Yahoo Finance I’m a Financial Planner: Here Are 8 Money Traps That Even Frugal People Fall For
If your spending got away from you last year, you might have vowed to live more like a frugal person in 2024. That’s a smart choice. Adopting a budget-minded attitude is a good way to start cleaning up your financial act, but you have to stay vigilant even after you begin thinking and spending like a thrifty person.
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“Even the most frugal individuals can find themselves caught in hidden money traps,” said behavioral economist and financial planner Keisha Blair, award-winning international bestselling author of the “Holistic Wealth” book series. “Understanding these subtle pitfalls is crucial for safeguarding financial well-being and achieving holistic wealth. It’s good to uncover some of these clandestine dangers that even the most budget-conscious individuals may unwittingly stumble upon.”
With that in mind, here are eight money traps that can even catch frugal folks.
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Subscription Creep
The cord-cutting movement was originally marketed to budget-minded media consumers who were fed up with overpriced cable packages. Over time, though, many wound up paying as much or more for the ever-growing assortment of streaming services that households have to cobble together to replace traditional TV.
“The era of subscription services has ushered in a subtle yet pervasive trap — subscription creep,” said Blair. “Frugal individuals might sign up for multiple low-cost subscriptions, thinking they’re insignificant, but the cumulative effect can drain finances steadily over time. It’s important to recognize the need to regularly assess and eliminate redundant subscriptions.”
Discount Deception
Thrifty people love a deal above almost all else, but the lure of markdowns can cause even the most cautious spenders to fritter away money on things they didn’t need.
“Sales and discounts can be enticing, but they often lead to overspending when consumers perceive them as ‘savings,'” said Blair. “Frugal individuals might fall into the trap of buying unnecessary items simply because they are on sale. Recognizing the psychology behind perceived savings versus actual spending is key to avoiding this deceptive pitfall.”
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Convenience Culture
The fast way is almost always more expensive than the right way, but the temptation to cut corners is everywhere and, therefore, hard to resist for even the stingiest among us.
“The allure of convenience, from food delivery services to ready-made meals, can subtly erode a frugal mindset,” said Blair. “While time-saving conveniences are tempting, they often come with a hefty price tag. Evaluate the true cost of convenience to avoid sacrificing financial prudence for momentary ease.”
Stealthy Lifestyle Inflation
Spending more as you earn more is not a hallmark of the thrifty mindset, but even the most prudent spenders can fall into this trap because lifestyle creep happens so gradually.
“Individuals, even frugal ones, may succumb to lifestyle inflation without realizing it,” said Blair. “Gradual upgrades in housing, vehicles, or even dining habits may seem inconspicuous, but they can significantly impact long-term financial goals.”
Emotional Spending
The most disciplined spenders have feelings too, and feelings have a way of steering spending plans off course.
“Even frugal individuals are susceptible to emotional spending, using purchases as a coping mechanism for grief, stress, boredom, or sadness,” said Blair. “Recognizing the emotional triggers behind spending is crucial for maintaining financial discipline. Behavioral cues can serve as warning signs to redirect emotional impulses toward healthier outlets.”
The Gambler’s Fallacy
“Don’t throw good money after bad” is an idiom that reminds gamblers to cut their losses when their luck turns sour so they don’t fall victim to the dreaded “one more hand” mindset. This concept applies beyond the blackjack table.
“Engaging in speculative investments or chasing losses in the hope of recouping money lost is a behavioral trap known as the gambler’s fallacy,” said Blair. “Frugal individuals may be drawn into risky financial decisions under the illusion that past losses increase the likelihood of future gains. I always advocate for a rational and diversified investment approach.”
Social Comparison Syndrome
Even the most pennywise spenders have neighbors, friends and social media accounts — and the pressure to keep up with the Joneses can be too much even for them to resist.
“Frugal individuals may fall prey to the subtle trap of social comparison, feeling pressured to match the spending habits of peers or societal expectations,” said Blair. “It’s important to stay true to individual financial goals and values, resisting the urge to conform to external pressures.”
Saving Money Without Saving for Retirement
Finally, it’s essential to remember that frugal spending is only one piece of the personal finance puzzle. Penny-pinching won’t pay off in the long run if an obsession with saving money comes at the expense of saving for the future.
“Even those who meticulously manage day-to-day expenses may neglect long-term financial planning, especially when it comes to retirement contributions,” said Blair. “Consider the long-term impact of not maximizing retirement savings, especially the power of compound interest over time.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: Here Are 8 Money Traps That Even Frugal People Fall For
