How To NOT Save Money

by TK on May 3, 2021

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There has already been so much written about conventional ways to save money.  CD this, 401k that.  However, today I want to take an unconventional approach to the topic of saving money.  I want to talk about the wrong ways to save money.  You may ask yourself whether there is a “wrong way” to save money.  Rationally, you think not—as saving money is saving money, is saving money—it adds to your net worth.  But with so many vehicles for saving, there are great ways to save and there are bad ways to save.  An example of a bad way to save is obviously leaving the cash between your mattress.  But besides that, there are a several other not-so-smart ways to save.  I will go over those ways below.

Investing In Small or Micro Cap Stocks

Small and micro cap stocks are (usually) riskier investments than bigger stocks and therefore should not be invested with your savings.  However, if you have funds to speculate or invest in these higher risk investments, more power to you.  If you want to use your savings to  invest in stocks, invest in large cap stocks that pay out dividends.

Using Your Checking Account As A Savings Account

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You are actually losing money by putting your money in a checking account.  That is because your money doesn’t grow whereas inflation grows at 3% a year, average.  That means, by this year next time, $1 will be worth 3% percent less.  Instead of putting it in just a pure checking account, put it into something that accrues interest—if you are so intent on holding onto cash and staying extremely liquid.  Savings is usually the default choice for people as it is easy (usually comes with your checking account) but I recommend going online and looking for online savings account as they offer higher interest rates.  You also have a choice of putting it in a CD (certificate of deposit) account.

Letting Credit Card Debt Accrue To Save

You should never make the mistake of saving without paying down your credit card debt.  Credit card debt is the income killer because of their exorbitant interest rates.  Develop an emergency fund and then pay down your debt your most costly debt.  I don’t ever say that you should pay down your debt instead of saving though—you should always pay yourself, at least a little bit at a time.  The logic is that if you do not have a savings to fall back on, you are likely to go back to your old ways of using credit to pay for large items.  So if you have debt and want to save, you can do both at the same time.  You just really need to commit to paying off that debt as fast as possible.

Save All Cash And Not Contribute To Your 401k

One of the biggest mistakes you can make is not contributing to your retirement, specifically your 401k plan.  That is free money you are getting (from your company) on top of what you invested.  There is no logical reason why you should not be investing in your 401k plan—not even the oft-quoted “I barely survive on my wage now” is enough of a reason to not contribute.   Even a little helps—especially if your company can double that “little amount” that you put in.  I remember when I living paycheck-to-paycheck right out of college—I was still contributing at least $50 per paycheck to my 401k.  Those $50 per paycheck have added up to a healthy sum today.  Plus, all the money that is contributed to your 401k is pre-tax money so you might not even see the difference depending on how much you choose to invest.  Some people do not like investing in a 401k plan because they think the money goes into the abyss and can’t be taken out until retirement.  But that’s not true.

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