It is not that easy to manage your finances and make the money work for you. Sometimes you have to be extremely careful and not fall into money traps.
When we say traps, we mean that there are many pitfalls that can make you lose money. Usually, if you don’t know about them, you might end up losing your cash without even realizing it.
And even if you think that you are getting the most of your money, you might actually lose it. Yes, this can happen, and because of this, you should be informed. If you know how things work, you can avoid falling into money traps.
So, read on and see the things that you should never do if you are trying to save your money! Are you ready?
1. Buying things for the reward points
Most of the time, if you have a credit card, you know about the reward points. If you use your card to buy certain things, you will receive points that you can later use to cash back, get gift cards, or travel.
And we can understand that collecting points might become addictive, and you might really want them. It is never a good idea to buy stuff you can’t afford just because you want to collect reward points.
Spending money from your credit card that you can’t put back is not worth it. Yes, you will get those points, but in the end, if you end up in debt, this is not a good move. Any value you may have gained through reward points will be more than destroyed by the interest you pay on your debt.
2. Timeshares
Some people like the idea of timeshares, but most of those who pay for them do so because this is one of the most common money traps you can fall into.
Generally, someone will offer you a free vacation, but there is a condition. You will need to go to this business meeting while you are already on vacation. During this meeting, the company will pressure you to buy a timeshare. Nobody told you about this ahead of time.
This is really a money trap, and if you don’t want to lose money, as we think you do, you better avoid it at all costs. The only way to get rid of a timeshare is to sell it, and if you don’t manage to do it in time, the timeshare will be passed down to your heirs.
3. Spending money from your retirement fund
Probably, you’ve saved money for when you’ll be retired. This is a powerful move because that money will truly help you during your golden years. But one of the money traps is to begin spending from your retirement fund.
Avoid raiding your 401k or any other account you use for retirement money. We know that life happens, and sometimes you might be tempted to do this, but if you are not extremely careful, penalties will be added, and in the worst-case scenario, your principal will not work for you anymore.
The fact that many people hardly ever replace the money they withdraw from retirement accounts compromises their ability to maintain their standard of living.
4. Playing the lottery
Everyone dreams about becoming a millionaire overnight, but believe us when we tell you that the lottery is not the answer. Maybe you want a new car or to live in a mansion, but playing the lottery is for sure one of the money traps that make many people lose their money.
Paying for this chance to win the big prize is not the wisest thing to do, and yes, $10 is not a lot of money, but if you are doing it constantly, these ones will add up. And if you think rationally about this whole lottery thing, your chances to win are incredibly small, almost nonexistent.
Even if there is not a lot of money, instead of throwing them out the window and playing the lottery, you can do something else with them.
5. Car leases
All of us have been there. You have the old car you’ve got from your parents, and everybody around you has nice cars. Your best friend is now driving a new BMW with high-quality speakers and heated seats. This life is not fair, right?
So, you want a new car. What are you planning to do next? Maybe a car lease might sound tempting, but is this the best idea? A lease can get you a new, beautiful car fast, and after all, you will be able to afford to pay the monthly payments.
You can do this, but keep in mind that it is by far the most expensive way to drive a car. This is clearly one of the money traps you should never fall into. You better try to save your money and buy a new car when you can afford it.
6. Exchanging your time for something “free”
Another one of the money traps is forgetting that “time is money.” This is extremely important when you consider yourself a frugal person. Getting something for free is always welcomed, but think before queuing in line for a $3 sandwich.
The time that you have is more important than almost any free item that you can get. Always compare the amount of time that you can give to the value of the item that you can get for free.
Sometimes those two hours you will need to spend in line, waiting, can be used for other activities, be they relaxing ones or maybe ones that can help you make more money.
7. Buying stuff on impulse
Even if you know that you are not an impulsive person, it might happen to you to buy some things just because you see them and you want them now. This is called purchasing on impulse and is definitely one of the money traps you should be careful about.
Maybe you are walking through the store aisles and suddenly you see a vacuum cleaner. You think that the one you have at home, even if it’s still working, is old and probably doesn’t have a long life ahead of it.
So, why would you not buy this new one that seems to clean far better and also has a discounted price? It is clearly the best decision, right? Maybe it is a good idea to buy a new vacuum cleaner, but think again and decide if this is the best time to do it.
Impulse buying can be a real budget buster, and if you want to save money, this will not help you.
8. Subscribing to things you don’t need
We live in a world where you can subscribe to almost anything. Gyms, streaming services, newspapers – you name it. And it is ok to be subscribed to things that you like and use, but be aware that you can begin subscribing to a lot of stuff that you don’t truly need.
We can understand why it is tempting to subscribe to a lot of services, but most people end up subscribing to more services than they really need. If you do this, you will spend more money than necessary, and you most likely don’t want to do that.
There are many money traps, but this is one you can easily fall into. So, be careful and always review your list of subscriptions. Do you use all of the services? If yes, you are good to go; if no, cancel the subscriptions you don’t use.
If you want to become better at budgeting, this planner might help you: Clever Fox Bi Weekly Budget Planner
You should also read: No-Spend Challenge: 8 Tips to Save Up to $2,000 Monthly
