I bet if I asked a group of people what items they unnecessarily pay too much for they would assure me they do no such thing. Everyone hates overpaying for things.

Yet we are all guilty of the practice. Whether we buy overpriced items out of convenience or to treat ourselves the fact remains that we pay too much for some of life’s little indulgences.

If you saw a hose with several holes in it and you wanted to stop water from leaking out quickly and efficiently, what would you do? You would plug the biggest hole first. Fixing the leaks in your cash flow should work the same way. Stop the biggest leaks first.

Usually bigger means better, but not when it comes to overpaying for a vehicle. What I’ll never understand is why some people buy a new car when it’s a widely known fact that new cars lose a significant amount of their value the minute you drive the car off the dealer’s lot. It just doesn’t make sense to me to buy new.

Maybe it’s because these buyers don’t think their purchase loses that much value. If it was just a few bucks then it would make sense for everyone to buy new instead of used. Edmunds.com did a great little study to illustrate just exactly how much a car loses in value over the years. They used the incredibly popular Nissan 370z as an example. Brand new, this car will run you about $29, 873. The Edmunds study found that the minute you leave the lot with this car, the car depreciates by $2,559. That means before you even get your car home and parked in your driveway, your car has lost 9 % of its value.

But the outflow of cash doesn’t stop there unfortunately. If you drive that car normally and put on 15,000 miles or about there in the first year, your car will depreciate by an additional $5687. That means in the first twelve months your car will lose 19% of its value. The car continues to decline in value every year. By five years of ownership this car is worth only about 40% of its initial purchase price.

Now you might be saying this is an extreme example. In fact it’s not. On average all new cars lose 11% of their value the moment they leave the lot. And during the first five years all new cars lose on average between 15-25% of their value. Now that’s a leak worth plugging first and foremost.

Used cars get you all the modern day safety features, relatively low mileage, and will cost you thousands of dollars less than their new counterparts.

Everyone knows too that as soon as you buy a car, you’ve got to buy gas for it too. Len Penzo, from his blog by the same name, did this great little experiment a few years back where he tested the idea that buying the more expensive premium gas would actually save a car owner money by increasing the car’s performance and lowering its maintenance bills down the line.

It’s a popular theory that’s been floating around for a while. It was probably started by gas station owners and oil companies because it helps their bottom lines and it’s completely false.

Len put premium gas in his car for 30 days to see if he could increase the amount of miles per gallon he got out of a tank of gas. In fact he found that he got less miles per gallon using premium gas. The reality is that unless your car specifically requires premium gas, filling up with higher octane fuel isn’t cost effective in any way shape or form. Save yourself the money and fill up with regular.

Not only do you have to buy gas for your car, but you’ve also got to purchase insurance for it. Insurance by its very nature is extremely expensive for what you get out of it. It’s not really car insurance that is a drain on your finances, but certainly another kind of insurance is.

People buy whole life insurance because not only do the policies provide a pay out in the case of a family member dying, they also act as a tax shelter and allow the money built up in gains to be used in retirement for financial support. Sounds like a great product doesn’t it? It would be if it cost a whole lot less. The big problem with whole life insurance is the fees. The fees eat up most of the savings these products tout.

You would be smarter to use the money you were going to put towards the yearly premiums and sock it away in another investment, like the stock market.

Whole life insurance policies typically pay out only 4.5 % a year in dividends. That’s a lot lower than if you invested in the stock market, which typically returns about 8%.

Whole life insurance is the least cost effective option when looking for insurance that will pay out if a loved one dies unexpectedly. In most cases, you’re better off buying the lesser expensive term insurance, which still provides the death benefit, and investing the savings into another vehicle like the stock market.

People buy insurance because it gives them peace of mind. They know if something goes wrong, they have something to fall back on. It’s that same fear that companies play on when they offer a buyer an extended warranty. Warranties are there in case the item you buy breaks unexpectedly; in general they promise to replace or fix your item for free. But when you look at the likelihood of something breaking the added cost just doesn’t make financial sense.

Electronics, appliances and used cars are all big ticket items that always come with a sales pitch to buy an extended warranty. If the sales guy or gal is good the pitch will make it seem like it makes financial sense to purchase the additional coverage. But it never does.

In most cases the manufacturer’s warranty is sufficient coverage. Just about every product on the market today comes with a standard one year warranty from the manufacturer. No matter what you are buying –whether it be a new refrigerator, a laptop, or a used car –most minor malfunctions occur within that first year, while major malfunctions are more apt to occur down the line, beyond the scope of an extended warranty’s offer.

If you are that worried about what you are buying breaking then you shouldn’t be buying it! You obviously don’t trust the product or the manufacturer.

Extended warranties make even less financial success if you plan to use a credit card to purchase the item. Most credit card companies offer purchase protection for up to 90 days and some even double the standard one year warranty –all without charging you a penny for the protection. Save yourself the cash and pass on the extended warranty, no matter what you are buying.

Planning and preparation are two things that will save you the most amount of money no matter the category. Most of the time we overpay for things out of convenience and because we didn’t adequately prepare. Paying extra for expedited shipping is one of those things that if you prepare accordingly you’ll never have to waste money on it.

Last Christmas I bought gifts for my family that totaled about $50. I had them wrapped and ready to go a week and a half before the holiday, except I didn’t make it to the post office until 3 days before the big day. Because I didn’t plan accordingly and get to the shipping office in plenty of time what should have cost me $10-15 in shipping costs ended up costing me $75. I had to pay more in shipping than I did on the actual gifts. I could have spent that $60 on so many other worthy purchases than shipping costs. Make sure this doesn’t happen to you. Don’t wait till the last minute to ship something or buy something that has to be shipped to you.

If you’ve been keeping count that one makes 5 things that are draining the cash straight out of your wallet. If you take my advice and plug each of those 5 leaks you’ll save yourself upwards of $10,000. Even though I don’t know your exact financial position I’m going to go out on a limb and say you could use an extra $10k in your pocket right now. Heck everyone could.

But the savings don’t stop here. I promised you nine ways to save money and you’re going to get them. All you have to do is open up your email from Easy Street, a League of Power newsletter, next Wednesday and I’ll deliver the advice personally.

I look forward to speaking with you next week.

Keeping Money in Your Pocket,

Nancy Patterson

P.S. If in addition to trying to stop overspending you also want to make more money, then I suggest you read tomorrow and Friday’s emails from League of Power. Both days LOP will deliver a previously tested money making method to your inbox. Good luck!