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5 Money Traps To Avoid In Order To Save More Money

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Money Traps To Avoid

Have you ever passed by an add that offers a 2-for-1 special or a once-in-a-lifetime service? Do you look at the promise of a discount and get excited? If so, you could be falling for one or several types of money traps. What’s worse is that you could be wasting cash or paying bills without ever noticing it.

If you want to avoid regretful purchases, you need to keep an eye out for these money traps. Not only will you save your cash, but you can also use it for something more useful and practical. Here are five money traps you need to avoid and how they work.

What is a money trap?

Firstly, let’s explain exactly what a money trap is. At first glance, you might think that it’s a scam or a false promise that ruins your savings. While money traps can do that, they aren’t necessarily illegal or untrue. In your eyes, tthey can seem so good that feel compelled to spend your cash away.

In simple terms, money traps are expenses or purchases that can cause you financial problems in the long run. Unlike scams, they aren’t illegal and they don’t trick you into stealing your money. Instead, they are legitimate plans, products, or services that seem worthwhile. However, in the long run, they will compound into heavy expenses.

For example, imagine that you go to buy a lottery ticket for Powerball. Whether you stand a chance to earn thousands of dollars or millions, you don’t think that the $10 cost is much. You try it once or twice, thinking you have nothing to lose. Then, fast forward a few months, and you consistently spend $50 or more to buy lottery tickets. Not only are you trying to win a game of chance, where the odds are rarely in your favor, but you also develop a spending habit that does nothing in return.

What money traps should I be concerned about?

Now that you know what money traps are and how they operate, it’s time to find out which kinds to watch for. While there are several traps that exist in the world, there are five in particular that pose a serious threat. The scary thing is that you may have already seen or used one of them before.

1. The get-rich-quick scheme

If you look up ways to become rich online, you’ll find hundreds of self-proclaimed “gurus”. They’ll try to offer you a subscription or a book that promises you the easy road to success. For example, one might proclaim that stocks are the only investments you need to make, while another preaches the power of cryptocurrency. These so-called experts will do whatever it takes to make you believe that their way is the guaranteed solution, a one-size-fits-all plan.

In truth, there are so many ways that people can become rich or build their savings. I know of bus drivers and janitors who became millionaires even when they had minimum wage. I also know of people who warned me against real estate, only to come to me later for advice on investing in the same market.

The only real way to success is through hard work and dedication. You can be successful in any field you want, whether you choose to be a stockbroker or a singer. There is no shortcut to success, and anyone who promises that is either lying or delusional.

2. The investment waiting game

I’ve met several people in my life who spent so much time waiting to make an investment. For them, investments should only be done when you had a certain amount of cash or experience. However, all they did was fall into money traps as they found it harder and harder to get started.

The truth is that the best time to invest in anything is yesterday; the second best time is right now. Waiting until you have “enough money” can take forever, especially if you’re not satisfied with your earnings. Contrary to popular belief, you don’t need hundreds of dollars to get started.

For example, Warren Buffett is one of the richest people in the entire world. The Oracle of Omaha has made multiple trades and bought lots of stock over the years. However, I realized that he never waited until he felt rich or wealthy enough. He started as soon as he could, and while he is rich now, that doesn’t mean he was always rich. What mattered was that he got started and made his returns over time, instead of waiting for a big payoff.

3. The quicksand of debt

Many financial experts say that going into debt is a bad idea. Personally, I believe that is true to a certain point. Getting into bad debt or heavy debt is never ideal. However, that doesn’t mean that all debts are bad. If you think about it, mortgage loans and credit card payments are a form of debt. Under the right plan, these “debts” can actually lead to long-term payoffs.

However, one of the worst money traps you can fall for is the quicksand of bad debt. When you have overdue payments or choose plans that won’t pay off, you put yourself at a disadvantage. It might not seem obvious at first, but building up loans or debts for something that doesn’t pay you back is dangerous.

For example, choosing a college degree in something like basket weaving or music theory might sound fun, but it won’t lead to fruitful careers. Plus, if you consider your college expenses, you could easily rack up thousands of dollars in debt for a degree that won’t help you. By picking careers with good financial opportunities, whether that’s science programs or technology courses, you can find jobs that give you stability. I’m not saying that you have to abandon your hobbies or interests. Rather, it’s about looking for opportunities to pay yourself forward, whether that’s a good educational choice or a lucrative career in a special field.

4. The car dilemma

Let’s say that you live in a big city and work an office job. You get your first paycheck and your thoughts immediately go to that beautiful Corvette you always wanted. Before you buy your dream car, do you really need it? Though it might look stylish, a car in a city isn’t always the best option. In fact, you’d be spending less money if you focused on riding the train or walking to work. While a car is a nice purchase, it can compound your expenses with insurance plans and repair jobs.

Of course, that’s not to say that cars are money traps by themselves. You might need a good car to travel around or to get to a faraway place. However, that still doesn’t mean you need to get a Corvette. A modest car with good mileage and fuel consumption can save you a lot more cash than a fancy hot rod. It might not be stylish, but you could say the same for running out of cash.

5. The housing challenge

As someone who works in real estate, I’ve helped multiple clients find their dream houses. I’ve helped them plan out their mortgages and review the market before they find the next place to call home. However, there are some who buy the house while having little to no plan for it. For them, it sounds like good investments but it can actually be money traps in disguise.

The thing is, the houses themselves are not the problem. The issue is with the buyer, especially if they do so on a whim. A house is a big commitment and is ideal for those looking to settle down or gain financial independence. For those who are constantly seeking new jobs or wanting to enjoy their youth, a house might not do well for their future.

If you want to buy a house, make sure you know why you need it. The market prices are higher than before, and without a good plan, you’d only be paying for money traps. Take a look at your lifestyle and what you need the house for. For example, new parents and newlyweds may be looking for somewhere to settle down.

What should I do to avoid money traps?

By knowing these different types of money traps, you can take the steps needed to avoid them. Keeping your distance from these purchases or mindsets can help you save some cash and build your stock for the future. To help you out, here are some tips on avoiding money traps.

Shop with a purpose.

Have you ever wandered into a department store or supermarket, only to emerge with a plastic full of random things? If so, you might be too focused on answering your mood or listening to your cravings. The problem is that doing so can make it hard to tell what you need and what you want. Without a good list or plan, you could easily rack up a big bill for your shopping.

To save yourself from money traps like that, always step into a store with a plan. Take time to write down what you need to buy and the potential cost of each item. By taking into account what you have to get, you can learn to say no to the other stuff. Sure, that chocolate bar may look good, but is it worth spending that extra cash? Think twice about what you could do with that money before you waste it away.

Always stick to a reasonable budget.

Aside from shopping with a list, having a budget can help you cut down or remove money traps from your life. Planning out the money you will spend on various things, such as groceries or utilities, will help you monitor your expenses. Otherwise, you could go over budget and cause problems when you needed that extra $100 or $1000.

Keep track of your expenses.

Speaking of monitoring expenses, it’s always a good idea to write down and watch exactly what you spend and why. Keeping an eye on your money helps you see what’s eating the cash inside your wallet. Sometimes, you can even spot potential money traps when you do so.

For instance, you might think that a Netflix subscription is absolutely necessary. While you don’t need to get rid of one, you should check how much you’re paying for it. If you buy the premium package but you only watch once a month or so, then you’re only wasting your cash. Take initiative and consider what plan best suits you. Sometimes, that means downgrading your plan. Still, it’s better to buy what you need instead of wasting cash on what you think you want.

Set financial goals for the immediate and distant future.

Avoiding money traps isn’t only a concern for the present, but for the future. You might not be wasting money now, but there could be a stock or loan that tempts you into doing so later. To stop yourself from spending ahead, consider making a financial plan.

Outline all your goals for the near and distant future. For example, how much money do you want to save per month? What do you plan on using that money for? What other goals do you want to reach? By asking yourself the key details of each account and plan, you can steer clear of money traps by proactively using your cash for something good. Speaking of which…

Put every coin and bill into something useful.

One of the biggest money traps of all time is the idea of “leftover cash”. Have you ever gotten a few nickels after buying your groceries? In your mind, you might think that these coins are practically worthless. Before you know it, you either toss them aside or pocket them somewhere, never to be found again.

Here’s the truth: even those coins can still do something for you. If you think of each bill and coin as useful, no matter how much they are, you can start building better financial habits. Even the smallest dimes can pay your life forward. However, if you want that to become true, you need to treat all of your cash as an investment. It’s not just about the dollar bills in your savings, but every single digit in your investment or salary.

For example, try placing those coins into a jar to act as your emergency funds. Sure, they may not cost much now. However, the more money you add and the more change you leave, the more it will grow. Sooner or later, you could easily rack up a large sum to pay off any unexpected bills or accidents in your life.

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