We all like to save money, but there are times when the frugal option winds up costing you more money. Avoid these pitfalls to make sure your frugality doesn’t wind up draining your bank account.
1. Skipping Maintenance or Preventive Care
Skip your 20,000-mile check-up, your every-six-month dental cleanings, or your annual physical, and it could end up costing you much more than you’d spend on the maintenance itself. For example, those dental cleanings cost around $100 per pop. Skip them and you could be setting yourself up for fillings and root canals that cost upwards of $1,000. With your car, Bankrate estimates the sticker price for a year’s worth of oil changes to be around $120; cut corners, and the total cost for an engine replacement is around $4,000.
2. 50 Percent Off Is Still 50 Percent On
It’s science: bargain hunting can be addictive. Between the thrill of the hunt, and the feel-good chemical release from the reward centers of your brain when you find a deal, you are physiologically rewarded. And it can get costly. “One of things we see often is people use [frugality] as an excuse to buy things they don’t need,” says Kyle Taylor, CEO of The Penny Hoarder. “Whether it’s on sale or you have a coupon, you end up spending money just because something appears to be a great deal.” Avoid bargain brain — and its potential to cost you — with a trusty purchase pause. Walk away for 24 hours and see if you’re still thinking about it when the clock comes back around. Often, the urge will have passed.
3. Cheaping Out on Insurance
It’s easy to skimp on many types of insurance — renters, life, even health — because you’re hoping never to use it anyway. But “if you’re getting the bare minimum [coverage], you could be putting yourself at risk,” says Taylor. The question to ask yourself is whether you or your family could afford to replace the underlying asset — your car, home, belongings, or (in the case of life, health, and disability insurance) your income — without hardship. If the answer is no, spending money on a policy that doesn't cover your needs is almost as useless as not buying one at all. It doesn’t even have to be all that expensive. Some 60 percent of Americans who rent their homes or apartments, for example, go without renter’s insurance, according to InsuranceQuotes.com, and it’s because 45 percent believe it's too expensive. Wrong. It averages $187 a year.
4. The Difference Between Value and a Low Price
The latter might put a smile on your face the day you make your purchase, says Johnson. But value is longer lasting. Take Black Friday doorbusters as an example. They’re often third-tier brands that are cheaper in price, lacking in features and not built to last. Instead, she suggests saving your skimping on things you’re only going to use once (prom dresses come to mind) or those where store brands are just as good as the name brand (like Kirkland Extra Virgin Olive Oil from Costco).
5. Not Looking for Additional Savings
Instead of buying the cheaper option, just find ways to save on the quality products you know and love. For starters, you should compare prices online before heading to the store — and when shopping online, take advantage of coupon sites and cash-back sites, like Ebates. Moreover, consider using rewards credit cards or purchasing what you need with discounted gift cards, which you can buy from sites like Cardpool and Raise. Let’s say you’re due for a trip to Target: Right now, you can go on Gift Card Granny, a site that aggregates gift card offers and buy a gift card to the store that will save you an additional 7 to 8 percent on your purchase. Doing all this allows you to save money without skimping on quality.
6. Skimping If It’s “Over Your Head or Under Your Feet”
One rule of thumb holds that you should always be willing to spend more money on quality if the product in question goes over your head or under your feet — roofs and shoes are the classic examples. But the same holds true for products you expect to use for years, whether that’s a mattress that will provide a better night’s sleep or a home in a good school district.
7. Not Factoring in Your Time
One of my money rules is: “A sale isn’t worth the drive if you don’t save more than the price of gas to get there.” And you’ll want to factor in the opportunity cost of hunting down deals as well. In other words, if you make $20 an hour and it takes you a half-hour to drive to a particular location to score a bargain, you shouldn’t do it unless it saves you a good $10, plus another $3 or $4 for the gas your car eats up on the way.
8. Budget for Your Happiness
It’s possible to cut too many corners where your happiness is concerned. So whatever it is you enjoy doing — going out with friends, traveling or buying shoes — budget for it. “Some people are so frugal they don’t get to live their lives,” says Johnson. “They are so frugal they never take a vacation or celebrate an anniversary. Don’t get so caught up in frugality so that you don’t get to enjoy it.”