If you ever consult a financial advisor, you likely will hear about what you shouldn’t be buying if you want to get ahead. These items usually range from a coffee on your way to work to eating out.
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You may not know that even financial advisors are guilty of spending money when they shouldn’t. We spoke with a few to discover how they blow money despite being educated on money management and giving advice on what not to waste money on.
What things do even financial advisors admit to “wasting” money on?
The Concept of ‘Wasting Money’ Examined
“Even financial advisors, who are pros at pinching pennies and maximizing savings, have their own guilty pleasures when it comes to spending,” confessed Taylor Kovar, a certified financial planner, CEO and founder of Kovar Wealth Management.
It’s worth pointing out that the people we turn to for financial advice can be guilty of making similar mistakes.
“With respect to ‘wasting money,’ beauty is in the eye of the beholder,” said Dr. Robert R. Johnson, professor of finance at Heider College of Business at Creighton University. “That is, what is wasting money for one individual could be a prudent expenditure for another individual. We are not all wired the same and don’t all value all goods and services equally.
“Economists have a term called ‘utility’ to describe the satisfaction or benefit one receives from a given purchase. The amount of utility one individual gets from a given purchase varies from individual to individual. An individual’s goal — according to economic theory — is to maximize utility.”
The goal is to remember that a purchase that provides you with value, like your morning coffee or lunch with a close friend, shouldn’t be an expense that you feel guilty about. You can’t save every penny or you’ll end up missing out on plenty of enjoyable experiences.
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What Do Financial Advisors Waste Money On?
We will look at the items that even prudent financial advisors can spend money on.
Buying Coffee Instead of Making Their Own
Kovar admitted to spending money on his daily coffee habit. While financial experts often discuss the issues of spending money on caffeine, it’s not easy for everyone to cut out this expense.
Johnson elaborated on this topic:
“Some individuals — notably Suze Orman — have chastised people for making a routine of buying coffee. The daily latte from the coffee shop may provide some people with a great deal of utility. For those, the expenditure may make sense. For others, it may simply represent an expenditure that provides little satisfaction. Too often, it seems, pundits focus on the small expenditures– like coffee or lunch — when trying to get people to rein in spending.”
The key takeaway here is that you don’t have to feel guilty for spending money on little indulgences that bring you joy as long as you have a plan for your finances.
Streaming Services/Other Subscriptions
“Beyond the classic takeout coffee, you’ll find us occasionally splurging on things like all of the streaming platforms and even high-end gym memberships — wellness is wealth, after all,” Kovar said. “Keeping gym memberships, streaming services or magazine subscriptions that are rarely used is an easy way to waste money. It’s wise to periodically review and cut back on these expenses.”
With autopay becoming more common, it’s not rare for even a financial advisor to forget about an auto-renewal subscription. It’s also easy to convince yourself that you’ll use that subscription, leading to you keeping it on auto-renewal. You could end up spending decent money on a service that you barely used.
Not Paying Off Credit Card Balances on Time
“Using credit cards for purchases and not paying off the balance each month leads to significant interest charges,” Kovar said. “Be cautious about carrying a balance on high-interest cards.”
With spending going digital and paperless, it’s easier to forget about making a credit card payment on time. When you carry a balance, you have to worry about spending money on interest, which can add up quickly. It’s critical that you monitor your credit card spending and balances so you don’t fall behind.
Spending Money on Brand-Name Products
“Opting for brand-name items when generic or store brands of similar quality are available can be an avoidable expense,” Kovar said. “This applies to a variety of products, from groceries and clothing to medications.”
Financial advisors are susceptible to marketing tactics as they may not always choose the cheaper alternative. Spending the funds on the more well-known brand when you’re shopping is tempting. It’s essential to remember that generic brands can offer identical products at a much lower cost.
“The cost of extended warranties or additional insurance on products often doesn’t justify the expense, given the low likelihood of needing extensive repairs,” Kovar said.
If you spend money on the latest technology, you may not need to pay for the warranty. The extended warranty is a standard upsell whenever you purchase a new phone or any device.
The Newest Technology
“Continuously upgrading to the latest technology or gadgets can be a significant expense,” Kovar said. “Assess the real need for upgrades and make the most out of current devices.”
If you want to save money, you’ll want to get more out of your technology instead of simply upgrading at every opportunity.
“It just goes to show that no matter how well versed you are in financial planning, everyone has their little indulgences,” Kovar said. “The trick is balancing those splurges with smart saving habits to keep your finances in check.”
You shouldn’t stress about every minor expense as long as you have a financial plan.
“Bottom line is to spend money on those things that matter to you,” Johnson said, “and minimize expenditures on those things that don’t.”
It’s critical to realize that even those who have devoted their lives to money management are guilty of common mistakes. The goal should be to strive toward progress instead of aiming for perfection.
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This article originally appeared on GOBankingRates.com: 6 Things Even Financial Advisors Waste Money On