All apparent ways of saving money are not what they seem. Being frugal is wise, but being just plain cheap or unaware – or avoiding real needs as you try to save – can be just plain dumb. It’s true that taking a packed lunch and a thermos full of coffee to work are smart, frugal ways to save five or 10 bucks every weekday. But other so-called savings habits could end up costing you more than you bargained for – or leave you breaking even at best. When we provide credit counselling for Canadians we help them spend less but that doesn’t mean spending nothing. Here’s the big list separating the true money savers from the true money wasters.
Beware the lure of sales and coupons.
Following sales and using discount coupons are good consumer habits for saving money. But they can grow to become an obsession among some people who get so caught up in the savings process that they end up buying things they don’t need. Perspective is always in order. Stock up only on items that are required and that will be used within a reasonable time frame.
Buying cheap can end up making you a chump.
From clothes and shoes, to household goods and electronics, cheap price tags abound. But what about quality? If it’s not there, replacements are soon needed, and over the long run they can cost you more than you save. Price is always important. But be selective. Know what to look for in a product and maybe even do a little research. Above all learn from experience.
Groceries. Too much of a good thing or not enough.
You’ve heard the expression, too much of a good thing? Well, that applies to bulk grocery shopping where the appeal of great bargains can lead to the same kind of obsessional buying discussed above. What’s the point of buying three pounds of cheese if more than half of it just sits and goes bad in the back of the fridge? Also, if the cost of healthy fruits and vegetables doesn’t appeal to you consider the longer-term costs of ill health from less nutritional foods and junky treats.
The unsafe bet of scrimping on insurance.
If you have avoided getting home or supplemental health insurance in order to save – or if you are thinking about cancelling a current policy to boost cash flow a little – you’re a brave but not a smart gambler. The consequences of being uninsured can be financially devastating when problems develop or needs arise. Raising insurance deductibles is a way to save but you must be sure you can manage to pay the higher amount when insurance money is needed. If you are unsure about which insurance is essential then get in touch and one of our credit counsellors. Once we’ve reviewed your financial situation with you then we can comment further on which insurance is suitable to your budget or help you build a new budget for insurance.
What price do you put on your health?
Health is a priceless possession that needs to be attended to regularly. Saving money at the expense of your health – or that of members of your family – is simply wrong. Preventive visits to the doctor, the optometrist, and the dentist can help you avoid expensive health treatment care costs down the road. Not to mention, there can be immeasurable costs associated with your quality of life.
Letting maintenance slide can be financially slippery.
Avoiding home and car maintenance costs may bolster your bank account but only for so long. Thanks to what physics calls the law of entropy, everything in the universe is bound to fall into disorder which means that leaky roof or knocking engine can end up costing hundreds or thousands of dollars in repairs. Then you may have to buy a whole new car. Learning to spend your money is part of the quest to become and stay debt free.
Putting aside spending on your retirement.
Funding for retirement can appear to be an avoidable expense among those not yet nearing their golden years. Understand though that each year retirement savings are avoided becomes lost time for turning hundreds of dollars into thousands of dollars come retirement day – all thanks to compound interest. Meanwhile it would be most unwise for anyone to opt out of a workplace plan where the employer matches employee contributions to a company’s pension fund. That would be akin to thumbing one’s nose at free money. A Canadian retirement budget
has unique requirements so make sure you pay close attention to much you will expect to live on once the time comes.
Discounts through store credit cards.
Store credit cards are one way retailers get customers coming back for more with the promise of preferential “club” sav- ings. The dirty little secret here is that stores know many customers pay only the minimum due on store credit card bal- ances, meaning what customers pay on the credit card interest typically offsets the initial savings on goods.
Not seeing the forest for the trees, the gas stations, and the ATMs.
What’s the point of driving extra miles for cheaper gas if the gas you use to get you to the station offsets what you will save? And what’s the point of keeping a small amount of cash in your wallet if you’re spending two dollars every couple of days in service fees to get cash out of an ATM?
The point is, when you go for savings, give a little thought to your actions to make sure your money savers are not in fact your money wasters.
* Blog content provided through the support of platinum sponsors of Credit Education Week Canada’s Focus Magazine.