation energy," but this year they're projected to spend almost 20%. Living in a big house with unused rooms or bigger rooms than you need is like driving a stretch limo: You're buying energy for unused space.  A bigger house means more furniture, higher maintenance, higher taxes, and more time spent taking care of it. When home prices were rising, there was some logic to leveraging potential profits by buying the biggest. Now, that extra space is nothing but a cash drain.
  5. Paying interest. This should go without saying, but too few people get it. Borrowing money to live beyond your means makes lenders richer and you poorer. Using credit cards can be smart -- unless you can't afford to pay your balances in full every month. The only time you should ever pay interest: if what you're buying has a decent chance of rising in value at a higher rate than the interest you're paying to own it.
  6. Eating out too much. We recently wrote that Americans eat out about every third day, and offered some tips to save. But even if you drink water and take home half the meal, the cost per person is higher than cooking at home.  Cut back on the dining and you'll keep a few more dollars -- and maybe lose a few pounds.
  7. Keeping unhealthy habits. Smoking a pack of cigarettes a day at $6 each costs more than $2,000 a year. The U.S. government estimates the actual cost is closer to $10.47 per pack, once you add in the medical expenses smokers will face, including insurance costs. Excessive drinking is also an expensive and destructive pastime, as is gambling. There are plenty of healthier and cheaper ways to use free time: See "26 tips to save on entertainment."
  8. Paying for freebies. Why do we pay for things we could get gratis? From TV to travel -- even housing -- creativity and flexibility can often replace money. Check out two of our most popular stories: "10 things people buy they should get free" and "9 best ways to get free stuff."
  9. Turning down free money. As I said in "My 10 dumbest money moves," if your employer is offering matching money for participating in your company's 401k or other retirement plan, and you're not participating to the extent necessary to get the full match, you're literally refusing free money. You're also ignoring an opportunity to get a tax deduction and grow your retirement savings tax-deferred. (Are you saving enough for retirement? Try MSN Money's calculator.)
  10. Paying too much for insurance. You have a fender-bender and do $500 of damage to your car. Would you report it to your insurance company? If you answered "no" due to the justifiable fear of a rate hike, then let's hope you don't have a $250 deductible. If you do, you're wasting money on higher premiums than necessary. Raising your deductible from $250 to $1,000 could save you 10% to 20%. (How does your vehicle compare on insurance rates?)

Did I leave something out? Add your favorite money-wasters below.

 

More on Money Talks News and MSN Money:

78Comments
Oct 6, 2011 9:41AM
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Giving money to finacal advisors......total waste of money!!!!!
Oct 6, 2011 9:40AM
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It should be titled, 10 ways the Government waste money BIG TIME
Oct 6, 2011 9:39AM
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Mister Manners-I agree that time is money. But as far as mowing, washing the car, cleaning house goes...MAKE YOUR KIDS HELP YOU! That is how you do it. Some of my best memories with my parents and siblings is doing yardwork/housework together, getting in clean laundry "fights", hosing each other unexpectedly while washing the car, etc.

That's why kids don't have any work ethic these days. Because people, trying to save money, do everything themselves-without including their kids in the action.

Just something to think about.

Oct 6, 2011 9:21AM
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Buying your book would be a waste, too.  I don't like how you advertised it, and the part about guilt-tripping people on the "eating out too much" segment shouldn't be a way to get your point across. 
Oct 6, 2011 9:18AM
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You forgot sending tax dollars to Washington.What an extreme waste of money!
Oct 6, 2011 9:06AM
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I already buy store brand products, but the thing I can really vouch for is buying things used. The textbook I needed for my history class was priced at about $250 new, but I'm super cheap so the first thing I did was log on to my Amazon.com account and I found the exact same book for a penny. So of course before I go to the bookstore for another text book, I will research online.
Oct 6, 2011 8:57AM
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can you tell the government about waisting money,we need jobs!!!!!!
Oct 6, 2011 8:55AM
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the biggest source of money being thrown away is the 40% traders tax on gas we are now required to pay 40% more than the supply demand curve for gas because rules allowing non delivery speculation are in place just rules thats all. if enough people demanded it they would change these rules to stop this madness but unless that happens you will be paying 30 billion a month for this traders tax on gas and thats a lot of the economy thats being destroyed
Oct 6, 2011 8:45AM
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In attempting to save money, be careful of phony "deals". In "Consumer Reports" latest issue, there were ratings of various 'outlet' prices vesrus regular 'retail' prices for what is purported to be the same items.

 

Many , many outlet store prices were no bargain!

 

Consumer Reports found considerable differences in the quality of the "same" items with items at "retail", though more expensive than "outlet" stores.

 

I was amazed at how smarmy are the people who sell at "outlet" prices what are actually inferior copies of "retail".

 

'You get what you pay for' is unfortunately very true.

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Wasting energy, especially petroleum and electricity, can be very expensive these days.

 

Selecting the wrong cellular telephone plan can cause you to spend far more than necessary.

 

A backyard garden can save cash, along with cooking your own "snacks" instead of buying.

 

Reconditioning/renovating an existing article can be far less expensive than purchasing new or used.

 

As long as our government sells us out to communist China, Vietnam, Mexico, and others, the list we speak about will become bigger and all the more important.

Oct 6, 2011 8:31AM
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I agree with Mister Manners.  You take a chance when you buy used.  My daughter needed a MacBook for school (when she had a perfectly good Windows laptop!) and since they were THREE times as much as Windows laptops, I cheaped out and bought a reconditioned one.  Last week, it died and although it will be fixed, she is without a laptop in the meantime and who knows how long it will take?  I am cursing myself for not paying the extra $$ and buying a new onw.
Oct 6, 2011 7:52AM
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If you have an aversion to sitting on a someone else's used couch or wearing someone else's used clothing, buy them on clearance (not sale, clearance). Cheap and at least brand new.
Oct 6, 2011 7:48AM
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I always mow my own yard, repair anything broken (read a book on repairs - it is amazing the info out there on just about anything!! I not only save money but teach my children how to do it - great way to teach them the value of a hard days work !!

 

Oct 6, 2011 6:44AM
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I raised my deductible from 500 to 1000....guess how much a month that saved me ?   7 dollars.

Oct 6, 2011 5:49AM
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Be careful with that insurance deductible.  If you have a lien on your vehicle you better check with the lien holder.  I work at a financial institution and one thing you sign is an agreement to have a deductible of $500 or less. 

 

To BosoxinNY, depends on your location - name brands here cost about $4.50 -$5 pack depending on how and where you buy.(pack vs carton, convenience store vs grocery)

Oct 3, 2011 7:45PM
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No I paid $500 for a 1998 Nissan Frontier,put $2,000 worth of sensors + a battery and alternator and body work that I did my self.. (yes,I priced the sensors on the market,they really are that expensive)and it gets me to where I want to go and hauls what I need it to haul.And it has a frame thats not rusted out..why buy new?
Sep 27, 2011 6:25PM
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I have a contrarian view to 1. Buying used, in my experience, has cost me more money. Why? Because, as the adage says, I got what I paid for (translation: sh*t), and had to end up buying again sooner than later and ultimately spent more money than if I had bought quality new and taken care of it.

 

Also, for the view of paying for services you can do yourself - sure, that'll save you money. But as another adage goes, time is money, and what you save in money you burn in time - time that can be used to offset the cost of the service in more ways than one. For instance, you could use that time to sell some junk on Craigslist, build some woodworks and then sell them, etc. Or you can spend that time with your family, the best return of all. Hard to spend time with your children when you have to mow the grass, wash the car, work on the plumbing, etc.

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