With maturity comes wisdom and experience leads to knowledge but at one point or another we've all made naive and uninformed money mistakes. Having bad financial judgement is one of the most common obstacles for young people when looking to secure a stable financial future. Unfortunately, basic financial education isn't mandatory in public schools so many students who graduate are often ill-prepared when making financial decisions. The following are some of the most common dumb money moves people make when managing finances or making purchases.
TV shows on clipping coupons perfectly illustrate the concept of savings blindness. These shows emphasize price per ounce and buy two get one free offers to maximize what is received when spending hard-earned dollars. Bulk items at membership clubs carry this to an extreme by offering more product than can reasonably be consumed in a realistic period of time. When purchasing large quantities, focus on nonperishable items like paper or cleaning products and avoid fruits and vegetables or anything that can't be frozen. The last thing you want to do is spend hundreds of dollars on food, great savings or not, and throw half of it out due to spoilage.
The technology industry counts on the consumers love affair with shiny new baubles. The promotional materials espouse the benefits of thinner, faster and better to convince people who already own perfectly functional nice cell phones and computers to buy the latest and greatest. Don't fall for the trap by buying something you don't need and which doesn't offer any substantial benefit over what you are currently using. If you buy what you need and not what you want and avoid keeping up with the Joneses you can also avoid a major dumb money move.
I can't tell you how many times I've heard someone brag about driving 45 minutes to save five cents per gallon on gas. Many consumers partake in gasoline hunting by scouring the metropolitan area looking for the best price on gas regardless of how far it may be or how long it takes to get there. While the thrill of the hunt may be exciting, the payoff is negligible at best and your time and effort is best served in other pursuits
Parents know well that when a child takes an interest in a sport or activity to go slow at first and spend as little as possible. As adult however, we tend to forget this valuable lesson when it comes to our own interests. We will spend thousands of dollars on cameras or skis or computers only to give up the activity or hobby six months later. Make sure you are truly interested in your new flavor of the month hobby before investing significant amounts of money in something you're likely to give up at a later date.
This affliction occurs when consumers frequent any retail store which continually has sales. Sales hypnotism is like being a deer trapped in headlights when walking into a store plastered with 50% to 75% off signs. Not only do aggressive sales encourage consumers to purchase more product than they otherwise would it is often disingenuous. A large national not-to-be-named retailer often has 25% to 50% on significant amounts of inventory with little to no real savings. If a product is already overpriced by a huge margin then offering 25% off may not even make it competitive with other retailers. Make a list and stay focused when shopping to avoid this pitfall.