Have you ever decided to sell something just a few months after you bought it, only to find that it was worth just a fraction of what you originally paid for it?
Unfortunately, everyday items depreciate in value, so everyone has experienced this at some point. But we should all be very wary of what we're purchasing, so that we can minimize our losses.
Certain items will lose a lot more money than others, and they can really hurt you financially. But people around the world still buy these items, unaware of just how much of their hard eared money they're throwing away.
In this post we'll look at the top 5 worst purchases ever. Most people are guilty of buying at least one of these items, but after reading this I guarantee that you'll want to avoid them in future. So let's get to it!
The top 5 worst purchases ever
I won't pretend that I'm not guilty of this one, as I've lost a lot of money on cars over the years. But fortunately I came to my senses, and I found a way to avoid losing money which we'll get to shortly.
Whether you purchase a car new or used, it will lose value as soon as you hand over the cash. The average car will lose 11% of its value as soon as it's driven off the lot. By the end of the first year it will have lost around 40% of its value.
If you drive 10,000 miles per year, by the end of the third year you would have lost 60% of the original price you paid. So let's look at an example:
- You buy a new car for $35,000
- You immediately lose 11%, so this drops the value to $31,150
- At the end of the first year the value has dropped 40%, so the value of the car is now $21,000
- At the end of the third year you decide to sell it to upgrade, and it's now lost 60% of its value. So you can expect to receive $14,000.
- In just three years you've lost 21,000 dollars. Ouch!
Many people also buy their new car on finance, or they take out a loan to borrow the money they need. This means that there will also be interest on the initial price, further increasing your losses.
Most people need a car to travel to work, so you may argue that this terrible investment is unavoidable. But there are ways to decrease your losses, and ways to avoid loosing money on cars.
How to stop loosing money on cars
Never buy a brand new car
Buying a brand new car could possibly be one of the all time worst purchases ever! To save yourself thousands of dollars, leave this to people who actually have disposable income, and get the car when it's a few years old.
Buy a car that won't depreciate in value
One option is to buy a car that won't loose value, or even better, one that is increasing in value. This will include classic, or rare cars, but bare in mind that they will cost more to buy than your average used car.
If you're certain that the value won't go down, then it may be a good investment.
Remember that you'll still need to buy insurance and fuel, and you'll need to factor in maintenance costs. If these costs add up to more than the appreciation, then you may still loose money, so choose wisely.
Buy an older car
This method won't stop you loosing money completely, but the amount you loose will be far less. If you buy a good low mileage ten year old car for $800, the chances are that you'll still be able to sell it in a few years for at least half this price.
At the very worst you'd loose your $800 completely. But this is still better than buying a new car as in our earlier example, and loosing $21,000.
Sell the car
This may not be possible for everyone, but many people have realized that they don't really need a car. If you find that your car is simply sat on your drive loosing value, then it's best to sell it as soon as possible.
If you think you need it to get to the shops, you may be surprised that you can buy pretty much anything online, and have it delivered straight to your door. If you don't need a car to get to work everyday, consider selling it to save a ton of money.
More tips to avoid loosing money on cars.
- Buy a low mileage car: cars with lower mileage will hold their value much better, and choosing a five year old car with low miles, is better than choosing a three year old car with high miles.
- Choose an economical car: cars with big engines will cost a lot more to run. So always consider the "miles per gallon", and bare in mind that a smaller engine will generally be a better choice. Some countries will also charge road tax based on how economical the car is.
- Buy a popular make and model: this will help generate more interest when it comes time to sell.
- Never buy salvage: cars that have a bad history will always be harder to sell, and they will have a far lower value.
2. Video games
A recent study found that 69% of Americans play video games regularly, and 43% of them use a games console.
If you're one of these 43% then you'll know just how much games cost, and you probably have a big collection of them stacked up in your home. But did you know that video games actually lose their value quicker than cars do?
Lets say you buy a game, and after playing it for a few days you manage to complete it. It's been just three days since you bought the game brand new, but it's already lost a ton of its original value.
A recent investigation found that used games, even popular ones, loose around 70% of their original value in just three days!
Games can get boring pretty quick, and as soon as most people complete them they'll move onto the next one. This can easily turn into a vicious circle of buying at a high price and selling for pennies.
How to stop this vicious circle
There's only two ways to stop loosing money on video games:
- Sell the games console
- Buy used games
Think about selling the games console, and just imagine what you could be doing with the time you save. You could work on starting your own business for example.
Buy used games
Your other option is to buy the games used from sites like eBay. We've already discovered the you will be able to save at least 70% on the new price, so you should be able to pick up a $50 game for a cool $15.
The good thing about used games is that people don't know how many owners they've had. So a game that's been sold 10 times should still fetch around the same price each time.
This means that you probably won't lose money by buying used video games until they get old and less desirable. So sell them while they're still hot.
3. A home
We're all told that owning a home is a good investment. And we've all heard the stories of the people who bought their homes in the 1970's for $50,000, and recently sold them for $500,000.
This looks great to eager buyers who don't know a thing about the hidden costs of owning a home. But when you factor in things like taxes, insurance, maintenance, the mortgage interest, and the rate of inflation that eats your money away over time, it doesn't look like such a good investment.
The data shows that in the long term, home ownership actually produces 0% return on your original investment.
So although you may sell your house for more than you bought it, the amount you spent on it in the time you owned it, plus the fact that inflation is making the numbers look more pretty than they really are, you're actually making zero profit!
How to not lose money on a home
Don't buy a home
If you don't have enough money to buy your house outright, then you may be better off renting a place to live in. The best way to decide whether it's better to rent is to use a rent VS buy calculator.
Buying a home with a mortgage will put you in a large amount of debt, and interest rates can rise to keep up with inflation. A mortgage is a big responsibility that should be carefully considered.
Many people rush into a mortgage without realizing just how much of a burden it will cause, so think very carefully before taking the plunge.
Rent out your home
If it's too late and you already own a house, you may find that renting out your house, and then renting a home to live in will put you in a better financial position.
Many people find that the money they receive by renting out their house, will pay for a rental property, and leave them with some spare change at the end of the month.
How else can you benefit
The money you save by not buying a house will benefit you in numerous ways. You can do whatever you want with it, but my suggestion is to invest it into an high interest index fund.
By putting your money into the stock market you can expect around a 7% return on your investment over time. This is better than you will ever achieve by owning a house, unless of course you rent it out.
Check out THIS POST to find out how to get started with investing, and how you could make a million dollars if you start now.
Fashion can be fun, but let's be honest, it's one of the biggest rip-offs on the planet! Nonetheless, people still fall for clever marketing and spend hundreds, or even thousands of dollars on it.
Whether it's a pair of $400 sunglasses that your favourite celebrity wears, or a top designer bag with the logo in gold (cheap plated steel) that costs $150, these thing cost very little to produce.
In fact, most of these items come from china and are no different to the $2 version you see on Ali express! The only difference is that they have the designers logo printed onto them after production. Manufacturers on Ali express openly state that they can do this for any business!
This is awesome for the companies selling these products, and for people who want to seem rich. But most fashion lovers will brake their bank buying this stuff, thinking the high price makes it higher quality; but they couldn't be more wrong.
How to stop getting ripped off with fashion
Expensive clothes and accessories are one of the worst purchases you can make. They don't last any longer than the cheap stuff, and the quality is often exactly the same.
Most people only buy this stuff to show off, so one way to stop getting ripped off is to stop thinking about others opinions.
When you accomplish this, the only other thing you can do is to stop buying it, and realize that it's probably the same as the items you can get cheaply on eBay, they just lack the designer logo.
5. Bottled water
Did you know that bottled water rakes in a massive $100 billion a year? Americans today are drinking more bottled water than milk or beer, even though they could get the same stuff from their tap!
Yep, it's been proven than almost half of all bottled water that is sold, is actually derived from the tap, making this more than just a bad purchase, it's actually a scam!
I'm sure that most people reading this will be guilty of buying bottled water, I've gone through my share of bottles. But for some of us it's more of a convenience than anything else.
It's easier to carry a bottle of water around and sip it now and again, rather than going to the tap to fill a cup. So from now on, get yourself a refillable water bottle, fill it in the morning, and carry that with you throughout the day.
Stop throwing your money away on bad purchases
I'm sure many of you are reading this thinking – "I've thrown so much money away over the years." well guess what? You have, but you can start getting some of it back today!
I already mentioned investing your money into the stock market, and I suggest that you really consider doing so right after you've finished up on this website.
Start by finding a good index fund like the S&P 500, and add as much money to it each month until you retire. You'll find that your money will begin to work for you, rather than the other way around.
Although you can't take back the financial mistakes you've made over the years, at least you can make it all back, but it will take time. Forget the worst purchases you've made, and start investing in stocks and shares now, start a side hustle, and save as much money as possible from this day forward.
Many terrible purchases are impulse driven, and many are made as a status symbol, even though we knew these purchases would lose value. This is a great way to look good, but it's also the top way to keep yourself poor.
Some bad purchases are simply mistakes that we hadn't considered to be such a bad investment. But by simply thinking about what we're buying before handing over any money can prevent further mistakes, and loss of money.
No matter what caused you to make these bad purchases, they can all be avoided, and you can start saving money from this point on.
Thanks for checking out the worst purchases ever, I hope this article has been useful. Check out THIS POST if you'd like to start saving more money, even if you're on a low income.