Are You Penny Wise But Dollar Foolish?
One of the most popular ways that many people try to improve their financial situation is to spend less. Often, this is done by pinching pennies. While it is a good idea to look for ways to save money on your bills, it is possible to go too far. Additionally, you might actually be so focused on the small things that you end up spending more money in the long run.
Poor Quality = More Spending Down the Road
While you want to get a good deal, you do need to be careful. Look at your spending. Does it appear that you are buying some of the same things over and over again? If your spending records indicate that you are buying cheap things with great frequency, you might be in trouble. I found this out with my son’s jeans.
We thought we had scored a coup when we found some jeans for $9 apiece. We didn’t want to pay $15 a pair for jeans. However, the jeans ended up falling apart within a couple of months. The $9 jeans can’t stand up to my son’s use of them. We bought four pairs of jeans at $9 apiece ($32) and had to buy more jeans two months later. In a year, at that rate, we would spend 32 x 6 = $192. We bought the more expensive jeans, and found they last longer — four months. Indeed, our son grew out of the jeans before he ruined them. We spend $60 for four pairs of jeans, but over the course of the year, we only spend 60 x 3 = $180. We save $12 a year by buying more expensive jeans.
Run your own numbers, and consider the use you are getting. In some cases, a cheap item that you don’t use much doesn’t need to be of high quality. But there are some things that you can get more use out of if you are willing to pay a little bit more up front — but save in the long run.
What About Your Time?
Sometimes, we forget to consider the value of our time. If you stand in line for 45 minutes to get a free ice cream cone that only costs $1 anyway, you might not actually be ahead. You might have been able to do something way more productive with that time. Pay the $1, and go make $15 with the 45 minutes you have saved.
Also, don’t forget about the value of your time as you drive from store to store. Spending 20 minutes driving across town to save $0.20 on a single item might not actually put you ahead. On top of that, with gas prices, you might actually lose money.
Yes, it’s important to do what you can to trim the fat out of your budget. But you need to be aware of the big picture as well. Make sure you are coming out ahead in the long run.
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