Common money pits

These common money pits will keep your wallets empty if not carefully navigated.

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This May 16, 2015 file photo shows the 2016 Chevrolet Camaro unveiled during a news conference on Belle Isle Park in Detroit.

Most of us have fallen into a money pit, or have heard horror stories from someone who has. The classic example of a money pit is a house that needs a lot of unexpected repairs. There was even a movie in 1986 called The Money Pit with Tom Hanks and Shelley Long on this very topic, a comedy about buying a bargain fixer-upper house that didn't go smoothly, to say the least.

But there are other types of money pits that can lead to almost unlimited spending. Anything that has high maintenance, ongoing expenses, or requires a large investment that does not yield a corresponding increase in value is a money pit. And while it's obvious from this description that money pits should be avoided, they don't come with warning labels. (In fact, some are even cute and furry…)

So here's a list to look out for.

Common Money Pits

For many of us, these money pits are impossible to avoid.

1. Restoring a Classic Car

That old classic car might look like a fun project — and maybe even a good investment. But did you know it can cost $100,000 to restore a classic car that might sell for $25,000? Ordinary cars can be expensive to maintain, but restoring a classic car can get really expensive. Adding insult to injury: Even if you do manage to finish restoring a car and do a great job, it will likely be worth only a fraction of what you put into it. I once worked on a 1967 Mustang for a few years before selling it for less than I paid for it — what a deal!

2. Pets

It doesn't seem like it should cost that much to own a pet, but there are lots of little expenses that add up, including routine vet care, food, toys, treats, accessories, boarding, grooming, etc. The average annual cost for routine expenses to own a dog is nearly $1,000. Cat ownership is a bit less expensive at $740 per year.

The routine expenses mentioned above do not include emergency veterinary care or treatment for diseases. I recently spent thousands of dollars on vet bills for my very sick dog. I was beginning to wonder about spending so much, but then I thought if the tables were turned and I was hurt, how much would my dog give to help me? Everything. So I did what I had to do, and my dog made a 100% recovery.

3. College

Or at least, extended and aimless graduate degrees. There is a word for people who go to college for 11 years: "doctor." Even though I was in college for a long time, it was a good deal for me. I went to a state school and worked full-time for some of those 11 years while I was finishing my Ph.D. Since graduating, I have been able to generate money with my engineering degrees.

But college does not work out this well for everyone, and has potential to be a big-time money pit. The average cost for tuition and fees is around $9,000 per year at a public university, or around $31,000 at a private school. On top of this, you'll have to pay for room and board. At these prices, it doesn't take long to sink a lot of money.

4. Starting a Business

Starting a business can be a good investment opportunity, or it can quickly turn into a money pit. It takes a lot of money to get a business off the ground: equipment, rent, payroll, franchise fees, and much more. Once you start putting money into a business, it can be hard to stop. If you stop spending, you'll lose your investment and future earnings potential, so you'll want to put more money in and keep the business alive.

This process can go on until you don't have any more money left to put in. By some estimates, 90% of start-up businesses fail, so there is a high probability starting a business will be a money pit — and a small chance that you'll be the next Steve Jobs.

5. Fixing Up an Old House

I lived in an old farmhouse for eight years and did lots of projects that greatly improved it. The main limitation on fixing it up was money. Every time I would get some money, I would spend it on a project. Eventually I realized that there would always be another project and I would never have any money to spend on anything else. I decided to sell the old farmhouse and move on instead of continuing to spend money on endless projects.

Strategies for Dealing With Money Pits

Most money pits can be avoided or controlled. Even if you get into a potential money pit, you may be able control expenses to avoid overspending. Take care to avoid spending more money than you can afford if you are getting into a potential money pit.

1. Avoid Money Pits

The most effective way to avoid wasting money on a money pit is not to get into one in the first place. I have gotten better at recognizing and avoiding money pits over the years.

One of the best ways to learn about potential money pits is to talk with other people who have done a similar project or who own a similar item. If you are in a hurry, Internet research on typical expenses can go a long way to identify hidden costs before you commit to buying something that could be a money pit.

2. Limit Money Pit Spending

If you have a money pit in progress, you can at least try to control the damage. Resist throwing more money in and try to enjoy your money pit as-is, without pouring more into it. Sure it may need work, but that can wait. Set a budget for spending on your money pit instead of spending as fast as problems arise. Try to find a partner to go in with you and share the expenses and the work.

3. Get Rid of Your Money Pit

In some cases, your best move is to get rid of the money pit and let someone else take over the costs. With Craigslist and eBay, it is easier than ever to sell whatever it is that is draining your bank account. There are other options to get rid of your money pit besides selling — you can trade it for something else, or even give it away free to a good home, depending on the item.

This article is from Dr. Penny Pincher of Wise Bread, an award-winning personal finance and credit card comparison website.

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