When frugal is foolish
Sometimes what seems like a frugal choice can cost you much more than you'll save. Here are 12 penny-pinching moves to avoid.
This post comes from Brandon Ballenger and Stacy Johnson at partner site Money Talks News.
It's dumb to pinch pennies if the result ultimately costs more than the savings. Here are 12 times when penny-pinching can result in wasteful spending:
1. Car maintenance
Bad idea: skipping an oil change. You save $30 now, but your engine won't last as long. Best case, you spend $5,000 on a new engine years before you had to. Worst case, it might happen next week.
Better idea: Don't change your oil too often. Check your owner's manual. Some cars require an oil change only every 6,000 miles. Another place you might save? Fewer tuneups. Check with your mechanic, but many will say if your car's running fine, it's OK to leave well enough alone.
2. Car insurance
Bad idea: reducing your liability coverage. Whatever you might save, it's not worth it in case of an accident. You need enough insurance to cover your net worth.
Better idea: If you have an old clunker, consider dropping collision and comprehensive. Single best idea? Raise your deductible.
Bad idea: dropping health insurance, skipping doctor visits, splitting your prescription doses or otherwise not properly taking care of yourself. Even if you're feeling fine, saving a few bucks now can cost you tens of thousands later, not to mention your health, your happiness and even your life.
Better idea: If you can possibly afford it, get insurance, even if it's just a high-deductible major medical plan. If you take prescription medications, ask your doctor if there are cheaper substitutes, and ask for free samples.
Bad idea: cutting back on home maintenance or insurance. The cost of maintenance beats the cost of repairs, and you always need enough insurance to replace your home and possessions.
Better idea: It's easier to paint your siding than replace it, and it's cheaper to water your plants than buy new ones. When it comes to insurance, don't cut your overall coverage, but rather cut costs. Raising your deductible from $250 to $1,000 can save you 15% on premiums.
5. Savings and debt
Bad idea: putting money in a savings account earning 1% while paying 18% on a credit card. While it's comforting to have a fat bank account, your net worth is decreasing by the difference between what you're earning and what you're paying.
Better idea: If your job is in imminent danger, save all the cash you can. If your job is secure, however, pay off high-interest debt, then start saving. As you pay off debt, make it a priority to pay more than the minimum due.
Bad idea: spending more time researching marginally cheaper flights, hotels and rental cars than you do enjoying your vacation. The Internet is a great way to comparison shop, but when it comes to travel, you can quickly find yourself bogged down.
Better idea: If you find logistics tiresome, or if the trip is complex, get a travel agent to handle it. The average fee to book a plane flight is $36, a bargain compared with the time you'd otherwise spend online.
Bad idea: buying something obviously cheap or cheesy for your significant other, particularly if little or no thought went into it.
Better idea: When it comes to gift giving, you don't have to spend a lot. You do, however, need to use some imagination. From picnics to framed photos, there are plenty of ways to say "I love you" without breaking the bank. In short, if you're only going to spend a little, think a lot.
8. Quality of life
Bad idea: saving so much that you're getting little enjoyment from life.
Better idea: Make a list of the activities that truly make you happy, then vow to stop using discretionary income for anything that isn't on it.
9. Retirement plans
Bad idea: not contributing to your work-based retirement plan, especially if your employer matches your contributions.
Better idea: Contribute at least enough to your retirement plan to get the full employer match. There are very few times in life when you're offered free money. This is one of them.
10. Your teeth
Bad idea: saving a few bucks by skipping dental exams and cleanings.
Better idea: Have the regular exams, and also take proper care of your teeth, including flossing daily. It will save big money, your appearance and many uncomfortable hours in a dental chair.
Bad idea: being unwilling to get a degree or advanced training in order to make more money later on.
Better idea: Furthering your education doesn't have to cost $45,000 in annual tuition, nor does it require attending an Ivy League school. From state college to technical schools, more education today can mean fatter paychecks for decades.
Bad idea: avoiding risk by keeping all your savings in an insured bank account.
Better idea: Investing only in insured savings means losing ground to inflation over time. Put part of your money into stocks and other ownership investments. But do your homework first.
More on Money Talks News and MSN Money:
They under estimate the importance of a fully funded Emergency Account. The idea of paying off debt before saving money for an emergency leads to problems when trouble strikes. You need to have at least 12 months saved in an Emergency Account before you start paying extra to pay down debt.
Many people learned in 2008 that their available credit can be taken away from them at the drop of a hat by the bank. With the Emergency Account you can continue to pay your bills even with an unemployment. In 2008 if more people would of had a fully funded Emergency Account they could have maintained their standard of living without having to withdraw money from their 401k at a time of declined value.
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