Smart Money

17 Things We All Buy, But Don’t Need

What do expensive mutual funds and Private Mortgage Insurance have in common? They both make this list of things people waste money on.

Editor's Note

You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted below.

It’s kind of ridiculous how easy it is to overspend. There are just so many things out there that we can choose to spend money on. And sometimes the sheer number of options gets overwhelming, and we wind up buying things we don’t need.

Especially when finances are tight, it's important to only spend money you actually need to spend. Yet many of us spend money on things we don't really need, even though it's pretty easy to avoid these expenses.

So whether you're trying to save more money or just get through a financially difficult time, knowing what to look out for can help. That's why we put together this list of things people waste money on.

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 onto a warranty for 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. Plus, many credit cards offer extended warranties for free.

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 as, if not better than, mutual funds that cost much more. Your retirement will thank you.

Don’t know how much your investments cost? Check out Empower. It’s a free online tool that will tell you.

(Personal Capital is now Empower)

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. You’d hate to pay $500+ if you got into a car accident with a higher deductible. But if you lower your deductible, you’ll pay extra each and every month you pay for your policy.

Check with your insurance agent about how much you could save with a higher deductible on your car or homeowners insurance. Then, put the money you save into a savings account. You'll pretty quickly save up enough to cover that higher 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.

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. Check out this article for some advice on how to choose how much life insurance you need.

5. Cell Phone Extras and Paid Apps

Most of what you can do on your cell phone, you can figure out how to do for free. This used to be the case with additional ringtones. You had a bunch of free ones, but you could subscribe to a service to get more for an additional fee. Note: Your phone will still ring, even if you don't pay for fancy ringtones!

These days, paid apps are the ringtones of the Smartphone world. Some paid apps may be worth your while, depending on what you're purchasing them for. But many times, there's a free app--or a free version of the app--to do what you want without costing extra. Think twice before you purchase apps. Find out how to slash your cell phone bill here.

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 to book the rental 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." So purchasing additional rental car insurance just doesn't make sense.

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 percent 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 percent 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 just pay interest on the overdraft until you pay it off.

But here's the catch: In addition to interest, the banks now charge 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.

12. Exercise Equipment/Gym Memberships

Buying exercise equipment isn't necessarily a bad thing. But if you have equipment or a gym membership you never use, you'd be better off saving your money. If you're already disciplined at working out, these can be worthwhile expenses. Just be sure to keep them as low as you can. Choose a cheaper gym, or get your in-home equipment used.

But if you’ve just made a new resolution to exercise every day, consider a lower-cost option first. Instead of spending a ton on a treadmill, commit to walking or jogging outside regularly. Then if you make that a habit, you can invest in equipment you know you’ll actually use.

13. Single-Use Kitchen Appliances

Any home goods store will be packed with kitchen appliances that have only a single-use. These can be tempting. Sure, it’s nice to save time when peeling potatoes or whipping cream. But if the appliance only has one use, you can probably do better than that. Instead of wasting money on cabinet-hogging single-use appliances, look for appliances with a variety of uses.

For instance, a stand mixer could be a good investment if you bake often. You can give it more uses with additional add-ons. But you won't spend a ton of money on a different appliance for each use your stand mixer can handle.

14. Many Personal Care Products

It’s really easy to justify spending way too much money on personal care products. But do you really need four different types of lotion, sixteen hair products, and twenty-five shades of eyeshadow? Probably not. Your best bet here is to keep things simple. Find a hair, face, and body care routine you like, and stick with a handful of affordable products. When you’re tempted to add more products to your routine, ask if you’re accomplishing anything new or just changing for the sake of change.

15. Formalwear

Sometimes you need to dress up for a special occasion. But owning expensive formalwear probably isn't justified for most of us. Instead of buying a tuxedo or formal gown, it's often best to rent these items. This is especially true if your size frequently fluctuates or you like to stay up-to-date on the latest styles.

These days, women can even rent formalwear gowns online through Rent the Runway and similar companies. You can use a gown for one night for must less than the actual cost of the gown.

16. Things Your Smartphone Can Do

If you have a smartphone, chances are it can do a lot of things you used to have to pay for separately. For instance, you used to have to buy a separate GPS subscription for your vehicle. Now, you can just use your phone's GPS to get where you need to go. Likewise, you can use your phone to get the latest news, to stream podcasts, or to download music.

Go through the list of services you're currently paying for, and see if you can do any of them on your smartphone for free. You might be surprised at the money you could save.

17. Loads of Baby "Stuff"

As parents, one of the primary places we overspend is probably on our children. It’s especially easy to do if you have a new baby. All the stores tell you that you need a variety of “stuff,” including a swing, a bassinet, a pack-n-play, a crib, a specialized changing table, and fifteen different skincare products. The bottom line is that you don’t actually need all this stuff, and you can spend much less money on your baby than this.

This also translates into when you have more grown-up children. They don’t need every toy they want, 50 changes of clothes in the closet, and every gadget known to man. Keep your parental buying decisions simple, and you’ll save a lot of money.

Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC

Abby Hayes

Abby Hayes

Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.

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