3 Innocent Money Mistakes That Can Cost You Big Time

3 Innocent Money Mistakes That Can Cost You Big Time

We all make mistakes. A screw-up here, a misstep there -- it happens. What really matters is what we learn from it... right? Unfortunately, if those mistakes have anything to do with money, the takeaway can cost way more than you bargained for.

To help save you a headache and some cash, Worth It...Not Worth It? author Jack Otter shares three innocent money mistakes we can all avoid to be smarter about our financial futures.

Mistake #1: Using a debit card at gas stations (and hotels)

buying gas

Using your debit card to get your morning latte is one thing, but gas stations operate a little differently than your local coffee shop, Otter points out.

"[If] you charge $2 or $3 of coffee, it goes out of your back account, end of story," he says. "But if you use your debit card at a gas station, you might only get $30 worth of gas -- but the gas station puts a hold on $80 or $100, whatever it estimates you might have spent. Until it reconciles its books, you can't touch that money. So, you could overdraft your bank account even though the money's in there."

It's even worse when you book a hotel, Otter says.

"Say you're going to stay at a hotel for five nights, a $200 room. Not only will they hold that money, they'll estimate incidentals you might use -- the gym, the minibar, whatever," he explains. "You could see $1,200 in your bank account frozen."

To be on the safe side, Otter suggests using your debit card as little as possible, instead defaulting to a credit card or cash. (The exception: If you carry a balance on your credit card. In that case, use the debit.)

Mistake #2: Paying off your mortgage early

piggy bank house

The moment you buy a house, paying down your mortgage becomes a high priority for many homeowners. While this seems like a responsible thing to do, Otter says there's actually a much smarter strategy for your finances.

"A better use for your money is to put it into your retirement account, your 401k," he advises. "It mainly comes down to taxes... Your employer pays you $1, but after taxes, that's only 70 or 80 cents. If you put it in your 401k, that's pre-tax, so the full dollar goes into your 401k. Plus the company match, that's $1.50 you're putting toward retirement."

In other words, you could pay your 70 cents toward the mortgage, or you could save the $1.50 in your retirement account. The latter strategy, Otter insists, is the smarter move.

"Over 20, 30, 40 years, that money compounds tax-free. So, you're much better off putting it in the 401k," he says.

Mistake #3: Falling in love

couple in love

What's wrong with love? Nothing, unless you and your partner differ in what you splurge on versus save.

"We all have sort of a mental financial math where we splurge on the things we really love, and then we cheap out on the things we don't care about," Otter says. "Then, you meet someone who has different priorities: You love to eat out... You don't care much about traveling. But your partner, he or she loves to travel."

In this situation -- as is common in relationships -- the key is communication and compromise.

"The solution is not to tell your partner he or she can't go on that wonderful trip," Otter insists. "The solution is to work together to come up with financial priorities. Sit down and say, 'Okay, these are the things we love to do together; we're going to figure out a way to pay for them. In order to do that, here are the things we're going to have to cut back on.'"

Before You Go

You're Making A Reservation On The Phone
Even great restaurants have empty tables sometimes, and while you might be able to snag one by calling at 5:00 on the evening you want to eat, online services like Savored and OpenTable do a fine job of searching for availability -- plus, they reward you with a discount. If you use Groupon-owned Savored, for instance, which currently lists restaurants in 10 cities and is adding more soon, you could pay 30 percent less for food (and drinks, too) if you want to dine that night at 8 p.m., and up to 40 percent if you're willing to eat at 6 p.m. (bonus: no coupons necessary).
You're Walking In Hungry
You've heard it's not wise to go grocery shopping when you're famished -- and it turns out that advice applies to dining out, too. Aaron Allen, a restaurant consultant who has advised clients including The Cheesecake Factory and TGI Fridays, says over-ordering is a common mistake among the ravenous. Two ways to avoid this pitfall: have a small snack before you leave home, or split an appetizer, which will leave you plenty of room for your entrée (and save you some money, too -- especially since appetizers are some of the most high-margin items on the menu).
You're Hoodwinked By A Smiley Face
Allen sees tip inflation growing at an even higher rate than food inflation: It used to be that a gratuity of 10 percent was acceptable and the norm; then it went to 12 percent, because customers wanted to show that they weren't just satisfied -- they were impressed. This cycle continued, and now the typical amount is 20 percent, with some restaurants even suggesting 22 percent and higher at the bottom of the bill. Obviously, there are times when a very generous tip is appropriate (and it's still true that most servers make below minimum wage, so they really do depend on the extra cash). But base your tip on the service itself, says Allen -- not on what a restaurant "suggests." And beware tactics like the smiley face (one study found that people tip 18 percent more when a waitress draws one on the check).
You're Drinking The House Wine
Although it sounds like a bargain, "house wine" is usually the worst value on a restaurant's list (unless, that is, you're dining in a quaint Italian village). Allen says the markup on these bottles -- which can be domestic or imported -- is often very high, since restaurants know they're an easy sell. Instead, consider the imported wine section of the menu -- these bottles used to cost much more than American ones but have become much more reasonable. Chilean varieties, in particular, are a great deal; Allen finds many restaurants are responding to customers' increased interest in reasonably priced Malbecs. (And, as always, consider ordering a bottle if your group is going to drink more than four glasses.)
You're Ordering The Wrong Vodka
Allen has noticed that if he orders a vodka tonic, a waiter will often ask, "'Would you like Grey Goose or Belvedere?' -- as if those are the only two choices." The truth is, if you're having a mixed drink, you don't necessarily need a premium spirit, and having your drink made with whatever is in the well -- bartender-speak for 'non-fancy liquor' -- is an easy way to lower your drinks bill. The well (also called the house pour) might be Absolut or Smirnoff, which are both perfectly fine mixed with tonic or juice but cost about two-thirds less.

Next: 7 things to stop spending money on right now

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