5 Secret Money Traps Frugal People Don’t Fall For
Written by
Martin Dasko
Edited by
Ashleigh Ray
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Money traps have a tendency to throw off your budget and cause financial issues since you didn’t see them coming. The good news is that the more aware you are of these traps, the quicker you can spot them, so they don’t hurt your finances.
Frugal people usually avoid money traps thanks to their smart spending and saving strategies. Keep reading to find out which money traps frugal people never fall for — and how you can avoid them too.
Forgetting To Cancel After the Free Trial
“Subscriptions are such a great way for companies to make money because they get an ongoing stream of revenue for every single sale they make,” said Carla Adams, founder and financial advisor at Ametrine Wealth.
“There’s absolutely nothing wrong with subscription services since we all need internet, cell phone service and electricity… However, we do have to be careful about [them].”
Subscription services are one of the biggest money traps since you somehow go from a free trial to a recurring expense you didn’t expect.
“These days there are so many apps and other services that will give you a free trial period but require you to enter your credit card information to do so,” explained Adams. “If you don’t actively cancel after the free trial period ends, you are automatically signed up and charged every period going forward until you actively cancel.”
Erika Kullberg, an attorney, personal finance and debt expert and founder of Erika.com, echoed a similar sentiment.
She said, “With a subscription service, the company’s goal is that the customer will set it and forget it and continue to pay for the product or service every month, quarter or year. This means you are stuck in a cycle of spending money unless you are really on top of managing your subscriptions.”
How To Avoid This Money Trap
“Frugal people avoid free trials as much as they can unless they know it is something they want to sign up for long-term, or when they do sign up, they set calendar reminders to cancel before the subscription renews (unless they actively choose to stick with it),” said Adams.
“Frugal people also regularly review their subscription services and cancel those they are no longer using or are not getting enough value from.”
Carrying a Credit Card Balance
According to Kullberg, “Frugal individuals know that having a credit card is a great way to build credit and earn rewards but is not a useful tool for borrowing money.”
The convenience of a credit card along with the enticing rewards programs and perks make it an easy choice over other payment methods, but you have to be careful not to spend more than you can afford. Doing so could force you to start carrying a balance from month to month.
If you’re only making the minimum payments, your balance will accrue interest over time, causing you to pay even more. Since the interest fees can be astronomical, carrying any kind of credit card balance will make it challenging to pay down debt and save for your various goals.
How To Avoid This Money Trap
“Unless it’s an emergency expense, you won’t find frugal people using credit cards to spread out the cost of purchases they can’t afford since that results in very expensive interest payments,” said Kullberg.
Get into the habit of using your credit card sparingly and pay off your balance monthly to avoid dealing with interest charges.
Not Planning For Emergencies
Andy Cooper, the financial analyst at CouponBirds, warned that unforeseen expenses, like an emergency room visit or sudden car repair, can be costly.
U.S. healthcare spending is projected to rise from $4.7 trillion in 2023 to $7.2 trillion by 2031, growing by an average of 5.5% per year, according to the Centers for Medicare and Medicaid Services.
Without an emergency fund or nest egg to pull money from, you may have to take on debt to pay for these unexpected costs.
How To Avoid This Money Trap
Frugal people understand that not all expenses can be predicted and plan for this with an emergency fund. Financial experts recommend setting aside at least three to six months’ worth of living expenses to help you plan for whatever life throws at you.
Not Adjusting the Thermostat
During the extremes of the summer and winter seasons, it can seem almost easier to set your thermostat once and forget it. But frugal people know their electricity bills will go up if they don’t take certain measures to keep it at a reasonable level.
How To Avoid This Money Trap
Frugal people will use tools and technology to ensure that they can save money on their heating and cooling bills.
“It’s important to adjust your thermostat when you’re not home,” said Adams. “Turn down the heat in the winter (but not so low that your pipes will freeze!) and turn down the AC in the summer when you’re out.”
And if you invest in a smart thermostat, she suggested, “to automatically adjust the temperature when you’re out of the house if you have a regular schedule that you’re at the office.”
Eating Out Frequently
Eating out has never been more convenient thanks to the availability of food delivery apps like UberEats. And that convenience comes at a cost.
With marked up food prices, delivery fees and tip, you’re often spending more than you thought you would on a simple meal. If you rely on food delivery apps, your meal budget will throw off your entire spending plan.
When it comes to frequently dining out on fast food or at restaurants, you’re still spending more than you would have if you cooked at home, especially when you factor in the gas to get there.
How To Avoid This Money Trap
Frugal individuals know that eating out often and relying on food delivery apps could hurt their budget.
“Try to buy groceries and remember that cooking is much healthier,” recommended Adams. “Plus, if you cut back on the regular, unnecessary eating out, you will likely get more joy on the more special occasions when you eat out since it will feel like more of a treat.”
There are money traps that can blow up your entire budget if you don’t watch out for them. Be sure to look out for these money traps as you focus on reaching your financial goals.
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