Trader logo

Are you scrimping and saving in all the wrong places?

by Chelsea Rose about a month ago in personal finance

How to avoid being penny-wise but dollar stupid.

Source: Ayan Chanda via Pexels

What does it mean to be penny-wise but dollar stupid? 

We all want to save money, but sometimes our money-saving strategies lead to costly financial mistakes down the line. 

That's because we can often be penny-wise but dollar stupid when it comes to our spending. While counting pennies is fine, viewing the big picture assures you ultimately come out ahead. After all, there is no point in going to great lengths to save a few dollars on small purchases while overlooking more considerable expenses. 

Thankfully, you can now avoid the following penny-wise, dollar-stupid money blunders and keep yourself and your wallet on the up and up:

Dollar stupid decisions we are all guilty of: 

  • Trying to save money by skipping doctor visits or annual check-ups but ending up paying a massive sum in a healthcare emergency that could have been identified and treated with frequent check-ups. What to do instead: Do not stop spending on preventative healthcare. Many communities have clinics that are free, low-cost, or federally supported. Check-ups, sick care, prenatal care, vaccines, dental care, medication, mental health care, medical testing and screenings, and more are usually available at such clinics. You can search the National Association of Free & Charitable Clinics, The Salvation Army, or your local teaching hospital to see if there are any free or affordable clinics in your area. Additionally, some non-profits provide payment assistance for those struggling to afford medication. 
  • Finding the cheapest gas station but traveling 20 minutes out of your way to save $0.05 per gallon. What to do instead: Identify the most affordable gas stations along your regular route and make sure you are not driving a vehicle with lousy gas mileage.
  • Not heatproofing your home. The average house loses approximately a quarter of its heat through the roof. Installing 25cm of insulation across your roof will help to minimize this loss, saving on your heating bill. In the same regard, you can DIY draught-proof your doors, windows, and floor cracks, saving you money on your electricity bills during the winter months. 
  • Spending hours on end filling out online surveys or writing pay-per-posts for a few dollars. What to do instead: Spend that time strengthening your abilities and landing a better job or developing a great business concept.
  • Purchasing a house that needs a complete renovation. It may appear to be a wise decision to save money upfront by buying a less expensive home and renovating it. However, this isn't always the case. The costs can certainly add up between fees for tradespeople, labor, architect, construction, wiring, legal, roofing, land tax, VAT, planning application fees, site survey, structural engineer fees, insurance, plumbing, etc. Plus, during the time of the renovation, you will most likely have to rent somewhere else to stay.
  • Buying a cheap mattress. Because low-cost mattresses are composed of inferior materials, they are more prone to losing shape and are more likely to sink or sag; thus resulting in you having to purchase mattresses more frequently. Low-quality mattresses can also cause misalignment of your neck, back, hips, shoulders, knees, and can result in pain, injury, or developing persistent discomfort over time. What to do instead: Research the best quality affordable mattress for your needs. 
  • Leasing a car instead of buying one:
    • First, when you sign a lease, you agree to drive a specified number of miles each year for the term of the agreement, such as up to 10,000 miles per year. Returning a leased car with more miles on the odometer than intended can harm the vehicle's resale value, and the dealer may levy an overage charge to make up for the vehicle's diminished worth. 
    • Second, it's critical to know exactly what kind of damage you'll be accountable for before signing a lease agreement. If you damaged the car or have excessive wear, you may owe money at the end of the lease. 
    • Third, you cannot resell a car you don't own, so you won't have those funds to contribute to a new car. Because, even after all of your monthly lease payments, the vehicle does not belong to you. 
    • What to do instead: Don't lease a car unless you easily afford the monthly payments, or your company is covering the lease. 

    Learn from their mistakes:

    TheStreet provides a short case study on penny-pinching gone wrong.

    A small firm typically distributed 500 fliers to current and prospective clients each month, as well as 5,000 copies of the monthly newsletter. Each of these jobs had a similar setup cost, about $50.

    The business owner came in one day, ecstatic that he had discovered a one-cent per page savings for the flier and a ten-cent per copy save for the newsletter in a town 60 miles away - a round trip of 120 miles and three hours total drive time.

    As a result, he would save $5 on fliers and $50 on the monthly newsletters, but he would have to spend $50 in new setup expenses at the new supplier for each project, or $100 in setup costs plus petrol and his time. The new vendor's total expenditures were $100 for setup, $20 for fliers, $2,450 for monthly time, three hours of travel time at a calculated $100 per hour, plus gas and mileage for 120 miles at $12. The business owner's new "penny-saving" expenditure was $2,892.

    On the other hand, the business owner had zero setup expenses on the flier and a reduced setup cost of $35 for the newsletter at his regular printer across the street. Only the inner content of the monthly newsletters, not the covers, were charged. So, with the existing provider, his entire cost was $35 for setup costs, $25 for one-page leaflets, and $2,500 for the monthly newsletter. The total cost was $2,560.

    When comparing the overall cost of the out-of-town "bargain," he found that it was $332 more than his regular vendor.

    When to save your pennies

    After all, is said and done, there is one area of life we should focus on saving pennies - hobbies.  

    It's a tale as old as time. A new and exciting hobby crosses our eyes, and we now have a burning need to splash our cash on this shiny new interest. Invariably, way too much cash is spent on a top-of-the-line musical instrument, baking supplies, sewing machine, carpentry equipment, professional camera, or sports equipment, just to lose interest months or even weeks later.

    It isn't easy, but it's necessary to exercise self-control when it comes to new hobbies. What may seem like a great new purchase could quickly turn into an expensive paper-weight when you discover you hate playing the piano or you have no patience for embroidery.

    Conclusion 

    The next time you decide to pinch your pennies, it's essential to question whether a temporary saving will cost you in the long run. 

    personal finance

    Chelsea Rose

    I never met a problem I couldn't make worst.

    Receive stories by Chelsea Rose in your feed
    Chelsea Rose
    Read next: Sharing Services Global Corporation (SHRG) Elevating Lives, Making ‘Happy’ Profitable

    Find us on social media

    Miscellaneous links

    • Explore
    • Contact
    • Privacy Policy
    • Terms of Use
    • Support

    © 2021 Creatd, Inc. All Rights Reserved.