The 7 biggest ways people waste money and how to avoid them, from a financial attorney

As the coronavirus pandemic has caused millions of Americans and their families to take a second look at their spending habits, it's more important now than ever to recognize where you can cut back and save.

An easy place to start is looking at your spending habits and recognizing when you spend when you don't need to. This money could be added to your emergency fund or saved for holiday shopping, which often seems to come as a surprise each year.

"One of the most common ways I see clients get into financial trouble is through unnecessary spending that drags their budget down," says Leslie Tayne, a debt-relief attorney at Tayne Law Group. With people combing through their finances this year, it's a good opportunity to zero in on what your money goes toward and break the habit of spending on things you don't need.

Below, Tayne shares with Select seven big (and unexpected) ways people waste money — and how to avoid these costly mistakes.

"This is one that often goes overlooked because many often think the more insurance, the better," Tayne says. "But certain forms of insurance are just not necessary for most people and can lead you to spend unnecessarily."

These insurance products might be a waste of money, argues Tayne:

• Identity theft insurance if your credit card comes with built-in protections from fraud. Most credit cards, like the cash-back Citi Double Cash® Card (see rates and fees), do.
• Children's life insurance, as children don't usually have assets to protect. Most child life insurance policies have a savings component called "cash value" that can be used to pay for college or a down payment on a new home, but the fees outweigh the rate of return and it's better as a parent to invest your money elsewhere. More importantly, open a 529 savings account or make sure you have an emergency fund to over your child's costs.
• Rental car insurance if your typical car insurance has coverage that extends to a rental car.
• Collision insurance if your car is older and not worth much. Depending on your deductible and damage, it might not make sense to have collision coverage on your insurance policy.
• Travel insurance if you book your travel on a credit card that already provides travel insurance. Note that most travel credit cards cover trip cancellation and lost luggage (like the popular Chase Sapphire Preferred® Card and Chase Sapphire Reserve®), so contact your card issuer to determine if this is the case.

With interest rates slashed to near 0%, now is certainly a good time to refinance your mortgage for a lower rate. A better interest rate on your mortgage can save you money in the long run.

But avoid doing it too often, says Tayne, as it can come with a lot of loan fees that may negate any savings you get with a lower interest rate.

According to Tayne, if you have good credit, can afford your monthly payments and have equity in your home, refinancing makes sense. Just remember to factor in the costs that are associated with the refinancing, then see how long it would take to make up for the cost of the fees.

"It could take three to five years to break even, so it definitely wouldn't make sense to refinance again before that point," Tayne says. "If you're planning on moving before you would break even, that would likely not be worth it either."

To calculate your break-even point, follow a few simple steps:

1. Calculate what your monthly savings would be with the new loan by inputting the details (current loan amount, current interest rate, remaining term, new interest rate, new term) into a mortgage calculator like this one.
2. Calculate what you would pay in total for refinance fees. Review the loan estimate your lender provides you and ask about any additional costs to expect.
3. Divide the total loan costs by what your monthly savings would be. For example, if refinance fees cost $3,500 in total and refinancing will save you $100 each month, it would take 35 months (almost three years) to recoup the cost of refinancing.

If you can afford to make larger payments toward your credit card bills — or even pay your balances off in full — you should. By making only the minimum payments and carrying a balance month to month, you end up paying a high rate of interest, and your credit card balances quickly balloon.

"High-interest debt quickly compounds and can get out of control," Tayne says.

If you have other debt in addition to credit card debt, prioritize the one with the highest interest rates. "If the interest rate is in the double digits, it might be a good idea to pay more than the minimum to eliminate overall debt more quickly," Tayne says.

For those who can't afford to pay more than the minimum, make sure you're at least paying what you can on time when the bill is due.

Emotional spending happens on occasion, especially during times when we are seeking comfort. "But making a habit of it — whether it's positive or negative emotions or both — can be disastrous to your financial situation," Tayne says.

Of course, there are going to be times when you want to treat yourself and buy something new — that's human nature. But emotions change all the time, and you shouldn't hand over the wheel or let them pull you in too many directions. That's a surefire way to drain your resources, according to Tayne.

"If emotional spending puts you into debt or throws your budget off, that's not okay," Tayne says.

Instead of yielding to every emotional impulse, try to spend on small things or something specific that you've budgeted for ahead of time so you don't dig yourself in a hole. Always check the return policy, especially if you love to shop final sales.

And if you're celebrating a win, such as a promotion or a big achievement, try to imagine how you'll feel in a few days before splurging on a fancy dinner. If it still feels OK and there's room in the budget, go for it. If something feels off, listen.

To help reduce the temptation to spend, remove shopping apps from your phone and unsubscribe from retailer emails. Before you make a purchase, try writing it down first, along with the price. Wait 48 hours before you buy it, or any item in your shopping cart, so you can make sure it's within your budget and really makes sense for your lifestyle.

If you forget about it two days later, chances are you don't actually need the item, but simply needed a way to soothe yourself that day.

Free trials for a new fitness app, streaming service or subscription box can be a good way to check out a new product or service without having to fully commit upfront. But just as easy to sign up for, a free trial is also easy to forget, especially if you use the new service only for the first few months. Check out apps like Truebill, which can help you identify subscriptions you're paying for but not using.

As many Americans adjust to work-from-home lifestyles, now is an opportune time to reevaluate your lifestyle and spending habits. Prioritize the subscriptions or memberships you use regularly, putting them into categories, such as fitness, entertainment, news, dating apps, lifestyle boxes, etc.

"Evaluate whether you're utilizing the subscriptions you're paying for in a way that makes them worth the money," Tayne says. "Even subscriptions or memberships you're aware of might not be worth the money."

And if you do sign up for a free membership or subscription trial, set a reminder on your phone to cancel before the intro period is up.

Planning ahead can help you save money on all kinds of things. For example, you'll pay a lot more for snacks you buy at the gas station than you will if you just bring treats from home.

Here are some ways you can better plan ahead so you don't end up paying for the "convenience factor" while traveling, whether over the holiday season or in general:

• Look up gas prices online to find the cheapest prices. Gas stations very close to highway entrances and exits often charge much more than gas stations further away, Tayne says. Just make sure you don't drive too far out of your way to get the cheaper prices and waste fuel in the process.
• Pay checked bag fees on budget airlines, such as Frontier or Spirit, in advance. Paying to check bags after booking the flight can be significantly more expensive.
• Book any service or travel plans directly through the provider, rather than through a third party. "Third parties may allow you to compare rates easily but may charge other fees during the booking process," says Tayne.
• Sign up for an expensive meal kit instead of just buying groceries.

"Keeping up with the Joneses," or living beyond your means as a way to gain status, is an incredibly common way people waste money, Tayne says. It's easy to feel pressured to buy certain things because others around you have them.

She admits that this "lifestyle creep" and comparing oneself to another happens all the time with her clients, and is a big reason they get into debt.

While it's hard to avoid comparing your life to others in a world abundant of social media, try to be true to yourself, your lifestyle and your budget. "No two financial goals are the same because the road to reach that goal is likely very different," Tayne says.

Everyone comes from different paths, but what it takes your neighbor to reach a certain financial milestone is likely different from what it takes you, and vice versa. Keeping your sights set on your own personal goals, needs and priorities is a much better way to save money — and maybe even lead a happier life.