Ever drive too far out of your way to save a few bucks on gas but end up wasting time and money in the process? Ever fall under the trance of "free" marketing tactics and buy four cans of soup just to get one free (but all you needed was one)? Sometimes seemingly good financial intentions are perfectly irrational — and can backfire. It happens to the best of us. Check out these three financial #fails.
Casting a Wide Net
Comparison shopping is smart. Running through too many choices, however, is not, especially if some of those choices fall out of your price range. Let’s say you’re shopping for a car and only want to spend $10,000, but you continue to look at vehicles in a higher price range. After seeing cars with fancier features you may begin justifying spending more money.
Having too many choices can also be paralyzing. In the book "The Art of Choosing," author Sheena Iyengar gives an example of how fewer people participated in their 401(k) savings when the plans offered a high number of mutual fund options.
Also see: Signs You Suffer From a Financial Disorder
Trading With Too Much Confidence
Having a grip on your finances and investment portfolio goes without question, but being too bold may backfire. This is a tip especially for men. A study by the University of California Davis tracked 35,000 household portfolios over five years. They found that men traded stocks far more excessively than women, due to overconfidence. But in the long run, their returns suffered more, earning 1.4% less than women’s portfolios.
Also see: Frugal Habits of the Millionaire Next Door
Donating to Charities With High Overhead
Being charitable is a virtue. But if your goal is to make a direct positive impact, some donations are smarter than others. Charity Navigator says organizations that spend their money wisely allocate at least two-thirds of all donations directly toward their mission. You can look up your charity on their site, and they’ll provide its “financial” rating.
Also see: Allowance: How Much Should Your Child Get?
With that in mind, the Center for Investigative Reporting and Tampa Bay Times recently unveiled the top 50 worst charities in America. Topping the list is Kids Wish Network, which has reportedly spent less than three cents for every donated dollar helping needy children. The rest went to operating expenses. Also topping the “worst charities” list: Cancer Fund of America and Firefighter’s Charitable Foundation.
What are some other financial fails? Connect with me on Twitter @Farnoosh. Use the hashtag #FinFitFAIL.