22 Things Broke People Waste Money On

21:58And then repairs are always cheaper than replacing typically. So that is another one as well. And investing in a sturdy case, obviously a screen cover is gonna be the two big things that you can do to make sure those last way, way longer. Number nine is designer clothes on credit. So Americans carry$986 billion on a credit card. currently, according to the Federal Reserve. And store credit cards equals high APR. So store credit cards usually have really high interest rates, 25 % plus. A, store credit cards are some of the worst credit cards to go out there and get. They don't give you very many benefits.

22:31They don't really help you out. With the exception of the Amazon card, I would say that's the only one that I know of that really has tremendous benefits, where you get like 5 % cash back. If you shop at Amazon a lot, it is a pretty decent deal to have that Amazon card. But outside of that card, every other card that you see is just not going to make sense if it's a Macy's card or if you get a Dillard's card or if you go out there and get a TJ Maxx card. Those don't have the benefits that you would get with other credit cards out there. Some of my favorites. And if you go to the personal finance podcast dot com, there's a little menu at the top that says credit cards.

23:05And those are my favorite credit cards. It's my page with all my favorite credit cards that I use day in and day out. Chafe Sapphire, Capital One Venture, the Amex Gold. All of these are some great cards out there that you could look at getting into more. Okay. Never, ever put designer clothes on credit though. And then number 10, and this is one that I think some of the folks who maybe are younger are going to really relate to, but it's buying rounds of drinks for everyone. Now, when I was in college in my early twenties, when you're going out a little more and you're just hanging out with friends a lot more when you go out now, you wouldn't catch me dead in a nightclub or bar past 7 PM, but nightlife overspinning can add up and it can add up dramatically.

23:41And if you're the type of person who just buys rounds for everybody all the time because you feel like it's fun or that's the way you want to give back to your friends, I get it. But at the same time, that gets very, very expensive. Specifically, if you go out and buy shots or if you go out and buy drinks that are way more expensive, those are going to have a big impact on your wallet. Because one round with five people can cost you over$100 easily nowadays. I was just on a golf trip in Orlando. We bought a round for four people in the round. It was over$100 for that specific round. It is out of control the cost of what alcohol is currently.

24:12And so most people don't pay you back. They either forget or they're just out and about. And so if you want to do this, I would have a cash budget set aside. But if you are struggling to pay your bills and you're buying rounds also for other people, you have your priorities mixed up. Making sure that you do not buy rounds of drinks for people when it doesn't make sense is a huge, huge thing. In fact, the Bureau of Labor actually did a study. The average American spends$3 ,000 per year on dining and drinks out. And so if even a big chunk of that is drinks out, really rethink about that if you can, or just have that cash budget set aside for bars.

24:43So those are some of the sneaky budget killers. Now we're going to get into some of the lifestyle money drains next. My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money. Now I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything from your accounts and investments to your savings goals and spending. So you can see your entire financial picture in one place.

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28:04All right, so number 11 is going to be one that a lot of people are doing right now. It is buying brand new cars that you can't afford. So new cars lose 20 % to 30 % of their value in the first year, according to Edmonds. And this is something we have talked about at length in some of our car buying episodes. The average new car payment is$738 per month, according to Experian. Now, this is a massive, massive issue for a lot of people. $738 per month on a car, because the prices of cars are rising, is not the best financial decision for most people. And so many people will stretch their loans for six to seven years.

28:39In addition, fancier cars equal higher maintenance. One of the worst purchases I ever made was a luxury vehicle. and the maintenance on that luxury vehicle, which was a brand that rhymes with Mercedes, was something that was absolutely astonishing. You want to get an oil change? Guess how much an oil change is for a brand that rhymes with Mercedes? $2 ,000 per year. You heard that right. $2 ,000 per year. Oh, and if you want to get the higher level oil change, which they recommend every other year, it's$3 ,500 for the whole year. Your boy almost had a heart attack the first time they told him that.

29:11And this is something where I could not get rid of that car faster. I was in my 20s when this happened and I could not get rid of that car faster. And it is one of those things that just did not make sense for a lot of people. In fact, your insurance goes up, your taxes goes up, all those different things. And so I have a rule and I even bought that car used by the way. But my rule is I buy used or certified pre-owned. And we have a car buying rule, which we'll talk about here in a second. But I like to buy anywhere from two to three years old because it takes that big depreciation hit. And now you have a car at a deal.

29:42We bought a car over the course of last year because we had a new baby. And so we had to get a bigger vehicle because we had three kids instead of two. And so we got a bigger vehicle for my wife and we bought a car that was two years old and saved ourselves tens of thousands of dollars just because we bought this SUV two years old. Now, here's the car buying rule that we talk about here. First, we want you to buy it used, but we talk about the 24-12-10 rule. Okay, 20 % down is what I want you to have. Obviously, it's always best to buy cars cash, but 20 % down is going to be the rule that we talk about here.

30:13Because if you buy a brand new car and it gets in an accident, guess what? It took that depreciation hit. I don't want you to be underwater on that car. Okay, so 20 % down. You can also get gap insurance and compare the prices on those if you wanted to. Four years or less on your car loan, meaning that I don't want you stretching this out seven or eight or nine years. In fact, I'd really rather you have it three years or less, but four years or less on your car loan. Okay, 12 % or less of your income spent on your car payment, your insurance, your gas, and your maintenance. Those four things. Typically, this comes around to about 7 % or less on your car payment and the rest, the other 5 % goes to maintenance and gas.

30:47Okay. And then lastly is 10. You need to drive that car for 10 years or more. So all of my cars, my goal is to drive them for 10 years or more. That is how you get the true value out of them. The longer you drive them, the better off you will be financially in the long term because you won't always just have car payments because you're just re-in and up over and over and over again. So long term, you need to drive that car for 10 years or longer, as long as it's safe to drive, obviously. But the number one thing to do is just pay cash for cars. If you can't do that, then follow the 24-12-10 rule.

31:14Okay. Along those same lines, car modifications. So custom wheels for cars are going to cost you anywhere from$1 ,000 to$4 ,000 and mods rarely ever add any resale value. So this is something where insurance can go up with mods and you're going to end up spending way too much money. So if you go out and you buy a Tahoe, for example, and let's just say you get that Tahoe, but that's got some plain wheels on there. You want to get the black rims. You want to delete the chrome off the Tahoe so that you have the black on black. And now you're driving around town with that brand new looking Tahoe with a nice rims.

31:46If that's you, I rethink that or making sure that you make enough money for that to make sense. Nothing wrong with that whatsoever, but I just think car modifications are just a waste of money that you're just throwing money into the fire. Number 13 is overpriced cable TV packages. Now I've told this story before on this podcast. But when I had just last year alone, I got an updated cable bill. And the cable company decided to upgrade my cable. I have had streaming services for years, but did a bunch of cost analysis and figured out, okay, actually cable right now is cheaper. And so for the first year, it was absolutely amazing.

32:17I signed up for cable. It was way cheaper. It's like less than $100 a month for cable and really fast internet. And so I had that for years. Then I got a bill in and I saw the bill probably a month later and they auto charged me$240. I wasn't looking close enough like I should have been. So I said, what the heck is going on? And I had an overpriced cable TV package that they added me into. And so then I went back and started negotiating with them. We got it back to 125. I ended up cutting out the cable anyway because I didn't like how they raised the price on me so much and went back to, now I have YouTube TV again.

32:49And so we went back and forth on that, but I cut out this overpriced cable that I did not need, saved myself over$140 every single month by cutting this out. It was a big, big difference for me. And so a lot of you out there, if you have cable TV packages, look at some of your cable packages and see if you are charging too much. Because$100 per month, as you have seen in just some of these compound interest calculations, we can do it right now again and look at it. But$100 per month is$206 ,000 at a 10 % rate of return over 30 years. And if you did it over 40 years is going to be a big number.

33:21$555 ,000. So huge difference on what will happen with your money over time, just by making sure that you're controlling some of these subscriptions. All right. Number 14 is fancy gadgets you don't need. So US households spend over$1 ,500 a year on new electronics, according to Statista. And it's usually new tablets, smart home devices, kitchen devices, all those different things. And there's nothing wrong with this whatsoever. In fact, There's a lot of times that I will buy this stuff. It brings me value. But if you were the person who is doing this every 15 to 30 days and you were buying these new gadgets and you're constantly just buying the next new thing, Ninja has an ad and you buy the brand new Ninja gadget and then you get the brand new iPad the next month and then you go out and you get the Ninja Creamy the third month and then you go out and get the brand new Dyson vacuum cleaner the fourth month.

34:07If that's you, if you're the person who just keeps buying gadgets and you can't stop buying gadgets, this is something where I'm talking to you right now. Because if you have to buy something like this, at least use the 30-day rule, where I usually like to sleep on things for 30 days if it is something that is not a necessity and it's over a couple hundred bucks. That is going to be something that allows you for that cooling off period and something that really is going to make a big difference in you just making these impulse purchases. Because the folks who treat money in this range, the$200 to$500 range, as if it is$20, are the folks who typically are broke.

34:43So if you are someone who goes out there and you're treating$200,$500,$700 like it is nothing, like you don't have to think about it twice, even if you make good money and you spend those dollars without even thinking twice, without having a real conscious thought about this, typically those are people who make high incomes that are broke. It's treating$500 like it's nothing. That is something I want you to think through and make sure you have that cooling off period before you just buy that stuff. Number 15 is trendy diet pills or gimmick supplements. So Americans spend$2.1 billion a year on weight loss supplements, according to NIH, and many pills don't work as promised.

35:18If you're the type of person who just buys all these crazy different supplements and understand that it's just diet and exercise that's going to make the biggest difference for you. But if you're the type of person who just always wants to find the next pill, it really is not worth it, especially when it comes to your wallet. Instead, just making sure you focus on having a right exercise plan, having a diet in place that really is going to work for you. Those are the two big things that will absolutely change your life. It's not worth wasting your money. 16 along the same lines is fad beauty treatments.

35:44The US beauty industry is worth over$100 billion now and much goes to expensive trends. So things like lip plumping or eyebrow microblading or fad facials, these temporary results are earning big, big money. These are big, big businesses out there. If you look at like Kylie Jenner has a massive business when it comes to the beauty world. Hailey Bieber has a massive business. I think she just sold her business for a billion dollars. Some of these things are just not worth it. Focusing on the skincare basics and looking for deals are going to be the two big things that you can do. A lot of times you can get sold into different makeup or creams or lotions or shampoos or whatever else.

36:18All that stuff is typically overpriced if you don't think through it or understand the science behind it. Number 17 is retail therapy. So if your go-to is to go spend money every single time you get stressed or you have a big win or something happens in your life or you're just bored, if retail therapy is your thing and you cannot invest your dollars towards your financial future, that is a problem. And so we got to make sure that we are looking at the ways that our psychology is impacting our wallet. Because typically, retail therapy is a psychological thing. And it typically is to give you psychological relief for stress or anxiety or whatever else.

36:50And if that is you, just learning how to cope with that is going to make a big, big difference. Number 18 is monthly subscription boxes. So subscription box industry is now worth$22.7 billion, according to Subda. And they could be beauty boxes or snack boxes or surprise goodies. And they often lead to you paying for things that you wouldn't buy yourself. Now, I know they're fun. It's like getting a Christmas present every single month in the mail. But if you're not using the things inside that box, then it may be something that's just adding clutter to your house. Here's a great example. They have since passed away now, but we used to have two dogs.

37:21And when we had two dogs, we got the BarkBox. If you've ever heard of BarkBox, it's like a subscription that sends them treats and toys. And they absolutely loved it. Every single month, we would get brand new toys and treats. And so we did it for like 12 months straight. And after the 12th month of getting three or four toys every single month, We have 50 dog toys in our house that we just couldn't handle any more toys coming in. In fact, we would start to like stash away the toys to save them for the dogs when we would throw out a big stack of them. And so we started to have way too many treats and we started to have way too many toys where it just didn't make sense anymore.

37:49It was building up. So if that's you, if you're not using them anymore, if it's just kind of building up and backlogging, then try to cancel those subscriptions because a lot of times they can get pretty expensive depending on what you're looking at. A lot of those can be fun for a couple of months, but if you're really not using it, then look at canceling them. Number 19, this is a big ticket one, okay? is expensive weddings that you can't pay off. So the average wedding costs$30 ,000. And my take on the wedding is that if you have the money and you want to spend it on a wedding, more power to you.

38:16In hindsight, after my wedding, I wouldn't spend as much as we did on our wedding, but many couples are taking on debt to fund their weddings. That, my friends, is not something you want to do. If you have to take on debt to fund a wedding, you are making the wrong decision. It is point blank, black and white right there. If you want to have a wedding, fine. But if you take on debt to fund a wedding, that is not something that you should be doing because payments are going to linger on year over year for a party. And that is not something you want to be doing. So if this is something where you don't have a huge budget, look for budget-friendly venues.

38:44Look for ways that you can save money. Prioritize the guests that really matter. Look at the food costs. Look at the music costs. Try to think through ways that you can save money on your wedding. This is not a wedding competition. This is something that is special between you and your future spouse. And you need to make sure that you are spending consciously when it comes to it. We'll do an entire wedding episode because there's a lot of things that I can dive into on that. but it would take way too much time for this one. Number 20 is holiday gifts beyond your budget. So 35 % of Americans take on debt for holiday shopping according to LendingTree and overspending to impress family and friends is the main reason why they do that.

39:17And they also impulse shop at holiday sales. Now we have a system here on how to tackle holiday debt. So you never go into debt again on the holidays. And it is treating the holidays like a bill. So what you do is you look at how much did I spend during the holidays last year? You can look at your November or December statements, add up every single dollar you spent for the holidays last year. And I don't care if you're listening to this in July, but in January every single year or in July or whenever you first listen to this, what you want to do is you want to set up a bucket or a budget category in your high yield savings account.

39:44And you want to start to allocate dollars towards the holidays at the beginning of every single year. So if you start in January and you spent$1 ,200 last year on the holidays, you're going to put$100 every single month in that high yield savings account. And so by the time the holidays roll around, there's no stress. there's no anxiety. Why? Because the money's just there. You already have the money available and you can take that money and enjoy your holiday instead of stressing and worrying about money and having anxiety about money. That is the way to treat the holidays properly. And that is the way to save for the holidays properly.

40:16So you have enough cash on hand. Really, really important to make sure that you're doing that. Every single person listening to this podcast should be doing that. They should have a holiday fund. Number 21 is unplanned vacations on credit. Now, if you go into debt to go on vacation, you are doing it wrong. All vacations, no matter what, always need to be paid for in cash. Always, always, always, no matter what. Okay. If you do not have enough cash on hand, but you still want to have the experiences with your family, either wait an extra year and continue to save and or find a cheaper vacation each and every single year until you make more money.

40:50There is no reason whatsoever to ever go into debt for a vacation. It is going to destroy your financial future. You're going to have high interest rates on your credit cards. It is never, ever, ever an option for you. Make sure you get that down. It is never an option to go into debt for a vacation. Plan and save first, and it'll be so much better, so much more rewarding, so much more relaxing than taking some lavish vacation that you cannot pay cash for. All right, and then number 22, the last one, is lending money to friends that you know won't pay you back. So one in three Americans lose money lending to friends and family, and it creates these really awkward relationships.

41:21So if you're gonna lend money to somebody, I would treat it as a gift. And I've always done this. I've talked about this in the past, because otherwise, say you lend$2 ,000 to a friend, okay? What's going to happen is if they can't pay you that$2 ,000 back right away, now you're going to get frustrated. And when you get frustrated, then you're going to start to ask them, hey, can you start paying me a little bit of that$2 ,000 back so I can kind of recoup what I sent over to you? And now what's going to happen? Is they're going to get mad at you for asking for the$2 ,000 back? Is it fair? No, but this is always what happens when it comes to money psychology is that you're putting pressure on somebody else and they are going to get frustrated that you're putting that pressure on them when they don't have it yet.

41:58And so now your relationship is going to start to get damaged because you both feel like you're somehow being wronged in some way, shape or form. And this is what happens when it comes to money with friendships. So instead, if you're going to give somebody money, give it to them. If you value that friendship, give it to them. Yeah, you heard me right. If somebody asks you for a hundred bucks, just give it to them. Or if you don't have it and you don't want to give it to them, just say no. Just say, hey, I don't mix financials with friendship. I just don't think it's good for our friendship. And it's a very simple response, but you do not have people borrow money and then they pay you back and definitely don't co-sign for anybody.

42:28But those are the two big things that I want you to know and I want you to learn as time goes on here. So these are the 22 things broke people waste money on that I want you to avoid. Listen, thank you guys so much for being here. I hope you got value out of this episode. And if you guys have questions at all, join the MasterMoney newsletter and you can respond to any of those newsletter issues that come out every single week. Listen, thank you guys so much for being here. I truly appreciate each and every single one of you and we will see you on the next episode.

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