20 Things That Are a Complete Waste of Your Money

Summary

This video exposes common financial myths that can secretly cost you significant amounts of money. It debunks misconceptions such as treating your home as an investment, paying high fees to financial advisors, and overspending on renovations or credit cards for rewards. The video encourages a mindset shift toward smarter financial decisions, prioritizing investments that align with your true values. It emphasizes learning the basics of investing, cutting unnecessary expenses, and focusing on what truly enriches your life rather than chasing status symbols or financial fads.

Takeaways

• 😀 Treating your primary residence as an investment is a common misconception. Running the numbers may show renting and investing could be a better option.
• 😀 Paying a financial advisor a percentage of your assets (AUM) may seem small at first, but over time it can consume a large portion of your returns, costing you hundreds of thousands of dollars.
• 😀 Many home renovations do not pay off as an investment. Renovate for joy, not ROI, and avoid taking on debt for non-essential upgrades.
• 😀 Using credit cards for rewards to justify overspending is a dangerous habit. Pay off balances in full every month to avoid costly interest charges.
• 😀 Whole life insurance and infinite banking are often high-commission, complex products that most people don't need. Opt for simple term life insurance instead.
• 😀 Buying online courses without implementing what you learn is a waste of money. Focus on applying the knowledge you already have before investing in more courses.
• 😀 Status credit cards and airline loyalty programs are often a waste if you're not using the benefits. Audit your perks regularly and downgrade if necessary.
• 😀 Stop pretending to be ultra-wealthy with luxury purchases. Prioritize spending on things that truly add value to your life.
• 😀 Understand that financial advisors typically won't beat the market for you. Many simple financial setups can be managed on your own with basic knowledge.
• 😀 Invest your money in low-cost index funds, target date funds, and automate contributions to steadily grow your wealth over time.

Q & A

Why should you not treat your primary residence as an investment?

A primary residence may not be a good investment because the costs involved (mortgage, taxes, maintenance) can outweigh any potential financial gains. Renting and investing the difference could lead to better financial outcomes in some cases.

What is the problem with paying financial advisors based on assets under management (AUM)?

Paying financial advisors a percentage of assets (typically 1%) can result in significant fees over time, which can consume a large portion of your returns. This structure can lead to a reduction of your overall financial growth, especially as your portfolio grows.

How can you avoid paying high fees to financial advisors?

To avoid paying high fees, consider learning basic investing yourself and using low-cost options like index funds. If you need advice, hire an advisor for a one-time consultation or by the hour, rather than paying ongoing fees based on your net worth.

Why are home renovations often not a good financial investment?

Home renovations often do not provide the return on investment people expect. Instead of being an investment, they are more of a luxury or emotional decision. Renovating for personal joy rather than financial gain is a better approach.

What should you focus on when considering a home renovation?

Renovate for personal enjoyment and be honest about the costs. Avoid taking out debt to fund renovations, and save up money over time to ensure the project is affordable.

What is the risk of using credit cards to earn rewards?

Using credit cards to earn rewards can lead to overspending and accumulating high-interest debt. The interest paid often outweighs the value of the rewards. It’s essential to pay off your balance in full each month to avoid falling into debt.

What should you do before optimizing for credit card rewards?

Before optimizing for rewards, ensure that you are debt-free. Set up a debt payoff plan and prioritize paying off existing credit card debt before considering rewards, points, or cashback.

Why is whole life insurance often not recommended as an investment strategy?

Whole life insurance is a complex and expensive product with high fees and underwhelming returns. It is often better to stick to term life insurance, which is simpler, more affordable, and designed to provide protection rather than serve as an investment.

What is the issue with buying online courses without implementing them?

Purchasing online courses without taking action or implementing what you’ve learned leads to wasted money. The value comes from applying the knowledge, so it’s better to finish courses you’ve already bought before considering new ones.

How should you handle status credit cards or airline loyalty programs if you don’t use the benefits?

If you're not utilizing the perks of high-fee status credit cards or loyalty programs, consider downgrading or canceling them. Reallocate the money spent on annual fees toward something that better aligns with your values and priorities.