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9 things we routinely overpay for

While it's true that many times you get what you pay for, it's also just as true that sometimes you don't.

By MSN Money Partner Sep 13, 2012 10:59AM

This post comes from Len Penzo at partner blog Len Penzo dot Com.

 

Filling fuel tank. Copyright: CorbisIf you ask most folks, they hate to overpay for anything. Even so, many people do it all the time and don't even realize it.

 

After all, frivolous spending is something we're all guilty of at one time or another.

 

The good news is, getting the urge to splurge under control makes it possible to save significant amounts of cash that can be used to stretch your household budget.

 

Here are several things people often overpay for:

 

(Premium) gasoline. Two years ago I conducted an experiment where I ran premium gas in my 1997 Honda Civic for 30 days and actually averaged one mile per gallon less than when I was running lower-octane unleaded. Premium gasoline is intended for use in a very narrow niche of cars. Unless your owner's manual calls for high-octane fuel, it isn't necessary.

 

(Overly generous) tips. Never mind that tip inflation has caused the average bonus for good service to increase from 10% in the 1950s to, depending on whom you ask, 15% or 20% today. Some people give overly generous gratuities simply to make a good impression on the server. Even worse, they'll often leave average tips for poor service because they don't want their server to dislike them. Both practices make little sense, especially for folks on a limited budget.

 

(Organic) produce. Many non-organic fruits and vegetables, such as onions, avocados and corn, are grown with significantly lower pesticide loads than others, which is why some organic produce isn't worth the steep price it typically commands. In many cases, you're much better off buying the conventionally grown varieties and then carefully washing them. (Post continues below.)

(Non-generic) medicine. The U.S. Food and Drug Administration constantly tests and analyzes generic medicines to ensure their effectiveness, which is why it maintains that generic medicines perform just as well as their brand-name counterparts. Yet many folks insist on paying a lot more for non-generics anyway. Why?

 

(Bottled) water. Believe it or not, here in Southern California, where water is supposedly in short supply, I still pay a half cent per gallon for the water that comes out of my tap. I suspect tap water is even cheaper in water-rich areas of the country. Despite that incredible bargain, I recently bought 20 gallons of bottled water that was approximately 200 times more expensive. I know. But like I tell my kids, "Do as I say, not as I do."

 

(Faster) shipping. One of the hallmarks of financially responsible people is patience. Consider the enormous price premiums for expedited shipping. I recently purchased $10 worth of business cards from a company that offered next-day shipping for $54.25 and two-day shipping for $23.65. Meanwhile, the no-frills, standard shipping rate for people who are willing to wait an extra one to three days was only $5.77. Guess which option I selected.

 

(First-class) airline tickets. Unless you are flying on an extended trip overseas, it's hard for many people to justify the price premium of a first-class airline ticket, which can often cost two or three times the price of an economy-class fare. If the thought of sitting in a coach seat for any length of time is unbearable, consider premium economy class, which can often be had for a premium of $100 or less.

(Brand-new) automobiles. Almost everybody loves the smell of a new car, but that doesn't change the fact that, financially speaking, you can't beat a used vehicle purchased from a private owner. This is primarily because new cars typically lose up to half their original value over the first three years of ownership.

 

(Whole) life insurance. Unlike term life insurance, whole life insurance couples the term policy's guaranteed death benefit with an additional investment product. Yes, whole life may sound like a better deal. The trouble is, it's the least cost-effective option because you end up paying for both the insurance and the fees associated with the investment component. In most cases, you're much better off buying term insurance and then investing the realized savings.

 

Remember, while it's true that many times you get what you pay for, it's also just as true that sometimes you don't. The key to ensuring you always get the most bang for your buck is in recognizing the difference.

 

More on Len Penzo dot Com and MSN Money:

47Comments
Sep 14, 2012 12:59PM
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Something else we overpay for .... ink for printers! I can't believe the amount of money we have to spend for a tiny little ink cartridge.

Sep 13, 2012 8:12PM
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premium gas is over priced?  why no word on regular gas...that seems to be way overpriced also...
Sep 13, 2012 6:38PM
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government, we pay way too much in taxes to government on all levels. IT is the number one over priced item in the world
Sep 13, 2012 4:43PM
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I give a generous tip if I receive excellent service not to make an impression on the server.  I really appreciate anyone who goes above and beyond in performing their job.  The additional $2 or so above a normal tip to show my appreciation isn't going to break me.  I don't eat out enough for that :-)



Sep 13, 2012 4:42PM
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Yeah really, all they can come up with was 9?

how about adding Internet.. cell phones, cable/satelite, all those "bundle" goodies. What a rip off.

Sep 13, 2012 4:45PM
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They could include routinely getting oil changes sooner than the manufacturer's recommendation.  With synthetic oil and blends, 3,000 miles is no longer the norm.
Sep 14, 2012 4:15AM
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A fool and his money is soon parted.Everyday and everyway in America.
Sep 14, 2012 10:33AM
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You're kidding about the tipping -- right?  If you can't afford to eat out -- don't eat out.   That I'll buy as a money-saver.  But if you can afford to eat out, and you choose to do so,  you can afford to give a generous tip to the server.  They work hard -- and they do a lot of shifts where they don't make much money.    Plus -- the more you give to others in life (not only with money -- but with time, caring, compassion, etc.), the more you receive in life.    It's just the way of the universe..  
Sep 14, 2012 11:27AM
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The Volkswagen bug I bought in 69...was better made , more dependable, made of better steel and cost $20,000.00 less than the one I can't afford now, and you could apply that same principal to that quart of milk! Somebodys raking in a huge profit, laughingall the way to the bank....but it's NOT me or cows!
Sep 13, 2012 6:49PM
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It's really ridiculous to pay for cable Internet service and also pay for the cable company's VoIP.  Use something like Magic Jack, NetTalk, or Ooma, where you pay only for the equipment, then a low annual fee ($20-40), if you still even want a landline, instead of a cellphone you may already have. 

 

I'm not on the phone enough to warrant a standard contract for a cellphone.  I pay about $20/mo plus taxes and fees for mine.  I could be paying $10/mo, plus $.25/min for what I actually use.  That only works up to 40 minutes, though.  I only really keep it for safety purposes.  My family kept telling me I was a Luddite, though.

 

 

Sep 13, 2012 7:17PM
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In most cases, when a retail company expands very rapidly, it is because they overcharge the public (who may accept the overcharge willingly or because they are misled) and have excess profits to invest. For example, Nordstrom, Starbucks, Walmart and most insurance companies.
Sep 16, 2012 5:54PM
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Tips-" To Insure Prompt Service".       If a server is good 15%-20%  if not do not be afraid to tip less, if a bad server makes no money they'll quit and look for something their good at.
Sep 14, 2012 12:36PM
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don't go out to eat where you have to be waited on if u don't want to tip! dollar menu right down the street. servers get paid 2.01-2.13 an hour! some places the server has to tip out other employees a percent of their sales, so if you don't tip enough the server will have to pay to wait on you. if you are going to tip bad DO NOT go back because servers remember and talk about who tips bad or good!
Sep 14, 2012 2:52PM
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COFFEE! People pay way too much for coffee. Not to mention the environmental impact with all the disposable cups.
Sep 14, 2012 3:44PM
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In some cases generic drugs are not as good as the "name" brand. I don't care what the FDA says. Personal experience proved to me otherwise.
The problem is you can't tell unless you try them both.
Sep 16, 2012 5:35PM
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Premium gas: It is not expensive if that is what is the required fuel. Anything less can cause major damage

Tips: I do it this way, good service (i.e. my water is always full, I get extra napkins when I ask, etc)
warrants good tips, sometimes higher than most. Bad service warrants little to no tip. So I think it evens out.

Organic: EVERYTHING GROWN OR LIVING is Organic. Pesticides and pollution levels are only SLIGHTLY different. Buying organic is proof that humans are stupid.

Non-generic meds: sometimes there is no choice. The pharmaceutical companies are the real crooks in the world. There is no way a flu shot costs 25 dollars each person. probably made in China and cost the company 5 cents each vial which treats 100 people.

Bottled Water: Well, if you live in AZ you know tap water can really mess you up. CA, well our water supplies are so polluted that drinking tap water is a huge risk.....Buy a Britta or something it is cheaper in the long run.

Faster Shipping: Sometimes you need it next day. If it something that happens regularly, then yeah, you spend to much or you are just lazy and deserve to get shafted.

First Class airline seats: Ever flown to Japan in an "economy" seat........yeah, you will buy a seat upgrade if you can. Short trips like L.A. to Vegas.....yeah, you're a moron for buying first class.

New Autos: While a used auto is cheaper than new, the biggest benefit to new is the WARRANTY!!!!!! and the piece of mind that some punk did not put 24" wheels on it and beat the hell out of it. Used are good in the simple fact that most (if not all) the recalls have been done and the vehicle is certified (some dealers).

Life Insurance: Whole or not, this is one area in your life that you need to READ the whole document before you sign. This goes with any insurance. Agents/brokers/solicitors can not and do not explain EVERYTHING.

My take from this, be smart, think about what you are buying, take time to read the agreements/contracts, ASK for clarification and for Christs sake, THINK FOR YOURSELF. Only sheep and Lemmings follow things blindly. 

Sep 14, 2012 4:41PM
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Permium gas is only $2 extra for every ten gallons. If your car calls for it, you better put it in. It will cost you way more to repair the damage if you don't.
Sep 13, 2012 6:01PM
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Don't move to parts of Anaheim.  "Privatized" utilities.  You will pay as much for utilities, trash, water, etc. as for rent in a shared apartment.

"Privatized toll roads.  We pay to build them and then pay again to make some lazy schuck rich without having to work for his money.

Books.  The last book I purchased was about 200 pages and cost nearly $100. There goes my lifelong hobby (some would call obsession).

Sep 14, 2012 2:39PM
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The first thing that is too expensive is Obama, oboma care, obama gas,obama's redistribution of wealth, his jet travel, his theory on taxation, his wind powered energy cost and on and on.However, the one's that voted for him will suffer too.
Sep 14, 2012 4:27PM
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Doesn't everyone already know this?!

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