Saving money is a marathon, not a sprint. Whether you’re just starting your budget-friendly journey, or you’ve already built strong financial habits, you’re on the right path. But beware! There are many trends floating around that may seem like they’d be helpful for your wallet, but may end up costing you more in the long run. Let me expose some of the most common spending traps and how to avoid them.
Leasing a Car
This is one of the most common budget traps. On the surface, leasing seems like a great option because of the following:
- There’s usually a smaller down payment for leasing than buying
- The monthly payment is usually lower for leasing than buying
- You’re usually only locked in for two or three years.
But the tough truth of it is that if you really want to get the most bang for your buck, buying is a better option.
Although leasing may be cheaper during the time of your lease, it leaves with you with nothing of value at the end. If you do all the proper maintenance, experts say that most cars will last you up to 10 years. So after you’re done with the payments, you’re essentially driving your car for free – until it’s time for a new one. You can use an online calculator like this one to see how the numbers work out. In almost every case, buying will be the best long-term option for your wallet.
Capsule Wardrobes
Capsule wardrobes are a trend where your entire wardrobe consists of a minimal amount of clothing items all meant to complement each other, so that you can mix and match without having a whole closet stuffed full of clothes. This is an awesome way to get more use out of your clothing. And if that’s all you’re doing, sure, you’re going to save money. But that isn’t usually the case.
Let’s face it – if you were already utilizing all your clothes to their full potential, you wouldn’t need a capsule wardrobe. In most cases, giving your wardrobe a makeover to become a “capsule” wardrobe is going to cost you. Instead of rushing to the store to buy pieces for your new trendy capsule wardrobe, you’ll save more money in the long run by thrifting for in-season clothing and purchasing high-quality staples, like jeans, for the rest of your wardrobe.
Also Read: 5 Ways We Overspend Without Realizing It
Taking a “Staycation”
There’s evidence to suggest that taking a staycation will cost you more money than a true vacation. The next time you’re thinking about taking a few days off to explore places nearby, you may want to consider casting a wider net. If you plan effectively, your budget won’t suffer as much as you might think.
Not only will a real vacation make you feel more fulfilled, you’re more likely to be careful with your money when you’re not on your home turf. Travel services like Airbnb, airfare watch apps, and credit card reward points and miles make it easier than ever to spend a minimal amount of money while maximizing your R&R.
Also Read: Best Travel Rewards Credit Cards for 2018
Spending Only Cash
Lots of people swear by the envelope budget, which is a type of budgeting method that involves using envelopes of cash to keep your spending under control. This is a great budgeting method for some people, but if you want to take advantage of 21st century tools to get ahead financially, this trend is going to end up costing you money. I just want to plug a couple of my favorite tools here – Personal Capital and Acorns. These tools work great because I make most of my purchases with my credit or debit card.
Acorn rounds up to the nearest dollar on my purchases and invests it automatically – helping me build up my savings every time I spend. If I were doing my spending in cash, who knows how long that spare change would sit around? Getting it invested helps me capitalize on the power of compound interest. It may not sound like a big deal, but those little acorns of change really do add up!
Using Personal Capital allows me to analyze my spending trends. On a cash budget system, I’d have to keep my receipts, enter them into a spreadsheet, and pray that I could figure it out myself. Sounds like 1995, if you ask me. Instead, Personal Capital can tell from my account activity what steps I need to take to enhance my financial wellbeing. It’s seamless, easy-to-use, and extremely powerful for anyone who wants to take full control of your budget. I can guarantee there’s no envelope out there that can give you that kind of value!
