Money Wasters: Top Five Questionable Expenses

We all have our guilty pleasures when it comes to spending. For some, it’s a weeklong vacation at the end of the year. For others, it’s the latest tech gadget or a new piece of furniture. Splurging is fine as long as you plan for it, but living outside your budget is a recipe for credit disaster. Stretching yourself too thin can lead to overwhelming debt, unpaid bills and credit score damage. Ironically, many of the things we spend too much on have two things in common: their prices are variable, and they are often used as status symbols.  When it comes to saving money, it’s important to value utility over style and popularity—especially if you are working to improve your financial life. Give these money-wasters a second glance. The result could help you strengthen your resources.

Organic food.

High-end grocery stores tend to boast about their fresh organic produce and other products. Fair enough, but what does “organic” actually mean? According to the USDA,

Raw or processed agricultural products in the “100 percent organic” category must meet these criteria:

  • All ingredients must be certified organic.
  • Any processing aids must be organic.
  • Product labels must state the name of the certifying agent on the information panel.”

On the other hand, products that are labeled “made with organic ingredients” only require 70 percent of their makeup to fall into that category. The bottom line: Health is important, but investing your money in expensive food should result in a worthwhile payoff. Do some research to avoid overpaying for your groceries.

Private education.

There are a few good reasons to choose private education for your child:

  • The school fosters your religious ideology of choice
  • The public schools in your area offer sub-par curriculums or are located in a dangerous geographic location
  • The teacher to student ratio is generally better in private school

Private school is a perfectly valid choice for any family. That said, it’s important to consider all the options surrounding your child’s education. Consider the following example:

Michael and Cara Elison have three children, ages 9 to 14. The family has recently relocated to Naperville, Illinois, a community known for its excellent public school system. Although the Elisons previously sent their children to private school, they do some research to learn more about the schools in their new town. Much to their surprise, they are impressed with the public schools and decide to opt out of private education.

Education is important, but as the Elisons learned, it’s important to take a closer look at your choices. The result could allow your kids to reach their goals without emptying your bank account. Open your mind and consider your options.

Décor and electronics.

Sure, a custom upholstered sofa and a 60-inch flat-screen are desirable, but at what cost? The price of “stuff” is variable, and you should never spend $100 when $10 will do. Keep your credit health in mind when shopping for the perks. This strategy will help you keep your priorities in check.

Homes.

The ultimate status symbol: a big house. While lenders are imposing stricter rules when it comes to mortgage qualifications, they still can’t stop you from getting in over your head. When shopping for a home, ask yourself the following questions based on need:

  • How much square footage do I need? (e.g., if I live alone, why do I need four bedrooms?)
  • How much money do I need in the bank? (How will a down-payment affect my emergency fund?)
  • How will an inflated mortgage affect my ability to meet less-negotiable needs? (e.g., electricity, student loan payments, medical insurance premiums, etc.?)

A good rule of thumb: Keep your housing costs low by multiplying your gross income by three. For example, if you earn $70,000 per year, you should shop for a house priced at $210,000 or less. Signing up for a mortgage is long-term commitment; don’t allow excess to ruin your budget.

Cars.

Getting from Point A to Point B should never require unmanageable debt. Sure, you might want a flashy, impractical piece of machinery, but what does it mean for your credit and finances? Why saddle yourself with a $40,000 BMW when a $24,000 Mini Cooper offers many of the same perks (and is also manufactured by BMW, by the way). The bottom line: On the road to credit repair, simple math is your best friend. Shrug off temptation and stick to what you can afford.