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In this episode, Chelsea talks about the bad money habits that can get you into trouble — because you think they're going to *help* you save money. Always take money advice with a grain of salt, and make sure you're making the best decisions for your actual life.

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Hey, guys.

It's Chelsea from The Financial Diet. And this week's video is brought to you by Start rebuilding your credit today.

And today, I'm coming to you from my impossibly light-filled and airy apartment to talk about all of the various things that you might be doing in the interest of being responsible with your money that are actually wasting you money. It's often easy to just follow the letter of the financial advice that we're getting, rather than the spirit that might apply to us. Or to completely misunderstand something and base part of your financial strategy off of what might be a total myth.

Or maybe something that worked for a previous generation and not your own. One of the things that we love to do here at TFD is kind of sift a little bit through all the crap and get to the stuff that actually applies to you. It can be hard to tune out the noise when it comes to your money.

And it can also be difficult to know the difference between something that might be right for you and something that might just be costing you. So hopefully, this list will give you a better idea of how you can actually be responsible with your money. So without further ado, 9 responsible decisions that secretly waste your money.

Number one is setting up an automatic savings deposit you can't actually afford. One of the most common pieces of personal finance advice out there is the concept of paying yourself first. And generally speaking, this is a pretty good and healthy thing to do with your money.

We know that automatic transfers are really important for making sure that the money actually makes it to your account, because the easiest place for it to get lost is when you have to manually transfer it from checking to savings. And because it's so much easier on the brain if you never see that money in the first place. So you never actually process it as money that's yours.

When you see the money transfer from one account to the other, you can often have that feeling like you're losing money, rather than just paying it to yourself. But if you often end up having to transfer money back into checking or overdrafting in your checking because of overly ambitious savings, you're probably doing this too much. And additionally, many types of savings accounts are limited to six withdrawals per month.

And if you exceed that limit, you could be penalized. When it comes to automatic savings transfers, you want to make sure you are sticking to the amount that you can comfortably afford. Because frequently having to go and check your savings account, pull money out of it, see the numbers, see the money that went into it, the more opportunities you're giving yourself to take out of your savings, and the harder you're making it on yourself to keep that money out of sight and out of mind.

Plus, you're risking overdraft drafting on your checking by not keeping enough of a cushion there. Start slow with automatic transfers. And build your way up.

And remember that if you're left with a surplus at the end of the month, that can always go into savings, too. Number two is putting all of your extra income toward debt when you have no savings. One of the more potentially controversial pieces of advice that we often give here at TFD is that when it comes to debt repayment, even if that interest is high, you really don't want to be doing much more than the minimum you need to keep that loan from going into default if you have no emergency fund.

Yes, that will cost you more money in the long run, but you have to weigh that against what can potentially happen to your finances if you don't have an emergency fund and almost literally anything unexpected happens. Once you have an emergency fund saved up, of course you can get into a more aggressive debt repayment strategy. But not having any kind of cash cushion available to you can mean you're entering yourself into a cycle of things like consumer debt, possible eviction, having to move unexpectedly, not being able to get to work.

Any number of terrible things that could otherwise be solved by having a small cash reserve. Emergency funds are not just for things like when you might unexpectedly be laid off, and therefore, not have an income. What about if your car breaks down?

Or you have to get out of a toxic relationship? Or you get struck with an unexpected illness and go over your paid sick leave? Not having any money available to you in case of an emergency it means that one tiny setback can send you spiraling into a terrible financial situation.

And there's a lot of heated debate in the personal finance world about what constitutes an emergency fund. There are gurus out there who will say you save $1,000 cash, and everything else should go to the maximal amount of debt repayment. And then there are people who say you need a cushion of six months' of living expenses.

I personally am somewhat in the middle and think that the best way to go is to try and save up three months of the absolute minimal living expenses. Meaning you're cutting out all of the fun stuff, all of the nice to haves, and just focusing on what you absolutely need to get through three months of living. I think it strikes a good balance between being somewhat doable for a lot of people and covering you in a wider range of possibilities.

Just $1,000 can be very tight. And six months can be really difficult for people to save up. But whatever you decide is the right emergency fund for you-- and that can totally vary based on your living situation, income, et cetera-- I personally believe that you should keep debt repayment to the absolute minimum until you have that safety net.

And of course, while you're saving up an emergency fund, I highly recommend seeking out an additional stream of income to help build up that savings faster. Number three is buying bulk items that you don't actually end up using. We often think about buying in bulk as sort of an automatic way to get a better deal on things.

If you've ever met someone with a Costco card in your life, you have almost certainly been witness to a grandiose speech about the luxuries of buying bulk. But for a lot of bulk purchases, particularly perishable ones, buying in large quantities can actually end up costing us and wasting. Here's a horrible statistic.

The average American throws away a pound of food a day. And according to one 2018 study, households that shop bulk end up spending on average $11 more per month on packaged foods than households that don't. Which sort of flies in the face of what we all tend to tell ourselves when we're buying that, like, super jumbo 75 pack of string cheese, which is that we're getting a much better deal per string cheese.

According to one Vice article, in some cases, bulk purchases are actually more expensive than their grocery store equivalent. For example, 24 five ounce hamburger patties cost $85 at Costco, which works out to about $3.50 each. While that sounds like a hell of a deal, Kroger sells ground beef for $5.50 a pound, which works out to about $1.80 per burger.

And the more perishable the item, the likelier that you're not actually going to get to eating slash using all of them before they expire. Additionally, especially when making more recurring purchases that have a big impact on your overall budget, you want to make sure that you're taking the time to look at the cost per item, not just the overall cost. If you break down the cost per item and find that it costs just about the same amount as buying a smaller package of those same items, it's really just a marketing ploy to get you to buy more.

A good golden rule to abide by is that bulk items are almost always best purchased in non-perishable forms. That means things like toilet paper, cleaning supplies, toothpaste, soap, shampoos, stuff that you will always have a need for and which will not go bad. I mean, within a reasonable amount of time.

Number four is always opting to the cheapest possible option. One of the biggest mindsets it can be hard to free yourself from when it comes to trying to save money and live on a tighter budget is to just always assume that the least expensive option is really, in the long-term sense, the cheapest one. We get suckered in by a sticker price or a really good deal and fail to consider the implications that that purchase might have at a longer time scale.

And that's totally setting aside what a lot of those super cheaply produced items have in terms of environmental or human impact. It's always important to break every purchase that you can down into an idea of cost per use. It is a very simple concept wherein you divide the price of an item by the number of times you use that item.

And you often may find that that H and M dress, that was $20 off the rack but only ended up being worn twice because it disintegrated in the washing machine, is actually not that good of a deal when compared to that higher end dress that you've worn dozens of times over the years. When we look at things that we get a ton of use out of, like furniture, outerwear, shoes, cars, et cetera, we often find that the cheaper options end up really costing us in cost per use. Usually because these items will need frequent repair or replacement.

While the other items can be used again and again with simple maintenance over the course of years. It's important to start exploring things like thrift or second hand purchasing strategies if you are someone who wants to get into buying those higher quality, important daily items, but don't necessarily have the cash on hand to be buying them brand new. For example, something like a second hand leather jacket or really nice set of dining chairs can be a great way to get that item that will break down to a fantastic cost per use without having to necessarily shell out what it would have cost retail.

But just remember, even if you can't right now start opting into those higher ticket items, to stop only looking at the upfront sticker price as the ultimate indication of the value or the budget friendliness of that item. If you start keeping track of items you have to replace or repair or even just get rid of entirely, you'll start to see over the course of time what your items are really breaking down to. Change the mindset, and then change the purchases.

Number five is signing up for an unlimited membership that only seems like a good deal. It can often be very difficult to resist the siren call of unlimited. If you do something semi regularly, it's often way too easy to make that mental leap into thinking that you'll do it quite often.

Particularly if this is something that you wish you were doing all the time, like going to the gym. But even when it's something that's sort of a day-to-day obligation of life, like here in New York, riding the subway, the difference between unlimited and per use can be enormous. For example, a 30-day unlimited Metro card is going to run you about $127, while a single ride on that same subway system is $2.75.

That means you have to ride the subway 46 times a month, at least, for the unlimited version to be worth it. Now, if you're like many commuters and you take the subway to and from work every single day, that could be an easily good choice. But if some days you work from home or take other modes of transportation, or are frequently out of town, that good deal becomes less and less obvious.

Similarly, as I mentioned earlier, for things like workout classes, the on-the-surface good versus bad deal can seem very obvious. Some studios around New York City will charge, like, $20 a class. Whereas the unlimited monthly pass is $200.

That's a no brainer, right? You can get so many of those workout classes for free if you go all the time. But here's the thing.

In order to break even on that $200 monthly unlimited, you're going to need to go to an exercise class at least 10 times per month. You might want to go at least 10 times per month, or even think you're going to. But you have to be really damn honest with yourself about whether or not you actually are.

We also often think that those unlimited monthly passes will push us into doing something more. There are all kinds of rental services for things like clothing or even sporting equipment that, on the surface, offer amazing levels of access to products that you might otherwise be buying. But are you the sort of person who has a really, really hard time mailing stuff back?

I know I am. That would probably lead me to either rarely use these services or accidentally end up keeping items, because I was too lazy to go to the post office. My Achilles heel.

The point is, it is never more important to be honest with yourself than when you're weighing out the pros and cons of unlimited versus per use. Number six is not using credit cards. Our friend Tasha from One Big Happy Life and I recently did an interview on The Financial Confessions where we talked all about credit cards and how to use them and how not to be afraid of them.

And I am someone who nearly totaled her financial life through horrible misuse of credit cards. As I mentioned before on the channel, at the age of 18, I got a Hello Kitty branded, $500 limit, Visa credit card, which I maxed out, threw away, and ignored all collection notices for. Surprise, surprise.

I had like a 480 credit score and was being hounded everyday by debt collectors. So I know probably as well as anyone how big of an issue not using credit cards to your advantage or not using them wisely can be. But a lot of people's response to this-- and what some financial gurus will advise-- is to completely eschew credit cards at all.

And not only is this kind of infantilizing in the sense that it imagines you'll never be able to repair your habits and use something wisely and to your own benefit, but it also cuts you out of the really awesome possibilities that wise and even kind of cunning credit card use can provide to your financial life. For example, I basically never have to pay real money for my flights anymore when I'm flying for personal reasons, because I use my airline credit card to my extreme advantage by funneling as many purchases as possible through it, and making sure to always sign up for that card when you get the huge miles bonus. You have to keep track of things like the annual fees.

You have to make sure that you're super on top of paying them in full every month. And you have to make sure that you're never using them as an excuse to spend beyond your means. But being really disciplined and advantageous about how you use credit cards, aside from helping build your credit score, can open up a whole new world of benefits to you.

If you're the kind of person who can really use something like tons of hotel points or frequent flyer miles. But do keep in mind that the most cardinal rule of getting a healthy credit card routine into your life is to always pay the bill off in full at the end of the month, which means never exceeding your ability to repay when it comes to your spending habits. And to pay that bill on time.

As The Simple Dollar put it, "In addition to paying your bill in full, you should also make sure you pay your bill on time. Most issuers charge an ugly fee, often up to $39, for a late payment. And since 35% of your credit score is based on your payment history, a missed payment can really ding your score." Lastly, another really important reason to not let your relationship with credit be one of fear is because ultimately, learning how to use credit wisely and to your advantage is a really important mental building block to getting a lot of control over your money and your spending habits.

It's almost inevitable that throughout your life you will have to, at some point, leverage something like credit or debt, even if it's something as relatively universal as using a mortgage to buy a home. Learning to have a positive relationship where you are in control with that debt you are leveraging is crucial. Number seven is keeping the majority of your money in cash.

And by cash, I don't literally mean a stack of bills under your bed, although I'm sure some people do that. I'm more talking about keeping your money liquid in places like checking accounts and savings accounts. Or even possibly in literal cash.

Let's say, for example, you have $1,000 to put somewhere. And you choose to put it in a high yield savings account that comes with a 1.7% interest rate. In 20 years, if that amount is compounded monthly, it will grow to $1,404.61.

Conversely, that same $1,000 invested at a return of 6% compounded annually will grow to be $3,207 after 20 years. And when you account for inflation, those super meager gains on your high yield savings account will almost be wiped out. Now, keeping your money easily available in something like a regular retail bank account is extremely important for things like your emergency fund.

Or if you have a big upcoming financial decision for which you need a lot of cash, like, for example, a down payment, that can also be a time to make sure the cash is handy and not tied up in the market. These bank accounts can also be great for more short-term savings goals, like a vacation or the holidays or your various sinking funds. But otherwise, you really want to be making sure that you are putting your money to work in a variety of more interesting vehicles, things like tax-advantaged retirement accounts, ETFs, index funds, mutual funds, real estate, all of the different places where your money can be doing more active work for you and working toward bigger goals.

We can often get into this mindset that the more conservative a financial move is, the more inherently responsible it is. But there is definitely a way in which you can be way too responsible and leave a ton of value on the table. And in doing so, shortchange your future self.

Number eight is always maintaining a credit card balance. This is one of the biggest myths that we hear over and over again. People thinking that it somehow works to their advantage to keep a balance running on their credit card, because I guess in their minds, that somehow advantages the credit card company, which in turn makes them want to incentivize it.

But this is simply not true. And a recent article from CNBC put it perfectly. A 2018 survey from found that "Of people who carry a credit card balance, 22% did so because they believed it would help their credit score.

But carrying a balance on your credit card does not increase your score, it just means you'll pay more money over the long term as your interest payments build. The best way to use a credit card is to make charges during the month and then pay it off in full before the statement is due." Says Ted Rossman, industry analyst for There may come a time, if you are particularly short on cash or have come into some unexpected financial issues, that you may be obligated to carry a credit card balance, because you simply can't afford to pay it all off at once.

But always know that this is the un-ideal choice and never something you are doing for your own financial benefit. It always means you're accruing interest on this balance, which inherently means paying extra money. And given that it has no impact on your credit score, there's no reason to be doing it if you don't absolutely have to.

Lastly, number nine is buying a home as soon as possible. One of the most difficult mindsets for so many millennials to shake is the equating of owning a home with being a real adult. For most of us, we were raised with this repeated refrain from our parents that home ownership was the ticket to financial security and stability and comfortable adult life.

And aside from the fact that for a huge number of reasons, you may not be in the right position to be a homeowner, or it simply may not be the right choice for your life, it's also something that used to be way easier for our parents' generation. And that's something that many of them often do not realize. But the numbers are very clear.

Looking at Seattle, for example, census data shows that the median home value in King County in 1980 was $71,400, which in today's dollars is about $225,000. That is well below half of what it is now. Looking at median home values in Seattle census tracts in 1980 really does seem surreal even after adjusting for inflation.

That feeling you might have, that homeownership, especially for average middle class earners, was something that used to be way more accessible than it is, is not just your imagination. It's actually borne out by the numbers. In many desirable areas, homeownership is easily double, triple, or even more, adjusting for inflation, from what it used to be in our parents' generation.

So the upfront cost is, in and of itself, totally prohibitive. But add to that that you may be paying the equivalent of a mortgage in student loans-- something your parents almost certainly did not have to deal with at the same level, if at all-- and having that massive amount of debt, which affects things like your debt to income ratio, is going to have a huge impact on how you can possibly set yourself up to buy. But going beyond all of that, even if you can afford to buy a home and you're not held back by more institutional factors like average home price or student loan debt, this perception that home ownership is automatically the right decision for you once you reach a certain age is just totally bogus.

I'm 31 years old. I am married. My husband and I could afford to buy a home in many different locations.

And actively choose not to buy one for a variety of personal reasons. One of the most important being that we don't know that we would want to be living exactly where we're living in 10 years. So we cannot make the commitment to say that we are willing to put that investment in our principal residence at this time.

But you may also not be able to afford all of the various things that would come along with a mortgage, such as the fees, taxes, homeowners' insurance, et cetera. You might not be able to afford things like repairs or refinishing a home. Or be prepared to take on the responsibility of having to take care of a home physically, no matter what happens.

For many people-- for example, people who have children or want to have children soon, want to set up roots in an area, be in a certain school district, know that they're going to be at their job or in their industry for a long time, and have every reason to expect they'd be comfortable weathering a few different markets if and when they wanted to potentially sell-- homeownership can be a great choice. And building equity can be a huge advantage to their future. But it is not automatically the right choice.

And it's something that needs to be weighed very intelligently and thoughtfully against many other long-term financial options. Long story short, just because it worked for your parents doesn't mean it will work for you. And that applies to nearly every element of your financial life.

But one thing that has not changed-- and from what I can tell, won't change anytime soon-- is wanting a solid credit score to help build your financial future. And if you're one of the millions of Americans with an inaccurate or unfair credit score, you should consider working with As the name suggests, works with people to help them repair their credit.

And they've been crushing it for the better part of a decade.'s advisors will help you analyze your credit reports, identify any questionable negative items, and work to get them removed. If you have any questions about the credit repair process or what could possibly help you do with your score, give them a call or check them out at the link in our description to learn more.

As always, guys, thank you for watching. And don't forget to hit the Subscribe button and to come back every Monday, Tuesday, and Thursday for new and awesome videos. Bye.