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Five Ways You’re Losing Money and You Don’t Know It

Are you losing money without knowing it? What hidden costs aren’t you aware of? I can think of five.

Almost all of us have little things that we spend on, even when we think we shouldn’t. It’s easy to see that switching take-out coffee for coffee at home will save you money. However, many money decisions aren’t as obvious. Without taking a closer look, you’ll miss out on money that could be helping you reach your financial goals. These hidden costs add up to a serious chunk of change.

Here are five hidden costs that are likely costing you money:

1. Using Credit Cards Instead of Cash

hidden costsFor most of us, when we spend cash, we feel the money leaving our pocket. Putting something on the credit card is easier, and the pain of actually paying the bill isn’t until much later.

Multiple behavioral economics studies have shown that we spend more when we swipe plastic as compared to using cold, hard cash. One study titled Always Leave Home Without It showed that people would pay twice the amount for the same item when using credit over cash.

As a nation, we continue to spend more and more on credit cards as compared to debit or cash. It’s one of the most expensive hidden costs out there.

Travel rewards and cashback offers are tempting. But, with purchases where it’s easy to be impulsive and the value isn’t clear, like shopping, restaurants, and bars, credit card users spend much more than cash buyers. When the value of something is known — say, a plane ticket bought online — the difference between credit card users and other buyers is less.

If you spend an extra $100 every month on shopping and entertainment over someone who pays cash, you’re paying $1,200 every year for the privilege of carrying a credit card. That $1,200 invested over 30 years with a 6% return would be worth $16,500 of today’s dollars.

Put more money in your pocket by leaving the card behind for your weekend entertainment.

hidden costs2. Buying A Larger House

The process of buying and selling a house is expensive. Since you’re money savvy, you might consider buying a dream house that you want to spend the next twenty years in, so you won’t have to move.

But before you do, think twice. Buying a larger space often comes with many hidden costs. Buying the starter home when you only need an apartment, or the spacious house when your starter home will do, means more maintenance costs, higher utility bills, and more money to the mortgage and interest. Carefully consider all the costs of upgrading to the larger home before you really need it.

If your early upgrade for a starter home costs $300 a month for five years, and the upgrade to the bigger home costs an extra $500 a month for 10 years, you’ll have missed out on $37,000 in 30 years.

3. No Emergency Fund

hidden costsSaving an emergency fund is a first step towards better finances for many families. It’s a great place to begin for a reason; not having cash on hand can lead to a lot of worry and some big expenses. Without extra money in the bank, you can’t take advantage of the multiple discounts you get for paying in bulk.

Even worse, you’ll have to turn to credit cards in the case of a big car bill, a medical expense, or job loss.

Rainy days will happen, and being unprepared is one way to lose big money. Let’s say you lose your job and then rack up $15,000 on credit cards at a 25% interest rate, but then pay it off over 3 years. Your lack of an emergency fund will have cost you many sleepless nights, and an extra $6,100 in interest. Now that’s what I call hidden costs, and it seems like everyone’s doing it!

If you have high interest debt, financial experts generally recommend that you keep at least $1,000 or one month’s worth of expenses in reserve. If you’re just left with long term debt, bump up the emergency fund to 3-6 months worth of expenses.

hidden costs4. Paying Too Much In Taxes

Most of us don’t think too much about income taxes on a daily basis. They come off the top of our paycheck, and we only think about them when it’s tax season. But taxes are a large expense, and minimizing your tax can be a great way to build wealth.

One way to reduce the hidden costs of your tax bill is to stash away money in tax-advantaged accounts like a 401(k), IRAs, and 529 plans. You’ll defer taxes while your income is high, and then pay them later in retirement when your income will likely be lower. This can make a big difference in retirement.

Let’s say you and your spouse make $120,000 a year, and you want a $2,000,000 portfolio in retirement. If you save in pre-tax accounts, you’ll need to save $2,100 every month if you make 6% on your money. If you save in after-tax accounts, you’ll actually need to save 25% more of your gross income, or $2,635, every month to have the same amount for retirement. Over 30 years, this adds up to $189,720.

Many of us also overpay on taxes throughout the year. It might feel great to get a big refund in April, but you’ll also lose out on extra dollars by paying too much in taxes during the year. If you stick that money towards savings and investments, you’ll have a year’s worth of growth on the money over waiting until tax time. If you do this year after year, this extra growth can really add up. If you get a tax refund of $3,000 every year for 30 years, you could have made an extra $180, or $5,400 in 30 years.

hidden costs5. High Cost Investments

When it comes to investing, you might think more about how you can save more or earn more on your money. The cost of investing might seem less important than other aspects of investing, but keeping investment costs low is critical to the performance of your investments over the long run. Investment researcher Morningstar has found that low cost investments outlast and outperform the higher priced competition. There’s a wide variation in investment cost, and it’s a lot easier to pick a lower cost investment than to find to investment that beats the market year often enough to justify the cost.

If you pay an average of 1% on investments, instead of a more reasonable 0.2%, on a $2,000,000 portfolio saved consistently over 30 years, you’ll have to save $325 extra every month to make up the difference in returns. Over 30 years, that’s $117,000!

How to Stop Losing Money

Make the right decision with these 5 hidden costs, and in 30 years, you’ll have an extra $372,120 (or more!) for retirement. That’s a considerable sum!

These are just five ways you might be losing money. How can you identify other hidden costs?

First, it can be difficult to realize how much more expensive one option is over the other when costs are hidden and difficult to see on a daily basis. Second, money decisions cost more than the actual purchase price of an item. There’s also opportunity cost, or what you could have done with the money instead.

What hidden costs have you discovered lately?

This post has been written by Jenna, our staff writer who hails from

Money Save Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. My husband is a former IRS agent and we always try to tailor our income and estimated taxes so when we file we owe or break even. As long as we pay in enough so that we don’t have underpayment of estimated tax penalties, we are happy to owe. Once or twice due to some credits we didn’t anticipate, we got a big refund back and I admit my first thought was “great” but then I came to my senses and realized if we’d figured better, that money would have been earning interest all year.

    • That’s awesome that you’re able to do that. My husband and I do our best to break-even as well, with mixed success. 🙂

  2. Another way people lose money is by having too large of an emergency fund….well….a traditional efund sitting in a bank anyway. Having a huge efund sitting in a bank account devaluing against inflation does no good. Keep $1000 liquid, and invest the rest somewhere that you can liquidate if needed.

    • Ah… the good ol’ EF fund debate. : ) I like having more cash on hand than $1,000, but yes, it does cost me some amount of money every year.

  3. I am pushing for that larger EFund these considering things on the job are shaky. I think this is extremely smart especially if you are single. Great post.

    • Thanks! Good luck with the job and with building up your EF.

      • Got that EF built to 1 year! So happy!

  4. One thing I’ve noticed, is that people always get something bigger instead of getting rid of stuff they don’t need. For example, the new house we are moving into has less cupboard space. My wife was trying to figure out how to add storage until I pointed out the three cupboards full of stuff we didn’t use at home. So we are going to sell stuff instead of spending more money to store stuff we don’t use.

    Same thing goes for a house. Some people upgrade because they have no room left…. but they don’t need half the “stuff” they own.

    • Good point. Decluttering is waaayy cheaper than a bigger house.

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