“The biggest profit center for investment banks is the hefty fees they charge[…]”
-Alex Berenson
Remember in college when your parents would pop in to see you, inviting you out to lunch? Free food! Yay!
And yet, you have to listen to them talk about how they just discovered streaming videos. They ask you a million questions about what you’re doing, and who you’re doing it with. So was lunch free? Really?
Hidden fees are everywhere
The point is to recognize that every service, almost every good, has some price, some way in which you pay for it – except maybe the air you breathe. It is important to know when and how you pay so you’re the one deciding how to spend your money. Something that sounds too good to be true usually isn’t true.
Compare a bank offering free checking, but their savings accounts have a low interest rate, to a bank
charges for checks, but offers much higher interest on savings. If you had an emergency fund that earned
interest, paying for checking but earning more interest might be worth more
over time.
Being savvy, comparing all the fees, really helps you manage your finances like: paying closing costs for a mortgage versus a “no closing cost” mortgage, buying a car one place for an all-inclusive price or going to a dealer that charges separately for delivery, registration, and such, investing with a broker who also provides “free” financial planning or using a discount broker and having to pay separately for the planning advice.
Compare costs and keep more for you
Start paying attention to all the charges that go into your purchases. If you know the total charges before you decide, then you can be sure you’ve used your time and money wisely.
We did not really touch on taxes. Just like “free delivery,” government services are not free. Even a volunteer fire department depends on town funds for its building and equipment, and those funds come from taxing town residents. So you need to know when you owe taxes and for what.