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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.

By Stacy Johnson Mar 18, 2013 12:47PM

This post comes from Brandon Ballenger and Stacy Johnson at partner site Money Talks News.


Money Talks News logoWhile it's true that a penny saved is a penny earned, take it too far and another expression applies: A fool and his money are soon parted.


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: 

Image: Man changing oil © Ron Chapple, Getty Images1. 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.


3. Health

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. 


4. Home

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.


6. Travel

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. 


7. Gifts

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.


11. Education

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.


12. Investing

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:

Mar 19, 2013 11:51AM
Most of these items are not frugal, they are cheap, stubborn, or stupid.  There is a BIG difference between being frugal and being cheap.  Frugal people do not skip regular maintenance or proper insurance, cheap people do.  Also, frugal people tend not to have debt
Mar 18, 2013 4:59PM

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. 

Mar 18, 2013 7:25PM

Re: number 5

Define a secure job in this economy.

Mar 18, 2013 5:07PM
Mar 19, 2013 3:34AM
Changing oil when recommended is important: I kept my last two cars 10 and 16 years, running fine at the end, and I expect to replace my 2013 car in 2025-2030. The article says "Some cars require an oil change only every 6,000 miles," - today some cars on synthetic 0W-20 weight oil only need to change oil every 10-12,000 miles, and the synthetic oil only costs about $13 more per 5 qt. than regular 10W-40 oil.  My 2013 Honda Fit and my sister's 2013 Honda CRV both have an onboard calculator that analyzes your driving and determines when you should do maintenance. I have 1400+ miles and two months on my car and the display shows 90% oil quality - which means it's between 90%-86% or 10% to 14% used.
Apr 14, 2013 10:49AM
His he talking to fourth graders? This is news reporting that is shoddy.
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