There is plenty of information available about common scams to watch out for – Nigerian princes, “family members” needing immediate help, internet romances, and people pretending to be Microsoft, your bank, IRD or NZTA and asking for passwords or personal details.
But there are other financial traps that can also cause people to spend money unnecessarily, wastefully or excessively. They might not all be scams in the strict sense of the word, but they can still leave you out of pocket.
Here are a few to watch out for.
Alleged budget advisers who charge for services
Financial mentors (budget advisers) working for FinCap-accredited services do not charge clients for their financial mentoring support.
Anyone can call themselves a budget adviser, and some even advertise on television and social media. If someone wants to charge you for this type of help, check out MoneyTalks to find a free financial mentoring service near you.
Free subscriptions upfront, but cost you later
These often ask for your credit card details upfront, promising that you will not be charged until after a free trial of, say, 30 days. You are told that you can “cancel at any time before the end of the free trial”.
At best, that may be true. But many people forget to cancel in time, and cancelling can sometimes be more difficult than expected. At worst, the subscription may be for a non-existent service, with scammers simply wanting your credit card details.
Be careful before signing up. If you do decide to try a free subscription, make a note in your calendar for three days before the trial ends. That gives you time to cancel if you decide the service or product is not for you.
Loans offered by retailers
This one catches thousands of people out every year.
You see a car, bed, television or something else you want, and the retailer offers you finance. It seems so convenient – easier than saving up and easier than going to the bank for a loan.
But borrowing can make it easier to buy something you cannot really afford. Instead of stopping to ask yourself, “Can I afford this?” or “Do I really need this?”, you may be tempted to buy it straight away.
The retailer may also receive a commission from the finance provider. Depending on the finance arrangement, the loan could cost you more than other options.
Even worse, some finance deals come with a credit card, giving you another way to spend money you may not have.
So, if you see something you like, go home and think about it overnight. If you still want it the next day, work out how long it would take to save for it. If you are considering borrowing instead, compare the interest rates, fees and total repayment costs before making a decision. Remember, being offered finance does not necessarily mean you can comfortably afford it.
Mobile phones as part of a monthly plan
These days, a mobile phone is a necessity for most people. But unless you have plenty of money to spare, the latest iPhone is a want rather than a need.
Paying for a phone as part of a monthly plan may mean you buy a more expensive phone than you need. It may also mean signing up for a more expensive monthly plan than you would otherwise choose.
If your income drops and you can no longer afford the payments, you could end up facing debt and potentially losing access to the phone, depending on the terms of your agreement.
You might also want to buy a phone on its own, only to find that the salesperson tries to upsell you with accessories you never knew you wanted!
Do your homework before buying a phone. Compare the cost of buying a phone outright with the total cost of a monthly plan, and choose what suits your needs and budget.
In summary
Whatever you are buying, take time to think before you spend.
You may be confident that you would never fall for a phone or email scam, but there are plenty of other ways to part you from your money unnecessarily.
The Romans had a phrase for it: caveat emptor, which means “buyer beware”. It applies just as much today as it did then!
And remember – we are here to help you, for free.
