This week for Wednesday Wisdom: 10 things that you are doing to save money that may actually be backfiring (from SavvySugar). Very interesting (although I'm not sure I agree with all of them, or their assumption that you won't use your bulk food - I do!).
Check it out and let me know what you think!
10 Things You Do to Save Money
That End Up Costing You More
We're thrilled to present this smart Wise Bread story here on Savvy!
Have you heard of the expression “penny wise, pound foolish”? It’s
something I heard a lot growing up, from my parents, and it can have
multiple meanings:
- You are very careful with small amounts of money, but throw caution
to the wind with large amounts. This is akin to someone who eats from
the dollar menu every day but then blows a hundred dollars every month
on a gym membership that’s never used.
- You do things to save money now, only to have those savings cost you more farther down the road.
The second definition is what I’m focusing on today, because it’s a
lot easier to fall into the trap of saving money only to have it bite
you later on. Here then are 10 things that you may be doing to save
money that could actually cost you a lot more in the weeks, months, or
years to come.
RELATED: The Case For Expensive Shoes
1. Avoiding Regular Checkups With the Doctor, Dentist, or Optician
It’s something I did in college when money was tight. “Aah, who needs
to pay money to a dentist to have him tell me I should floss more?”
Well, after leaving the dentist alone for a few years, I paid the price.
Avoiding the regular cleanings and checkups left me facing a hefty bill
later on when I needed a bunch of costly fillings. I was lucky that I
didn’t need root canals or replacement teeth. Now I have a dental plan
that covers free checkups twice a year, but even if you don’t, get to
the dentist and doctor for health checks. It’s a lot better to pay a
co-pay now than pay for major surgery later on. And worse still, it
could even cost you your life, especially as so many conditions can be
treated if they’re caught early enough.
Read on for more.
2. Taking Store Credit Card Offers For Discounts, but Paying the Minimum
You are probably asked this all the time — “Would you like to sign up
for our credit card today and save 30 percent instantly on your
purchase?” It’s a good deal,
if you actually pay off the credit
card in full when you get the first statement. Sadly, when that first
statement arrives, many people find it way to easy to avoid the payoff
amount and instead pay the much smaller minimum payment. Before long,
you’re paying the minimum every month, adding more to the store card,
and you’re suddenly a credit card revolver who is paying hefty interest
charges. That initial 30 percent you saved can cost you so much more if
you’re not careful. Pay it late, just once, and you can add late fees
and interest rate hikes to your burden.
3. Doing Your Own Taxes
Many people use software like TurboTax and TaxCut, and they do save a
bunch on an accountant. These software programs are OK for very basic
tax preparation. But if you have anything slightly more complex, it’s
well worth your time to hire a tax professional to file your return.
These people are trained in the minutiae of the lengthy tax codes, and
they can find deductions and tax exemptions that you have no idea about.
And while the software may be able to take these into consideration,
you need to know what you can actually legally deduct before entering
it. I have a tax accountant, she charges around $250 to prepare my
taxes, and she has saved me thousands over the years. She asks questions
that the software doesn’t, and she knows how to get me the biggest
possible refund. I would never trust tax software over her for my
situation, despite the massive initial saving. And remember, tax
preparation fees are also tax-deductible the following year!
4. Building an Emergency Fund, but Not Contributing to a Retirement Plan
It’s essential these days to have an
emergency fund.
The finance experts say you need six months to one year of expenses
(although how anyone does that in this dire economy, with pay raises not
meeting inflation and massive unemployment, is something of a miracle).
But experts also agree that you need to look after your financial
future, as you cannot rely on any kind of state pension. If you’re
squirreling away money now in an emergency fund or savings account, but
you’re not putting money into a 401(k), IRA, or other long-term savings
plan, you’re not prepared for something you know is coming — old age.
And with compound interest being what it is, every day you put it off is
thousands of dollars wasted. If your employer has a 401(k) match,
that’s also additional money you are throwing away. Be smart and think
long-term. Once you have that in place, by all means, build your
emergency fund.
5. Buying the Cheapest Products to Save Money
I’ve said it before and I’ll say it again — buy cheap and buy twice.
Now, being a Wise Bread blogger does not mean I don’t like quality
items. I just don’t like to pay retail for them. Almost everything I buy
is well below the
RRP or MSRP,
but it’s usually a well-made product with a good rating. That goes for
clothes, shoes, electronics, tools — you name it. However, if you buy a
screwdriver set for $1 at a dollar store, or get your shoes for a few
bucks at a flea market stall, the chances are you’ll be buying them
again real soon. Cheaply made, poor-quality items may save you a few
bucks in the short-term, but you’ll only have to pay more later to
replace them. And if you replace them with more cheap junk, you’ll be
repeating the cycle. You get what you pay for. The only time I would say
that this is not true is buying generic brands in grocery stores. In
that case, you’re usually buying the same product that’s in the
name-brand tin or packet but for half the price.
6. Putting No Money in the Parking Meter Because “I’ll Be Back Quickly!”
You may be a world-class speedy shopper or errand runner, but you
just aren’t that lucky. Sooner or later, and probably sooner, if you try
and dodge the parking meters, you will get a ticket. These days, a
parking ticket can run you anywhere from $10 to $50, depending on which
city you live in. Is it worth gambling that 25 cents for a ticket?
Getting Suckered Into BOGO Deals and Other Sales
BOGO,
when it’s genuine, is hard to resist. But even then, whether it’s BOGO
free or BOGO half price, you have to stop and ask yourself, “Would I
really have bought this much of this item at this price anyway?” For
instance, if you go to a store looking for jam, and you see BOGO free on
jam, that’s probably a great time to stock up. But if you’re looking
for a new pair of sneakers and see BOGO half off, stop and think. You
went out looking to spend $60 on sneakers. Now you’re spending about
$100 after taxes. Did you even want two pairs? Will you wear them both?
Do you even like the second pair you’re buying? Sure, it can be a great
deal, but if you really only want, and need, one pair, you should only
buy one pair.
Also be careful when exploring the sales. It’s easy to see those 75
percent off stickers and go crazy, thinking you’re saving money. If you
are planning to resell the item for a profit, go for it. But don’t think
that you’ll get anything near full price for it somewhere else. There’s
a reason it’s on sale. And if you are just tempted to buy it because
it’s cheap, ask yourself, "Would I have bought this if it were more
expensive?" I see so many people
buying bargains that just gather dust in the basement. And they would happily sell them for the price they paid just to have that money back.
8. Driving Miles and Miles For Cheaper Gas or Other Bargains
At the time of writing this article, the average cost of a gallon of regular gasoline is $3.28. And the average vehicle
MPG is around 23. That gives you around seven miles for every dollar you spend on gas.
Do the math.
For example, if you want to put 10 gallons of gas in your car, and
drive four miles out of your way to buy gas that is five cents cheaper
per gallon, you have spent 57 cents to save 50 cents. And you’ve wasted
your time, put more wear on your tires, and used up oil as well. True,
it’s not a lot, but in the grand scheme of things, it’s just not worth
it. I’ve also talked to people who traveled 30 to 40 miles, one way, to
buy something used from Craigslist. So right there, you’re adding up to
$10 to the cost of the item you’re buying.
9. Avoiding Routine Car Maintenance
Most of us use a car to get to work. It's something that we need to
make money. It’s also something that needs regular maintenance, just
like your own body. But many of us like to save that money and do only
the basics. We’ll take it in for an oil change, run it through the car
wash, and that’s about it. Of course, then the time comes to get your
next oil change, and the mechanic has to inform you that your tires are
worn on one side because you didn’t rotate them. Or you discover that
little knocking sound you ignored is the sign of a major repair. When it
comes to cars, the old adage “a stitch in time saves nine” couldn’t be
more true. Take care of your car, and it will take care of you.
10. Buying Food in Bulk and Then Throwing Half of It Away
I’m guilty of this one from time to time because bargains are so hard
to pass up. When you see a whole bunch of bananas on sale for less than
half the price, you grab them. But then you watch them turn black
because you bought too many. I have lost count of the food items I have
bought over my lifetime that I never got a chance to use. Ironically,
when I was a poor student, it didn’t happen. I would shop from day to
day, buying fresh produce and cooking it that night. It would last two
or three meals and then I’d start again. The fridge was bare. These
days, I have so much stuff in the fridge I don’t know what’s in there,
and I think that’s a big problem. We load up on cheap bulk items and
then have no way of using it all. So while buying in bulk is good for
lots of things, be careful when buying perishables. It’s not a bargain
if you throw it away.
