How To Lose Your Hard-Earned Money: 11 Proven Ways
The old adage “work hard, play hard” seems like an enticing way to spend your hard-earned money, but it’s also the fastest way to end up in the poor house.
Check Out: 8 Frugal Habits of the Past To Save Money Today
Learn: How To Get Cash Back on Your Everyday Purchases
According to experts, knowing what pitfalls to avoid can serve as cautionary tales to help you better manage your wealth. “One of the most pervasive ways people lose their hard-earned money is by succumbing to the lure of instant gratification instead of long-term planning,” said Dennis Shirshikov, finance expert and head of growth at Awning.
Here are more examples of sure-fire ways to lose your money:
High-Interest Loans and Credit Card Debt
While it’s tempting to make a purchase on credit and think about the consequences later, Shirshikov noted that those who fall into this trap often find themselves paying exorbitant interest rates. “It’s like purchasing an item and then paying multiple times its worth over a prolonged period,” he explained.
The allure of buy-now-pay-later schemes might seem attractive at first, but the cost becomes evident in the long run. “A friend of mine once took out a payday loan for a short vacation, only to spend the next two years paying it off, all because he wanted a break from work,” Shirshikov said.
Jonathan Merry, finance and investment expert at Moneyzine, believes this to be the priciest debt we encounter. “It can come with an interest rate of 30%-40% annually,” he noted. “Credit card firms often lure you with a seemingly low monthly late fee of 3% on the principal amount. So, if you spend $10k with your card, the monthly fee seems a mere $300. Seems insignificant, right? But over a year, that’s an astounding 36% increase, if not more!”
I Grew Up Poor: Here Are 8 Things I Never Waste Money On
Falling for Get-Rich-Quick Schemes
The promise of making large amounts of money in a short period is appealing, but more often than not, these schemes turn out to be scams or ventures with high risks.
“Many end up losing more than they could potentially earn,” said Shirshikov. “A colleague once shared how her cousin invested heavily in a speculative venture that promised high returns. She was swayed by charismatic sales pitches, only to lose her savings when the venture collapsed.”
Not Researching Big Purchases
“This might seem basic, but it’s astonishing how many people spend significant sums on items or services without doing proper research,” Shirshikov explained. Whether it’s buying a new gadget, car or even a house, it’s essential to understand the market, compare prices and read reviews.
He gave the example of a former student who bought a car without proper research. “He ended up with a model known for its frequent breakdowns and high maintenance costs.”
Neglecting Regular Maintenance
Whether it’s a car, a house or your health, Shirshikov says that neglecting regular maintenance can lead to significant costs in the future. “Small issues can quickly escalate into expensive problems if not addressed timely. Think of it like a leaky faucet. If left unchecked, not only does it waste water, but it could also lead to bigger plumbing issues, all because of a delay in fixing a minor leak.”
Playing the Lottery
If your money is hard-earned, you’ll lose it by playing the lottery, said David Bakke, finance expert at Dollar Sanity. “You’ll lose it anyway, but it will be more impactful if your money is hard-earned,” he added, noting the odds are stacked against you. “And while you might get extremely lucky, most folks end up losing and in some cases, big time.”
Gambling It Away
Similar to the above, experts say this is a surefire way to watch your money go down the drain. “Gambling can be a fun pastime, but when it becomes an addiction, it can quickly become a financial disaster,” said Christopher William, a CPA finance expert and founder of Balanced News Summary.
“People often think they can win big or that they have the skills to beat the odds, but in reality, the house always wins in the long run.” He noted that people with gambling addictions often find themselves spending more and more money in an attempt to win, only to come out with less than they started with.
Overspending on Luxury Items
“People often think that buying expensive things will make them happy,” said William, “but in reality, it does not bring lasting satisfaction. Instead of buying expensive items that will quickly become outdated, people should focus on saving and investing their money to make it work for them.”
Online Impulse Purchases
Another way to lose is through online impulse purchases, said Bakke. “Impulse purchases are hard to avoid at the grocery store, for example, but they’re even harder to sidestep online.”
He suggests skipping the FOMO and forgetting about free shipping and fast delivery. “Stay away from online as much as possible, unless you’re in a financially sound position.”
Buying Stuff You Don’t Really Need After a Tax Refund Check
Tax refund time is a huge challenge when your money is hard-earned, Bakke warned. “It looks like free money, but it isn’t — because it was yours to begin with.”
Instead, he recommends treating it that way instead of thinking of it as a bonus or something else. “Never go crazy around this time of year. Instead, if you get a refund check, use it to pay down debt, boost an emergency fund or save for retirement. Those are the best routes to go.”
Purchases for Social Approval
“Ever bought a brand-name or pricey item just to impress others?” asked Merry. “Maybe a new phone model, a luxury car on hefty loans or designer clothes that strain your wallet?” He said these might be way out of your budget, but you still might go for them in hopes of gaining admiration or displaying a sense of superiority to those who probably don’t even notice.
Loans You Give That Aren’t Repaid
“If you choose to lend money despite the old saying — neither a borrower nor a lender be — then be cautious,” Merry warned. He noted that it’s tough to accept lending money to someone unreliable.
If you lend to friends or family, Merry recommends approaching it professionally. “Have a clear agreement detailing the owed amount, repayment date and any interest. This ensures responsibility and improves the chances of repayment.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: How To Lose Your Hard-Earned Money: 11 Proven Ways
