Wasted Money

Last week, I forgot to return four DVDs to the library on the due date. Luckily, I remembered on the day after they were due, but I still owed $8 in fines. Since I rarely have overdue items at the library, I was a little angry with myself. The payment was a penalty, and I didn't get any additional benefit from it. The $8 was literally wasted money. Here are my top three wasted money traps that I try to avoid:

Late fees. Libraries aren't the only ones that charge late fees. Just about every bill, e.g. credit card, utility, and mortgage, charge a fee for paying after the due date. When we had a mortgage, our total late fees could easily add up to over a hundred dollars a month, for the convenience of paying after the due date.

My spouse's solution is to pay bills in the week we receive them. In the rare instance we miss a payment due date, I call the biller and ask for forgiveness of the late fee. Usually, we are given one since our payment history shows we are consistently on time.

Penalties. These are incurred for ending a contract early, e.g. cell phone contract, early CD withdrawal and in some cases, an early mortgage payoff. Our remedy is to avoid contracts with a termination penalties and only commit money that is not needed to CDs.

Government fines. Parking tickets, traffic tickets, and late payment of income taxes fall into this category. One can avoid wasting money in this category, by following the rules. While at times I do exceed the speed limit on highways, I try to keep it no more than 5 MPH, which seems like the norm.

We target to pay zero in each of these categories each year. In most years, we have been successful at achieving zero. Hopefully, we'll get back on track in 2010.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

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