The other day I was sitting in the sauna with a guy who was about to pay the stupid tax. I’m sure he didn’t know what he was doing, but I knew quite well that he was in the process of making a stupid tax mistake that would cost him $250 to $300.
The stupid tax is the cost we pay for making avoidable financial mistakes that usually come about from a combination of greed, disorganization, impatience, laziness, or ignorance.
So, what was the guy doing in the sauna that told me he was paying the stupid tax? He was making the mistake of sitting in the 90°C room with his fancy AirPod Pros in his ears, which I knew would probably lead to a stupid tax—since I made the same mistake several months prior with an equally fancy pair of headphones.
The $300 I originally paid for my pair went down the drain, and I then had to pay an additional stupid tax of $300 to replace them with my current pair of headphones—which are, ironically, a pair of fancy AirPod Pros just like the ones the guy in the sauna was wearing.
Paying a $5,000 Stupid Tax
$300 isn’t enough to bring most of us to financial ruin. But the scary thing about the stupid tax is that it really has no limit to how high it can go. I learned this the hard way last year when I was cleverly duped out of $5,000 by a savvy con artist who almost bilked me for ten times that amount—before the last ounces of my better judgment finally kicked in.
The short version of the story is that it was a new friend I made while in Madrid who slowly and methodically convinced me to join in on his crypto scheme. It’s an embarrassing ordeal, and the details of that story are worthy of a separate post. But for now, let’s just say that I have a lot of experience paying the stupid tax—which has made me far more vigilant when it comes to protecting my money.
Being scammed and losing headphones are some of my most notable taxes. Yet there are many others that are more common—ones that we pay on a regular basis without even realizing we’re doing it. So to help us all win a bit more with our money, let’s dive into a few of the most common and easily avoidable types of stupid tax that practically all of us should try to steer clear of.
1) Expensive Mobile Plans
The mobile plan stupid tax is one a lot of people still pay without realizing it. Years ago, if you wanted decent coverage, you had to sign a 2–3 year contract with Verizon, AT&T, or T-Mobile. They had the towers, they had the speed, and they knew it. Verizon was the Cadillac. AT&T and T-Mobile were your Toyota and Ford. Sprint? That was Pontiac before it died. Boost Mobile? An old beater with tinted windows and no title.
But things have changed. Today, budget carriers rent space on the same towers—and even the big boys offer prepaid plans of their own. Still, people keep signing long-term contracts and shelling out $80–$120/month when they could be paying under $40/month for unlimited everything on the same networks.
The biggest barrier many people have when it comes to escaping the mobile plan stupid tax is that their contracts have cancellation penalties keeping them stuck. Then there’s the free phone scheme, which carriers use to keep customers on the hook. The way out? Pay what’s required to break that pesky contract and start buying your phones with cash.
2) The Free Trial Stupid Tax
We just love free things, don’t we? Some months ago I signed up for a free trial of a social meetup app I never used. I meant to attend an event—but ended up double-booked and skipped it. No big deal… until I got a $19.99 charge because I forgot to cancel in time. That’s the free trial stupid tax.
This is a classic example of why it’s so profitable for companies to offer us those 30-day free trials. Dangle the free trial carrot, collect payment info, and bank on the fact that inertia, time, and forgetfulness will cause a very large percentage of customers to miss out on cancelling subscriptions we never intended to keep beyond the trial period.
I usually avoid it by setting daily phone reminders that bug me until I cancel. Setting a daily reminder starting three days before the trial ends is the strategic move to ensure I don’t forget. That system works most of the time. But when it fails? That’s why regular spending audits are key—so you know exactly who’s sneaking into your wallet.
3) Overspending On New Cars
I believe cars are the source of the biggest stupid tax most people pay. Cars are already expensive enough when you consider gas and maintenance, but most people add insult to injury by paying the new car stupid tax—a well-known fact that new cars lose about 20%–30% of their value in the first year alone, and nearly 10% the moment they’re driven off the lot.
That means if you buy a $40,000 car, you’re lighting up to $12,000 on fire just for the privilege of being its first owner. That’s the stupid tax in action—and it’s one that can be easily avoided by committing to only driving lightly used vehicles (1–3 years old if you’re flush with cash, and much older if you’re barely scraping by).
If you’re looking for car spending guidance, see my car buying approach which was adapted from the famous 1/10th car buying rule.
4) Not Doing Preventative Maintenance
Bless my mother’s heart—she taught me the value of preventative maintenance. Ironically, she wasn’t great at it herself. I saw this up close when I bought a few properties in a real estate deal that were the main cause of me going broke. The homes were falling apart—roofs, plumbing, HVAC, electrical—you name it. The repairs cost me over $60,000.
Fixing things after they break is called repair. Preventative maintenance is how you avoid that fate. It’s proactive, not reactive.
Whether it’s maintaining your car, caring for your home, or even regularly visiting the dentist to clean your teeth, skipping basic upkeep is one of the easiest ways to rack up the preventative maintenance stupid tax. It may be inconvenient to pay to constantly take good care of things, but it can be downright painful to pay two or three times more to fix something that could’ve been avoided in the first place.
Reader Question
My question for readers is: What are some of the more common stupid taxes you’ve encountered? As we’ve seen, they’re avoidable with a bit of planning and attention to detail. So hopefully, in the comments section, we can crowdsource enough examples to increase our collective awareness of the seemingly endless ways we blindly throw away money.
Drop your stupid tax comment below!