Reading Time: 9 minutes When Saving Money Costs You More: 12 Times Frugality Backfires
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You have heard it said around the time of the big sale that the more you spend, the more you save. That is a poor justification for irresponsible fiscal behavior.
It is the battle cry of the person running for their lives with financial issues hot on their heels. Just because something is on sale, doesn’t mean it needs to be bought.
We could improve that saying a great deal with a small modification:
The more you spend, the more you need to save.
That’s better — not perfect, but better. Saving works both ways: You should save as much money as you can in a proper savings account. And you save as much money as is wise when making purchases.
Table of Contents
The Best Price Isn’t Always The Best Deal
Believe it or not, there are situations where prioritizing price is not wise. It might be penny-wise. But that often pairs well with being pound foolish. And that is a pairing you want to avoid.
The trick is knowing what situations call for deprioritizing immediate savings.
What you hope to do is spend a little more upfront and reap huge savings on the back end. But that is something of a gamble that does not always work out as planned. Sometimes, a venture is expensive on both ends.
That is perfectly okay because the return cannot always be measured in dollars, but it can still be measured in good sense. Here are a few examples:
Related: 17 Money-Saving Tips That Secretly Cost You More
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Working With A Professional: Estate Planning
Some things are just complicated enough to be a toss-up with regard to bringing in a professional or doing it yourself.
Take estate planning for example. Sure, you could get an app and do estate planning without any help.
But you might get tripped up by something like the difference between a revocable trust vs irrevocable trust.
Are you certain you understand the difference between a trust and a will? Are you clear on the assignment of a beneficiary vs. a contingent beneficiary?
Bringing in a professional can not only clear these matters up, but it can also help you find savings of which you were unaware.
Related: 6 Reasons You Should Have a Living Trust
Working With A Professional: Tax Preparation
Tax preparation also comes to mind. Why should you pay someone a commission when you can do it yourself and keep the entire return? For the answer, just check in with those who found themselves on the wrong end of an audit.
Indeed, you might not make a mistake and everything will be just fine. But the little extra you pay will pay off in peace of mind if not in cold, hard currency.
Related: Give Yourself A Gift Instead of Uncle Sam: Year-End Tax Tips
Eliminating A Future Bill
Buy now, pay later is all the rage. Unfortunately, that is not a very good thing for many people. Retailers would not offer it if they didn’t see an opportunity to make a lot of money.
With those deals, you have a set amount of time to pay back the full amount. If you fail to do so in that period, it quickly gets expensive.
The better deal for more people most of the time is to buy now, pay now. You will not get to enjoy the upfront savings.
But you will get that future bill off the table. There are no payments to forget about or get delayed due to unforeseen circumstances.
Never having to deal with a future bill for something you will have forgotten about by the time it is due is worth a larger up-front payment.
Related: Finance Expert: You Can Stop Paying These 13 Monthly Expenses Now
When The Benefit Is Too Good to Live Without
Going to college is one of the best investments of time and money. It also is a terrible investment for some individuals.
The most likely outcome of completing your college degree is that you will have an easier time getting better jobs that pay more for the rest of your life than if you don’t go.
If none of that happens, you still get a quality education that can only result in you being a better version of yourself.
You can’t put a price on that sort of thing. When the benefit is too good to pass up, leap, even if it costs you a little more to do so.
Related: 13 Pieces of Bad Financial Advice That Most People Still Believe (According to A CFA)
Investing in Quality
Consider Long-Term Value Over Short-Term Savings. Opting for the cheaper version of a product or service may seem like a good idea initially, but it could actually cost you more in the long run.
This is especially true when purchasing items like cars, home appliances, or furniture. If these items break down or need to be replaced sooner than expected, you could end up spending more over time.
Investing in high-quality items can often be more cost-effective in the long run.
These items tend to last longer and perform better, providing you with more value for your money. While the upfront cost may be higher, the long-term savings can make these purchases worthwhile.
Related: These Products Pay For Themselves Fast (But People Are Reluctant To Buy Them)
Healthcare
Don’t Neglect Your Health to Save Money. Trying to save money by neglecting your health can lead to larger expenses in the future. It’s important to prioritize regular check-ups, a healthy diet, and a fitness regimen.
These are investments in your future wellbeing and can save you from costly medical bills down the line.
Health is a Long-Term Investment. Remember that investing in your health now can prevent costly medical conditions in the future.
Prioritizing your health is a wise financial decision that can pay off in the long run.
Related: 30 Ways to Save on Prescription Medications
Education and Skill Development
Education and training are key investments in your future earning potential. While degrees and courses can be expensive, they can also lead to higher earnings over your lifetime.
This doesn’t just apply to traditional education, but also to workshops, online courses, and professional certifications.
It’s important to view education as a long-term investment rather than a short-term expense.
The skills and knowledge you gain can open up new opportunities and increase your earning potential, making the initial cost worthwhile.
Related: 23 Easy To Get Certifications That Lead To High Paying Jobs
Investing in Life-Enriching Experiences
Experiences can provide value that can’t be measured in dollars. Travel, for example, can broaden your horizons and enrich your life in ways that material possessions cannot.
While it’s important not to overspend on experiences, they can offer a unique form of value.
Investing in experiences rather than material things can contribute to your overall wellbeing and happiness.
These experiences can create lasting memories and offer personal growth opportunities that you can’t put a price tag on.
While insurance may seem like an unnecessary expense, it can protect you from significant financial loss in the event of an accident, theft, or disaster.
The peace of mind can often justify the cost of insurance it provides.
Insurance is a Financial Safety Net. Having insurance can act as a financial safety net, protecting you from unforeseen circumstances that could otherwise have a significant financial impact.
It’s a proactive measure that can help safeguard your financial security.
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Retirement Planning: Planning for Your Future Self
It might seem counterintuitive, but putting money into retirement accounts is not the same as saving money. It’s an investment in your future self.
While you might be able to save a bit more now by not contributing, you’ll likely end up with less in the long run.
Retirement planning is a crucial aspect of financial planning. It’s about ensuring you have enough money to maintain your lifestyle once you stop working.
By prioritizing retirement savings now, you can help ensure a comfortable and secure future.
Related: Should I Max Out My 401k? a 42-Year Old Retired CFA answers!
Investing in Higher Quality Foods
Spending more on higher quality foods often means investing in your health and wellbeing. These foods are typically more nutritious and contain fewer toxins.
Not only can this lead to improved overall health, but it could also help prevent costly medical conditions in the future. Moreover, when you consume high-quality foods, you’re likely to eat less due to their nutritional density.
Related: 19 Foods You Need to Stop Eating After 50
Spending More on Discount Points on Interest Rates
Discount points are a way of paying some interest upfront on a mortgage to secure a lower interest rate over the life of the loan.
Essentially, you’re spending more money now to save money in the future. I wrote a detailed article about this: The Best Mortgage Housing Hack, Despite Rates Rising
While purchasing discount points will increase your initial loan costs, it can result in significant savings over the life of your mortgage.
This is particularly beneficial if you plan on staying in your home for a long time. The longer you stay in your home, the more you save, as the cost of the points is spread out over a larger number of years.
It’s important to note that the decision to purchase discount points should be based on your financial situation, how much you can afford to spend at the time of closing, and how long you plan to stay in your home.
Related: 13 Ways Bad Credit Scores Can Hold You Back
In Conclusion: You Get What You Pay For
Dealing with issues professionally, eliminating future bills, and becoming your best self are all good reasons to prioritize the benefit over the momentary savings.
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