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What’s the Stupidest Thing I’m Doing With My Money?

Besides spending too much of it? Lots of things…

There are so many dumb ways to spend your money — indeed, Las Vegas was pretty much founded upon this principle. But vices and material pleasures aside, what are truly the stupidest ways to waste your money? Alongside a couple of Certified Financial Planners affiliated with the XY Planning NetworkMark Wilson, with MILE Wealth Management in Irvine, California, and Kayse Kress, with Physician Wealth Services in Bristol, Connecticut — we tried to figure out the worst offenders.

I know I’m spending too much, but how do I spend less?

Yes, spending too much on discretionary items is pretty obvious. Wilson, however, says the solution to spending too much is easier than ever. “It’s a great practice to get into the habit of knowing in rough buckets where your money’s going, and having a good sense of that.” Apps like Mint can track all of this and sort it out for you, so that you know, for example, if 50 percent of your income is going to things like Starbucks, fast food and bar tabs. Wilson doesn’t recommend you categorize every single transaction, because you’ll likely never do that, but just getting a rough sense, maybe once a month, of where your money is going is hugely beneficial.

Of course there’s other low-hanging fruit: Carrying debt on your credit card (but you already knew that), which is to say wasting your money; and just parking your money in a savings account, which isn’t putting your money to work. Stop that shit.

I pretty much figured you were going to say that. What else am I doing wrong?

Aside from the obvious stuff, Wilson says the thing he sees all too often is employees not taking advantage of their company’s 401(k), especially if there’s a significant matching contribution by your employer. To him, this definitely qualifies as “stupid.” If you put in 8 percent of your salary and get an immediate 50 percent or 100 percent return, it’s a no-brainer, he says. “I hear people say, ‘My 401K has bad investment choices.’ I’m sorry, if you get a 50 percent return when you put your hundred bucks in, that’s a good investment choice,” Wilson affirms.

Is an emergency fund a smart idea?

It is, unless you have significant debt at a high interest rate. Wilson says he sees people with emergency funds but a significant credit card debt. While it’s a great thing to have some rainy-day cash on hand, you’re way better off paying down (or paying off) your lousy debt first. If you do have an emergency, just put it on the credit card, and you’ll still be ahead of the game at the end of the day.

What about fees?

Ah, fees. That’s a big one. Kress advises never to spend money on ATM or bank fees, and keeping track of your money is the easiest way to avoid this. Likewise, Wilson says commission fees are a thing of the past, if you know what to ask for. Many universal life insurance policies and stock market index funds now have commission-free options that are far, far better options, with much higher returns, than the usual fee-based offerings. Commissions tend to be huge on products like these, so find an adviser who knows about commission-free options.

How about the little stuff? It always seems to add up.

Most people have no idea how much it really adds up to. “It’s not just the 20-year-olds, but the 50-year-olds and many 70-year-olds have no idea how much discretionary money they’re spending,” Wilson says. This is where it comes back to tracking your spending: “Technology has eliminated almost every excuse anyone can come up with. Find a software or tool that works for you,” says Kress.

Kress also recommends culling ruthlessly. “Tracking your spending will help you find the money being spent on items that no longer add value to your life or have crept in unexpectedly,” Kress says. “Look for subscriptions you’re no longer using, or a museum membership in a town you no longer live. Don’t take anything for granted! Are you consistently throwing away leftover food? Can you cut down on your paper product consumption? Do you buy the first item you see, or do you shop around for better pricing?” Also, be honest, man: Do you really need it sent to you the next day, or can you save a few dollars by briefly delaying your gratification?

Seriously, your Netflix, your Spotify, your iCloud storage — all those subscriptions add up. Look for a cheaper plan that works for you, or see if you can put up with listening to advertisements every once in a while. And delete some of your stored photos and videos — you’ll probably never look at them anyway!

So what’s a not-stupid way to invest my money, especially if I don’t have a company 401(k) plan?

Wilson says whatever you do, don’t invest too conservatively, especially if you’re young, saying he would add timid investing to the “stupid” category. Maybe you’re really cautious, or you only have a bit of money, or you saw people you know get screwed back in 2008, but “those are harmful decisions in the long run,” says Wilson. “I like to see people make better, more aggressive decisions when they’re young. … That compounding makes a big difference.” In other words, choose the more aggressive option when you have one.

Anything else?

There’s always the time-tested method of spending mostly cash. Credit cards are built to be bad — there’s no accountability, whereas if you give yourself $200 for the week, and you spend $45 on gas, you know exactly how much left you can spend. There’s a small tradeoff: Going cash-only (or even cash-mostly) also means not being able to track where you’re spending your money as easily as you can with a credit card — and as we said, that’s important — but you’re much more likely to spend less money when you carry your tangible, budgeted amount around with you and leave your card at home.

It all sounds stupidly simple, but as we know, it’s not so easy to not spend your money so damn stupidly.