Avoid these costly mistakes.
Money can be a very sensitive topic. Much of society sees money as a benchmark of how successful you are. The more you have, the more successful you must be, right? Wrong.
Someone without a lot of money could drive a fancy car or wear designer clothes to impress their friends, family, or whoever else they are trying to get the attention of. Similarly, someone who has plenty of money could drive a beat up car, wear old, faded jeans with holes in them, and live a minimal lifestyle.
Looks can be deceiving, and they never tell the full picture. Plus, just because you do have a lot of money, that doesn't immediately make you a "successful" person in every way possible. There are far more important things in life than money - family, friendship, love, etc.
Still, it will be hard to live a happy, stress free life if you don't make enough money to achieve a standard of living that allows you to cover all necessary costs like food, housing, utilities, etc. Luckily, you don't have to make a fortune to cover all of your basic expenses. In fact, if you are smarter with your money than most people, you can make less and still live a comfortable life.
The following are three things people who are smart with their money do not ever buy. Avoid them to save more and dodge unnecessary expenses that could affect you financially in the long term.
*This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice.
1. This Item Brand New
When I went shopping for my first car, I was already midway through college. I had a strict list of features that I wanted my car to have, but those features did not include a sun roof, heated seats, or a specific color. Most importantly, I did not want to buy a new car.
Not only was I unable to afford a new car, but I also knew it would not be a smart decision financially.
"A brand new car looks and smells good — but it’s never worth the price, says self-made millionaire and bestselling author David Bach. Nothing you will do in your lifetime, realistically, will waste more money than buying a new car, he tells CNBC Make It. It’s the single worst financial decision millennials will ever make.”
The moment you drive a car off the lot, it is no longer "new". Even if you buy a very, very gently used vehicle, you can shave some money off the sticker price. Financially, it doesn't make sense to buy a car new.
I had a list of practical necessities - low mileage, clean, ran well, minimal to no previous accidents, no serious cosmetic issues, etc. Of course, I brought my dad with me whenever I went to look at a car, because he has a ton of experience in the industry and actually used to work on cars extensively.
I ended up with a tan colored car that was not fancy, sleek, or modern, but it ran beautifully and it continues to get me wherever I need to go effectively, which is the most important part.
Even today, about three years later, I am still happy that I made the purchase I did. Still, there is one feature I would look for if I could go back. I would consider getting a car with four wheel drive, as I only have front wheel drive, and I have lived in a state that snows heavily each winter for the past three years. Thus, it would have been a very convenient and practical feature to have.
2. Luxury Goods
While you might see celebrities showing off their luxury goods on the red carpet, those who are smart with their money don't drop $1,000 on a purse or $500 on a coat. In fact, Business Insider cites a survey which shows that many of those who are millionaires often shop at low cost retail stores, like Lowe's, Target, and even Costco:
"Millionaire Corner, a wealth management news site, surveyed 1,200 investors to ask which retailers they actually shopped from. Among the respondents with a net worth of $5 million or more, Home Depot, Lowe's and Target were the most popular retail stores. Nearly half the respondents said they like to shop at Costco, while a third shop at Walmart."
Finding the best prices on necessities like groceries, household products, and even home improvement items is an easy way to save serious cash week after week. Those who are smart with their money understand this, and they are able to get a lot more for their money as a result.
3. Credit Card Purchases They Can't Afford
There is nothing inherently wrong about putting a large purchase on a credit card. In fact, it can actually be beneficial if you get cash back or travel rewards on your credit card.
The problem arises when you make charges on your credit card that you can't afford, and therefore, don't pay off each month. This leads to interest charges that are often very high and become more and more difficult to pay off, until you are consumed in debt.
"Most credit card issuers offer a variable annual percentage rate (APR), which means that the interest rates fluctuate with market conditions."
The rates by credit card vary, but they can often be as high as 20 - 25 percent. These insanely high interest rates can get you into some serious debt, so it is important to be aware of how much you are spending.
It might be easier to swipe a piece of plastic than fork over that hard earned cash. However, you have to remember that even when you make a credit card purchase, you still ultimately have to pay that money back.
The money you bring in each month might seem like the most important aspect of your finances. However, the way in which you save or spend that money is equally important.
Once I got to college and started managing my own money, I quickly learned how to budget, spend less, and save more.
Learning personal finance can help you manage your money better. Ultimately, this will allow you to save more, spend less, and achieve more financial freedom, so it's certainly worth the time and effort.