7 common money traps even smart people fall into

Managing cash flow is vital to financial success. See 7 spending mistakes to avoid and help yourself save money.

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I don't gamble. To me, it seems like a waste of my hard-earned money. I hate to see $100 disappear into a slot machine, never to be seen again, or to have my pile of chips swiftly raked away by a craps dealer because someone rolled a 7.

But when you think about it, even without gambling it away, we watch our money disappear all the time. We hand it over pretty easily to a cashier or with the click of a mouse.

Earlier this month, I wrote about the last 10 things I bought, even though it was somewhat terrifying to think about opening up my wallet to the world. Since then, I have been contemplating the good and bad money decisions I have made in my life.

Managing cash flow is vital to financial success, since most of us don't win the lottery and have a lifetime stream of income coming in automatically every January. We work hard for our money and want to make the most of it.

Here are seven spending mistakes to avoid to help your cash stretch farther:

1. Buying Things on Sale.

You may wonder why buying things on sale is a mistake! You might even ask me, "Wasn't that one of the smart money moves you outlined in your smart spending post?"

Sales actually can be a huge money waster. No matter what the price is or what a great bargain you got, if you purchased something you aren't going to use, you just threw away your money.

I've purchased so many "bargains" at department stores or discount stores over the years that either weren't really my style or didn't go with anything else I had in my closet. Don't make that mistake!

Tip — Ask yourself, "Would I be this excited about this purchase if it weren't on sale? Would I buy this at full retail? Will I use this — a lot?"

Then and only then decide to make the purchase.

2. Buying Stupid Things.

Have you ever purchased an ashtray on a stand since you thought it might make a good planter?

How about a bonsai or a macramé hammock? Have you ever bought a convertible sports car (which was way too small) followed by a sedan (which was way too big)? I have.

The plant stand went to charity, the bonsai died, the hammock rotted in the rain and the cars were sold and replaced with more sensible models. However, I'd love to have the money back from all the illogical and strange purchases I have made over the years.

Tip — Hold onto your wallet. Since we are all human, we are going to make mistakes, it's part of life. Just try your best to limit them by having criteria for purchases — especially big ones.

3. Throwing Money at Problems You Can't Solve With Money.

Do you know what makes your skin glow? Though I am not a dermatologist, I have found that exercise, spending a few minutes in the steam room at the gym, drinking a ton of water, getting a good night's sleep and drinking nutrient-rich carrot juice works wonders for the complexion. Does an expensive skin cream help? Maybe, maybe not.

When you are feeling low, tired or sad, does online shopping make you feel better? Maybe. But so does calling a friend, walking around the block and petting your dog.

Tip — Stop and think if you are trying to solve a "problem" with a purchase. Ask yourself if there are other things you can do instead throwing money around.

4. Not Spending When You Have an Opportunity.

Why work so hard if you aren't going to spend your money on what can add great value to your life? A few years ago, some dear friends of ours were married in a fifteenth-century cathedral in Alicante, Spain.

Guess who wasn't there? Us!

At the time, the expense of the trip hindered us from going. In hindsight, it would have definitely been worth it.

Tip — Spend money on the important things.

5. Not Maximizing Points and Rewards.

When I used to travel for business, I had all the hotel and airline points a girl could want. Now, I enjoy sleeping in my own bed every night, but miss my points, bonuses and discounts.

I could get them through a rewards credit card instead. By not putting purchases on a rewards credit card, I've missed out on free airline tickets, hotel nights and gift certificates.

Just be sure to pay off the balance each month so you aren't paying finance charges to get points!

Tip — If you are disciplined enough to pay off your balance every month, charge your purchases on a robust rewards credit card to take advantage of points or cash back.

6. Not Setting up Automatic Savings Outside of Your 401(k).

Common advice is to pay yourself first, but that's easier said than done.

We tend to pay the bills that are in front of us, spend on fun things and then leave our savings until last, if there's anything left.

In fact, years ago I had an automatic investment going to a mutual fund. When I changed jobs and banks, I stopped it and decided to just send funds in once a month myself.

"I am disciplined!" I said. Well, that was 10 years ago, and guess how many monthly investments I sent in? Two.

Not good! Learn from my mistake and set up an automatic investment plan to come out the day after your paycheck hits your bank account each month. Talk to your investment company to set it up.

Tip — Automate your savings and investing both inside and outside of your 401(k). Set up a direct deposit from your paycheck to a bank account and an automatic monthly transfer to your favorite investment account.

7. Not Spending Enough.

Sometimes you think you are being thrifty but end up not getting what you really want.

Here is an example. I live near a gorgeous winding river where "the deer and the antelope play" — literally — as well as a few moose. My husband and I gaze at the river every evening looking for wildlife on our deck with our binoculars.

The binoculars are decent, but not great. We own three different pairs instead of owning one really great pair. We can see moose, deer and even fishermen casting their lines, but not in great detail.

It would have been better for us to buy one great pair of binoculars and share them. Our experience would be enhanced with sharper images.

Tip – Buy the highest quality items you can afford (even if you have to wait to get them.)

We all make money mistakes because we are, after all, human. Hopefully by highlighting a few of mine, I can help reduce the number you make.

When all else fails, hold onto your wallet.

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This article was written by Nancy Anderson from Forbes and was licensed as an article reprint from October 27, 2015. Article copyright 2015 by Forbes.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917.
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