11 Things We All Buy, But Don’t Need

Particularly in financially difficult times, the last thing we should do is spend money on stuff we don’t need or even want. Yet that’s exactly what many of us do. I’m guilty of it, even though avoiding these expenses is really easy to do.

So I thought it would be a good time to put together a list of things many of us a buy, but really don’t need. If you can thing of other things we waste our money on, please add to this list be leaving a comment.

  1. Extended Warranties: Service contracts and warranty extensions are my biggest pet peeve. I love it when a store clerk asks me if I want to spend $39.95 to add one year on to a warranty of something that costs $150. Are they serious? Yet electronics retailers and other stores make a fortune on extended warranty contracts. While none of us wants to spend $150 to replace or repair something that breaks, we could if we had to (or we could go without). The service contracts and extended warranties are never worth their cost. We should look to insure only those things that are vital (e.g., home, life, health, auto) and that we cannot afford to replace.
  2. Expensive Mutual Funds: Investing in high cost mutual funds is an easy mistake to make. Unfortunately, mutual funds don’t send us a bill each month for the cost of their services. If they did, high cost mutual funds would go out of business fast. As a general rule, keep the total weighted cost of your mutual funds under 50 basis points (1/2%) and the cost of any single fund under 100 basis points. These funds are every bit as good (if not better) than mutual funds that cost much more. Your retirement will thank you.
  3. Low Deductible Insurance: This is similar to buying extended warranties. We generally don’t need to pay for low deductible insurance policies, particularly for auto and home. We raised our car insurance deductible to $500, which is the maximum permitted by law where we live. We’d hate to be out $500 if we had an accident, but the cost of a lower deductible policy (say $250) is just not worth it. If you haven’t already, check with your insurance agent and find out how much you’d save if you raised your deductible.
  4. Unnecessary Life Insurance: Buying life insurance is not my idea of a fun time. Yet for those of us with dependents, life insurance is generally a must. But be sure not to buy more than you need. One rule of thumb says you need 17 times your annual salary. That’s a good place to start, although your specific set of circumstances may require more or less insurance. Stick with term life insurance, which is the least expensive, and recognize that once the kids are grown, you’ll need a lot less (if any) life insurance.
  5. Ringtones and other Cell Phone Extras: Having just removed several ringtone subscriptions that were added to my children’s cell phones when they took a survey on Facebook (at least that’s their story and their sticking to it), I can attest to how quickly these costs can add up. A cell phone advertised for $9.99 a month can quickly become $50 a month after taxes, fees and a bunch of “extras.” Study your bill each month and stay away from the unnecessary extras the cell phone carriers love to tack on.
  6. Rental Car Insurance: Rental car insurance is almost always unnecessary. Your own car insurance policy should cover you (although make sure to double-check), and the credit card you use probably offers rental car insurance. For example, Discover Credit Cards come with the following rental car insurance: “Your Discover Card comes with a Car Rental Insurance Plan that provides $25,000 of secondary collision damage insurance when you rent a car using your Discover Card and decline coverage offered by the rental agency.”
  7. Private Mortgage Insurance: We paid for private mortgage insurance 15 years ago when we bought our first home. Because home values increased a few years later, we were able to get rid of PMI quickly. But as difficult as it can be, the best bet is to save a 20% down payment before you buy a home. If you do, you avoid the cost of PMI. Another option is a second mortgage. Interest rates will be higher on a second mortgage than on the first, but interest is usually deductible, and interest payments decrease as the principal amount is paid off. If you do have PMI, make sure to ask your mortgage company to remove it once you’ve built up a 20% equity cushion.
  8. Unnecessary Cable, Internet & Phone Service: Have you ever spent 10 minutes studying your cable, Internet, and phone bill? It’s amazing how much “stuff” you get charged for. For cable, we get charged for high definition, a digital video recorder, the digital video recorder service, the remote control(!), and of course cable. This is one of the reasons we are in the process of canceling our cable in favor of free HD TV. But scan your bill each month to see if there are services or extras you don’t need and cancel them.
  9. Overdraft “Protection” Fees: This one is really aggravating. Most banks offer overdraft protection. Spend more than you have in your account, and the bank will cover the difference up to a certain amount. You’ll pay interest on the overdraft until you pay it off, which for us is never more than a few days. But here’s the catch. In addition to interest, the banks are now charging a fee as well. The fee can range from about $10 to as high as $35, from what I’ve seen. These fees can make a payday loan look like a good deal. As a result, stop relying on overdraft protection.
  10. Too Much Electricity & Natural Gas: It is so easy to cut back on electricity and natural gas costs. Just using a few CFL bulbs will save money. Add to that a programmable thermostat, energy saving power strips, better insulation and weather stripping, and a natural gas water heater, and you can save a bundle.
  11. Books & Magazines: Mrs. Dough added this one, and she gave me a look suggesting that somehow I buy too many books and magazines. She’s right, of course. I usually justify the purchase because it relates to blogging, but it’s still money out the door. And because I buy the same magazines every month, I need to get a subscription, which typically saves more than 50% off the cover price. The point is that the cost of books and magazines really adds up. Combine the library with magazine subscriptions, and you can save a bundle.

As a final note, I’d like to wish Mrs. Dough a happy 21st wedding anniversary! Anybody who can put up with me for 21 years deserves a medal.

Topics: Personal Finance

13 Responses to “11 Things We All Buy, But Don’t Need”

  1. Warranties of any kind are a waste, such a rip off. The only time I do that is on a computer because I know it will last 4 years and it’s very expensive. I actually buy books and can understand how its a waste, but I enjoy the buying and reading experience and most libraries don’t have the books I want.

  2. Per discussion of not paying rental car insurance, I use to rent cars every weekend because I was trying to save up for a new car. Just remember your policy may cover an accident, but you still would have to pay a deductible just like it was your car. Then your insurance may go up on a car that wasn’t yours. Worse yet, your policy doesn’t cover an accident. Just a thought because most people decline insurance without fully thinking about it.

  3. I agree with you on the extended warranties. Many years ago, I used to work for Sears and we were encouraged to sell warranties and sign people for credit cards more than actually selling products. In extremely rare cases where the warranties come with a service agreement that will do preventative maintenance or cover accidental damage they might be worth it for some people. However, most of the time the average person will forget to even take advantage of this benefit, and it is just a 100% profit for the company selling it.

    Also, great mention with the magazine subscription. This is one I struggle with as well. I LOVE magazines and I pay full news stand price on all of them month after month. Time for a subscription.


  4. Re: rental car insurance

    JD at Get Rich Slowly had a post a while back about getting into a car accident in a rental car. Some comments suggested that getting the rental insurance is important because there are some fees that are typically tacked on that your insurance probably won’t cover. And the “secondary” part of the credit card insurance may indicate that it only kicks in after yours, which leaves you with the deductible. If you just pay for the rental car insurance, you hand them the keys and walk away.

  5. Dee, I remember that article well. The question remains, however, whether it is worth buying insurance to cover those types of fees. If I can afford to pay for the fees should I get into an accident, I would not buy insurance to cover those fees. Just my two cents!

  6. As to #11 and Craig’s comments, I would suggest a more thorough look into the library. I do live in an urban area so our library system may be more advanced and offer more features than others, but in our library you can request books, CDs and DVDs (to buy) and have books from other libraries (including the big “central” one on the other side of town) put on hold for you for free. Our library also makes all back-issues of magazines available for checkout as the new months come in. If I read anything I want a copy of, etc. I can wait for the next month and check it out and make whatever photocopies I want (clearly I’m far too frugal to pay 10 cents for each copy!)

    I have a friend who buys books because she wants to “build a library” and ostensibly likes seeing lots of books around her. I have the same thing and can visit it any time I want for free.

    My library is an *amazing* resource. I’m willing to best most everyone else’s is at least pretty good.

  7. Congratulations on the 21st anniversary!

    Great list. Oddly, I’ve found that the programmable thermostat has resulted in higher power bills, not lower. This has been true two months out of three — last month by a large margin. Apparently I was doing better with the analog thermostat, leaving the air conditioner off until it was too hot to breathe and then turning it on at the warmest tolerable setting, than with relying on a computer chip to do the job.

  8. This is a great list. I’m guilty of several of those…

  9. Good list of ways to save money on items we don’t really need to buy. I like the library for borrowing books, CDs and DVDs. Exchanging books with other friends is also another good way to save on buying books and also frequenting second hand libraries and discards from your local library.

  10. A really good list of ways to save money during hard times. I agree with and actually do most of them.

    I guess the one area that I would have to ask the question “How do you know?” would be centered on #4 “Unnecessary Life Insurance” .

    Sure, buying more life insurance than we actually “need” can seem like a waste of money. .. But if you happen to die with this “extra insurance” coverage in force, the death benefit will probably have a better ROI than any of the more traditional asset classes.

    The bummer with term life insurance is that:
    1) If you live, you don’t collect anything.
    2) If you die, your beneficiaries get the benefits.

    Beneficiaries don’t often complain about the “extra death benefits”. They are usually more concerned about that it is not enough.

    That is why it is important to speak with a licensed, professional agent who can help you best assess your needs and more importantly, your wants.


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