10 Things You Do to Save Money That End Up Costing You More
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 further 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 ways that you may be doing to save money that could actually cost you a lot more in the weeks, months, or years to come. (See also: The Case for Expensive Shoes)
1. Avoiding Regular Check-Ups With the Doctor, Dentist or Optician
It’s something I did in college when money was tight. “Ahh, 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 check-ups 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 check-ups 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.
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% 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 pay-off 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% 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 minutia of the lengthy tax codes, and they can find deductions are 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 my 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 into 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, 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, I’ll say it again — buy cheap, 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 the 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 Quick!”
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?
7. 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% 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 7 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 life 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 30-40 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 needs 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.
Well, that’s my top ten list, based on a lot of my own personal experiences. Do you have any stories of being penny wise, pound foolish? Chime in.
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I have an issue with #3. I promised myself, a long time ago, that if the tax code was so complex that i could not do my own taxes I would sue the government. I will never go to an accountant to do my taxes. It is ridiculous for it to be so complex that an individual with a master's degree cannot figure it out.
Bobby, I feel your pain! When I am pulling my hair out doing my taxes I remind myself that I am a (relatively) intelligent and educated person who should be able to handle it. We'll see if the IRS agrees:)
In reference to #7 about BOGO sales, while people regularly think about stocking up on things like food and personal care products, these types of sales can be a great time to stock up on things like athletic shoes and basic clothing. If you find a pair of shoes that you love and fit well and are at a great price, why not buy two or three pair? Shoes wear out. If you're active, athletic shoes wear out fairly quickly and don't really go out of style (or no one really cares) or come up with new, must have technology or features on a regular basis. So it can make good sense (and save money in the long run) to stock up when you find a great deal. Similar thinking can be applied to things like socks, underwear, school supplies. And, to a lesser extent, to things like towels, belts, backpacks, lunchboxes or other things that wear out and must be replaced every few years. I even did this with luggage once when I found a great deal on sturdy rolling duffel bags at Target. I was able to travel fairly extensively for over 12 years using the two duffel bags that I bought for $25 each. The bags have recently been retired to "non-airline" trips only, but I still plan to use them for those sorts of trips for a number of years to come.
I LOVE the BOGO sales that are buy one get one 50% off. Well, I always stop and think, lets see, I'm essentially buying two items that are 25% off each. Usually not worth it.
+1 on the athletic shoes. The New Balance 993 with a BOGO half price offer is a great deal. We have bought as many as four pair at a time. I think any clothing essential is worth looking for a BOGO offer.
I just called and made an appointment with my doctors office - thank you! ...and I'm classic #6! hahahaha!!!
Good article!! But I can't stand the expression, "You get what you pay for." Sounds like one of those nonsensical things my grandma used to say like, "a penny saved is a penny earned." ...And I disagree with the premise itself.
I bought my dad a $100 tablet on sale which he uses every day and carries it around like it's a newborn child or something. I knew that he'd be too scared to actually use a more expensive one. My brother, on the other hand, (who's always cash-strapped) has been through about three $500 iPads in the same 12-month period. One broke, one was stolen, and he's on the third now (can't wait to find out what happens to that one). Sometimes the cheaper item is the better. You don't have to worry about it getting stolen. You don't have to worry about getting sand in it at the beach. If you break it, it's not gonna run you $500.
So, "you get what you pay for"? Well, is a Mercedes really that much better than a Kia if you're just using it to get around anyway?
your brother seems to be an exception to the rule. it has been my experience that people who spend more on an item, i.e. an iPad vs another tablet, are more likely to take care of that item. provided they're not a spoiled snobby brat who doesn't appreciate the cost of things.
as for your father, many older people are like that. my mother had cataract surgery but refused to invest in a decent pair of sunglasses to protect her eyes; which ironically can prevent cataracts in the first place. the quality of an item DOES make a difference and you DO get what you pay for. I'm not talking about a $300 pair of silly designer glasses that are for looks & not function, but a quality polarized lens, from a manufacturer who offers a warranty (i.e. Costa del Mar) is worth the money and protects your vision.
and then the Kia vs Mercedes... ever hear of safety ratings or resale value? ever been in a wreck in a cheap aluminum vehicle? well, I have. and there is no way I would be caught dead in one again. they almost got me once already.
"Sounds like one of those nonsensical things my grandma used to say like, "a penny saved is a penny earned." "
Maybe you're just too young to have come to respect and appreciate people with greater life experience than you. The problem with your brother's iPads is with your brother, not the product. And yes, you do get what you pay for. Mercedes please.
Just because you don't stop and think about it doesn't mean it's "nonsensical." A penny saved IS a penny earned. What that means is it's sometimes hard to save money. You save money by doing without, or by thinking through the math of a "good deal." You earn your way to savings. You work for that penny. It's a perfectly well-reasoned phrase. Try living by it for a while, and watch your hard-earned pennies add up.
One thing that I have found myself wasting money on is buffets. Buffets are a good value if you are going to eat a lot. So if I go to a buffet I feel compelled to eat more. If I would have gotten soup and a salad it would have been cheaper and my waistline would have thanked me! But instead I am suckered in by the value.
Oh I can't even count the amount of times all of these have happened to me. Especially number 5... I've had to re-purchase or lease so much equipment it's ridiculous.
Number 10 hits a little too close to home. My husband and I like to have a little extra ground beef in the freezer to turn into hamburgers or tacos or mix in with mac n cheese when we're short on time for dinner.
I usually buy three lbs. at the grocery store, use one that day or the next few days, and stick the other two in the freezer. It's worked pretty well.
The other day I was at Costco, and I saw 7 lb. of ground beef for $2.77 a lb. That's at least $1.00 less per lb. that it is at the supermarket, so I bought it. The "use-by or freeze" date was 2 days after I bought it, but I was planning to go home and break it up and put it in the freezer that night, so I figured it would be fine.
When the use-by date came, I remembered my ground beef. I pulled it out of the fridge to portion it and was dismayed to find that it had turned brown and smelly. I had to throw all 7 lbs. of ground beef away, which was basically like throwing a $20 in the trash. I'll stick to my grocery store ground beef at a dollar extra a lb., instead of risking throwing away that much food/money.
Another observation re number 7:
I've seen people with shopping carts full of jars of pasta sauce when they have been BOGO free. I admire them, whether for their ruthless shopping power (and stamina at getting through so much pasta sauce), or because they may not really eat pasta sauce but when they see a deal they really go for it (even if it is not actually the smart thing to do)!
#6- so true! i paid a $98 parking ticket once. never again.
This is rarely true for most people "And remember, tax preparation fees are also tax deductible the following year!". This deduction and some other deductions have to be more than 2% of your adjusted gross income. My tax prep software tells me that :)
I am still trying to optimize the "buying in bulk" issue. I love shopping at Costco. Toilet paper and paper towels are always worth stocking up on. But clementines go bad before we eat dozens of them, alas.
This is all pretty good advice I think. I would disagree maybe a little bit with the clothes and shoes one though. I find that 99% of the time, when you pay more for clothing it's not for higher quality, it's for a name brand, and/or the CHANCE that it will be more stylish. You don't have to "buy fewer items of clothing" because you paid more for them, I just don't think that's correct.
check the quality of all clothing. name brand or not but i will wager that way more often than not the name brand will be of higher quality. then again which name brands are you talking? the ones that can be found in Walmart/JC Penny? or clothing from actual retail shops?
I have to disagree about #3. Doing my own taxes forces me to keep up with the tax code, and have an awareness of how my financial decisions affect the taxes I pay. I'm sure I save more by making tax-aware financial decisions than I spend by not being aware of every questionable loophole.
If you have your own business, and your taxes are complicated, I could see hiring a tax accountant. But if your business is that complicated, the accountant is going to charge more than $250.
#5 is good advice for adults. For buying clothes or shoes for rapidly growing kids, though, it can be cheaper to buy inexpensive or even second-hand! My son changed shoe sizes every six or seven weeks when he went through puberty!! I got him the cheapest I could find until his growth spurt slowed down!!
I'm guilty...
I often drive out of my way to save a few bucks and now that I know the magic formula of $7=1 mile, I'll be cutting back on those trips.
BUT - I've never gotten a parking ticket, because not feeding a meter is just plain nuts.
Thanks for the great list.
Other way around Pat, it's (very) roughly 7 miles for every $1. If it's the other way around, I believe you're driving an Armored Personnel Carrier.
Don't throw away bananas that are almost black. Just peel them, slice them, and sauté them in butter. They're sweet and can be eaten with pork or chicken or even as dessert
with nuts and raisins.
Or put them in banana bread! And if you're not ready to bake right away, you can just stick 'em in the freezer until you want them.
My car is ancient and dates back more than a decade or two, but I can't seem to let myself let it go. #9 is something I always have issues with. It seems as though I have endless car repairs and am always in need for new auto equipment.
Ah- sure, you have more repair costs than a new car, but you also aren't making a monthly payment, either. This should be number 11: Pay off your car, and drive it for a few more years, instead of getting caught in the perpetual car loan pitfall. When you do the math on a car loan, you will pay almost double the purchase price over 5 years. That is money down the drain. I chose an American made pickup truck for my current vehicle, and I am excited to be paying it off soon. I plan to drive it for at least another 5 years, hopefully longer. Vehicles last much longer than they did 20 years ago- why not take advantage of that? Of course, to be fair, you also have to balance the increased risk of breakdown, and it is a big help to be mechanically inclined. Still, I can rebuild the entire front suspension for less than one month's car payment, and it all will last another 6-8 years. Put that extra savings into your emergency fund, and you won't worry so much about unexpected repairs. And even though a newer model might get 1-2 miles further on a gallon of fuel, that savings is nothing compared to what I save every month with no car loan payment.
Once I bought a really expensive piggy bank to my kids to encourage them to save money only to realize the piggy bank cost more than what they actually managed to save:)