10 Things You Should Absolutely Not Pay For
Cutting useless expenses out of your life can significantly shorten your path towards financial freedom. If you are like most people, you’ll probably have some experience with spending money on useless things.
We humans have a tendency to overspend, and to spend our money on things we absolutely don’t need. We buy things because we think it increases our social status, because it temporarily makes us feel good and for various other reasons.
In this article I’ll cover ten things that are such a waste of your money that you should never pay for them.
Imagine that you’re standing in an electronics store about to buy a new washing machine.
After you’ve made your pick of all the different models, the salesman has one final advice to you. He offers you an extended warranty package for your washing machine. The warranty will cost you just ten dollars per month. It will extend your warranty with two years on top of the first year of manufacturer warranty.
While making this offer, the salesman is very eager to remind you of the costly purchase you’re about to make and how much repairs will cost you when your precious washing machine breaks down.
You doubt for a second, but terrified by the idea of having to pay 300 dollars for repairs in the future you take the extended warranty. In your cognitive dissonance you tell yourself it’s a cheap price for a lot of extra security.
Ten minutes later you walk out the store and start asking yourself... “have you ever owned a washing machine that broke down within three years? No? And how many people do you know whose washing machine broke down within three years?” You think very hard for a moment but can’t come up with anything.
Three years later your washing machine still runs fine and you realize that your extended warranty was nothing more than a bonus for the salesman.
The concept behind extended warranty is to use year fear as a weapon against you. The odds of such a product breaking down as a result of normal usage the first few years are so incredibly low.
Next to that, the price of extended warranty is often disproportionally high. This is because most of the people who buy an extension of their warranty are quite certain that they will benefit from it in the future.
They know of themselves that they are washing machine abusers. This is exactly the same reason that phone, tablet and camera insurances are ridiculously expensive.
If you don't have an abusive relationship with your electronics, it's cheaper to put the money you would otherwise spend on extended warranty in an emergency fund and then use the emergency fund to cover emergency expenses.
Instead of wasting money on extended warranty for every costly product your purchase.
Luxury branded clothing
What do Versace, Armani, Louis Vuitton and Hugo Boss have in common? Thousand dollar jeans, three hundred dollar t-shirts and two thousand dollar handbags for starters.
Clothing from luxurious brands are often seen as status symbols by many people. There are plenty of people who run warm by the feeling of spending their months’ salary on a LV handbag or a pair of Armani shoes.
From a price/quality perspective, buying luxury branded clothing is a total waste of your money.
The quality is often equal to, or only slightly better than regular clothing, but it will cost you ten times as much. As with all clothes, you’ll eventually toss it away. The handbags become dirty and the leather starts to tear, the jeans don’t fit anymore when you gain weight and the t-shirts somehow end up with irremovable stains.
Clothes should serve a practical and somewhat esthetical purpose. It shouldn’t be used as a means to lift your self-esteem or social status.
If you need to flash an Armani logo to boost your social status you better spend those 300 dollars on a self esteem seminar.
Vintage and design furniture
Redecorating your living room, bedroom or kitchen with vintage furniture is quite a strong trend lately.
Social media platforms like Instagram and Pinterest are full of inspirational pictures of vintage living rooms and kitchen. There are more house makeover TV programs than ever and one after another luxurious furniture brand seems to enter the market.
Fancy brand names with expensive products that often go hand in hand with words like “vintage” and “design”. Brands of which many only seem to thrive when the economy thrives and fall apart as soon as a recession hits.
Now, I’m definitely not a person who would recommend one to decorate his house with a bunch of incoherent crap from the thrift shop. But people who empty their bank accounts for so called design and vintage furniture really surprise me.
In my opinion, any product made in bulk in a factory that has a tag with the word “vintage” on it is just an excuse for you to empty your wallet. Buy a simply 100 dollar table from Ikea, attach a tag to it with the word “vintage” followed by a fancy brand name and you can charge 600 dollars for the same table.
Both tables are of equal quality and look exactly the same. The only difference is in the price.
Just as with clothes, furniture should have a practical and somewhat esthetical function. Meaning that furniture should be sustainable, esthetically appealing and practical.
If it meets these three conditions the only other thing is that it should be reasonably affordable.
Brand new cars
The third thing you should never pay for is brand new cars. Why is that you ask? I’ll explain you…
Imagine, you’re on a vacation. While taking a stroll down the beach I approach you and engage in a conversation with you. While we are having a conversation I tell you that I have a proposal for you.
The proposal I have for you is simple. You give me 100.000 dollars and I give you 70.000 dollars back. That’s it.. just a simple exchange. Would you do it? Of course not.. you’re not stupid.
Now, imagine the story I just told you didn’t take place on a beach but in a car dealership and I am the car salesman. Do you know what a 100.000 dollar car is worth the minute after you drive it out of the garage? 70.000 dollars.
Instead of spending 100 grand on a brand new car you could buy exactly the same car with a limited mileage for just 70 grand. It’s as simple as that.
When I meet people who got fined for something in traffic I often get curious and start asking them all sorts of questions. Apart from a parking ticket that I absolutely did not deserve I have no history of traffic fines whatsoever.
A few weeks ago, a friend of mine mentioned he got a traffic fine. I asked him what happened. He started telling me that he had left work late and was about to be late for dinner. His wife had called him in the car and told him that she was about to serve dinner because the kids would otherwise be late for football practice. In his hurry home he hit a red light and ran into a 250 euro fine.
His cognitive dissonance led to him finding all kinds of justifications and excuses. Meanwhile, the economist within me was running a bunch calculations. Now… I won’t bother you with all the details but I will share the conclusion.
Based on what he earns, he spent around 8 hours working for 250 euro’s. After this, he blew these 250 euro’s trying to save a mere three minutes of his time. He could've taken an unpaid day off and still net the same result but then without working eight hours.
Traffic fines are absolutely useless. Speeding will often save you such little time that it is not worth it. Neither is hitting a red light, tailgating or using your phone behind the wheel.
There are a few things in life that come entirely free in life. Oxygen, unwanted advice from your father in law and sunlight.
Yet, there are actually people in this world who find it absolutely normal to pay for “artificial” sunlight. A few weeks ago the weather here in the Netherlands was beautiful. It was 30+ degrees Celsius and sunny throughout the entire week.
I had spent my day at the beach and at night I took a stroll downtown. During my stroll I passed by the local tanning salon. There were three girls outside discussing about if they were going to visit the tanning salon every night of the week to catch a tan.
I doubt they even realized how ridiculous their discussion was. Paying for something that mother nature provides for free…
On top of that, plenty of research has shown that tanning isn’t harmless. So you basically pay money for something that might kill you one day. If you want a sunlight, just walk out your front door. (Unless you’re British of course…)
We’ve just covered paying for skin cancer so now it’s time for a different type of cancer: lung cancer.
Paying for cigarettes is quite simple. You basically pay for something that doesn’t add anything to your life but an elevated chance to get cancer and all kinds of other medical complications.
If you don’t smoke yet, never start smoking. If you smoke, make sure that you quit immediately. Paying for cigarettes is utterly incredibly useless.
Branded soft medication
Cough syrup, aspirin and vitamin tabs come in all sorts, flavors, brands and most important: prices. The price differences between popular brands and generic soft medication can be quite big. This price difference causes a lot of misconceptions about generic soft medication.
Many people think that they are unsafe and less effective than branded medication. However, this is entirely false.
The FDA requires that generic medication is equally safe and effective as brand medication. Moreover, generic medication is in most cases an exact copy from branded medication. The effects are exactly the same, the price is just different.
The only thing you pay for when buying branded medication is marketing. Large medication brands spend loads of money on marketing. The money they spend on marketing simply makes the product more expensive.
If you’re looking for soft medication, save yourself some money and buy their generic counterparts.
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