Things You Should Never Cheap Out On

There are many points in life where spending less money on something is a good idea, because you don’t get any benefit out of the more expensive variant. And yet, some people take this idea to the extreme, and always look for the cheapest option for absolutely everything in their lives. That’s not a very good approach for some specific types of purchases though, and it can lead to many problems in the long run.

Learning to recognize which things are appropriate to cheap out on and which aren’t is an important part of developing solid personal finance management skills. There are various details that you’ll have to consider here though, and it’s not always a straightforward decision.

Insurance

Insurance is one of those things that many people like to cheap out on with the wishful thinking that they’re never going to need it anyway. Which is strange, because when you consider statistics and people’s attitude to them, it should be the exact opposite. 1 in 77 deaths in the US were caused by car crashes several years ago, while the odds of winning the lottery are a fraction of a single percent. And yet, guess which one people consider a somewhat likely possibility, while completely ignoring the chance that the other could happen to them?

Spending a little more on your insurance might seem like wasting your money, but when one day you run into a situation where you need to cash in on that insurance policy, you’re absolutely not going to see that money as a waste.

Big Purchases

Car, apartment, house – there are some big-ticket purchases that you should not only take your time to research carefully, but you should also try to invest as much as possible into. These are assets that will not deprecate that much over time, and in some cases – like real estate – they might even gain additional value if they’re maintained properly. With that in mind, you should make sure that you’re getting the best option available right from the start.

If you have to, take out a loan. This is one of the moments in life where a loan is not only an appropriate solution to a financial problem, it’s the preferred one. As long as you take your time to research the loan you’re taking out and ensure that you’re getting the best deal on the market, the rest should come together by itself.

Home Security

Home security is something you only need to set up once – minus the monthly fees of the security company you may have chosen – and that, combined with its general importance in your life, makes it a viable candidate for something that you should splurge a little on. Remember, a burglary accident only needs to happen once to turn your life upside down, and after that, installing a security system will be a bit late anyway.

Make sure to get the latest models with all the bells and whistles, and pay attention to any ongoing maintenance costs that you may need to prepare yourself for as well. Don’t underestimate the importance of having a good home security setup, because it’s going to matter a lot for your overall peace of mind in the long run.

Repair Services

Having something repaired can cost a lot of money if you want the job done right. But in the end, cheaper options exist too – if you don’t mind completely replacing the product shortly afterwards. Handymen value the quality of their work, and you should too, because they’re the ones saving you from an even bigger potential expense (if you have to completely replace whatever is broken).

This means that you should never dispute the quote you receive, even if it seems ridiculous. As the old anecdote about the ship engineer goes, “the bill was $10,000 for screwing one bolt, because it cost you $1 for me to screw the bolt, and $9,999 for knowing which bolt needed screwing in the first place”. Don’t insult someone by implying that you could have done the same with a few YouTube tutorials.

Childcare

Having children is wonderful and very engaging, but you’re going to want to unwind and relax on your own from time to time. And in those cases, you have plenty of options for professional childcare services on the market. Make sure that you hire someone competent though, and pay them whatever they’re asking. Because you’re quickly going to find out that the number of people available out there who actually know how to look after a child properly, and have the patience for it, is not as great as you might think. And there’s a good reason most of them charge so much for their services – they know what they’re worth.

Why Discounts and Sales Are Not Always in Your Favor

Many people obsess over sales and promotions. Some go as far as to mark big sales days in their calendars and make special arrangements just so they can be available at these times. And while it’s smart to always be on the lookout for discounts and other attractive deals, there is a reasonable limit that you should be careful not to cross.

Because in the end, discounts and sales might look like they’re your friends, but they can easily work against you if you’re not careful. There are many finer points to watch out for, and developing healthy shopping habits is largely about being careful and understanding the implications of what you’re spending your money on.

The Purpose of Sales

A sale is for the benefit of the store running it, first and foremost. There are many ways this can happen, and they are not always immediately obvious. For example, a store might run a sale for a less frequently purchased product to drive more traffic to their location, and prompt people to purchase other products as well. Or, a store might be trying to get rid of extra stock that’s about to expire soon.

The point is, it’s never because they want you to feel good by gifting you free stuff. You should try to develop the ability to see through promotions and realize their true purpose. This is going to save you from making many bad decisions.

Double-Check Major Discounts

Sometimes a major discount may actually work against you. It sounds weird, but it’s true. A common trick is to bump up a product’s price shortly before putting it up on sale, with the final result being that the “sale” price is actually even more expensive than the original! You should make liberal use of the internet to research price trends and historic records to ensure that you’re not being taken for a ride.

There’s plenty of information available on that front these days, so you should do your best to do your research before deciding to purchase anything just because it’s on sale. And if you don’t need it, then you should probably not even be looking at that sale in the first place – but more on that below.

Major Promotion Days

Things like Black Friday, Cyber Monday, and other similar major “sales holidays” are prime examples of the above. They’re carefully designed to increase sales and provide other benefits for the businesses that run them, luring people into spending lots of money on things they weren’t even planning to buy in the first place. And then you see these huge crowds basically stampeding over each other just to get that -5% on a TV set.

Be very wary of these special days and don’t fall for all the hype – it’s usually fabricated anyway.

The Illusion of Discounted Purchases

Then there’s also the thing about buying things just because they’re discounted – if you didn’t actually need that product in the first place, you just lost money. You might think that you’re getting a good deal because you’re paying less than the base price. But think about it – without that sale, you had no inclination to even buy the product at all. So this means that thanks to the sale, you’ve now lost some money on something you didn’t even need.

Some people even go as far as to take out a loan for a major purchase when they see something discounted. This is obviously a bad idea for many reasons, and if you’re responsible about your finances, there should be no need to explain the implications here.

Exceptions

Of course, as with anything, there are exceptions to this. Not all sales are bad – far from it. It’s just that some are designed to get you to spend more money, rather than allow you to save anything, and they’re the problem that nobody is talking about. But in the end, things like paying attention to the prices at your local grocery store can definitely be useful if you want to ensure that you’re always getting the best deal on your regular purchases.

It should also go without saying that the above statements don’t apply to things that you actually did want to buy. For example, that game you’ve had your eyes on since it came out is currently 50% off? That’s definitely a valid saving opportunity, even if you don’t plan on playing the game immediately. The point is that it’s a purchase you were already considering, and did not randomly decide to buy it as a result of seeing it on sale.