10 Money-Saving Tips That Don’t Work
Save your sense with these cent-saving schemes to avoid.
Buying Food in Bulk
When you see a whole bunch of bananas on sale for less than half the regular price, you grab them. Then you watch them turn black because you bought too many. While buying in bulk is good for lots of things, be careful when buying perishables. It’s not a bargain if you throw them away. A Costco employee probably won’t tell you not to buy in bulk but there are a lot of secrets they aren’t telling. Find out 12 things a Costco employee won’t tell you.
Taking Store Credit Card Offers
That 30 percent off is a good deal, if you actually pay off the balance in full right away. Sadly, many people find it way too easy to pay the much smaller minimum payment. Before long, you’re paying the minimum every month and adding more to the store card, and you’re suddenly a credit card revolver who is paying hefty interest charges. Here’s a neat way to repurpose that credit card in the workshop.
Always Choosing the Cheapest Price Tag
Buy cheap, buy twice. If you buy a screwdriver set for $1 at a dollar store, or get your shoes for a few bucks at a flea market stall, chances are you’ll be buying them again real soon. Cheaply made, poor-quality items may save you a few bucks in the short term, but you’ll only have to pay more later to replace them. And if you replace them with more cheap junk, you’ll be repeating the cycle. The only time this is not true is when you’re buying generic brands in the grocery store—you’re often getting the same product that’s in the brand-name packaging. If you’re thinking about thrift stop shopping, think again about buying these 10 items at the thrift store.
Getting Suckered into Buy-One-Get-One (BOGO) Deals
BOGO, when it’s genuine, is hard to resist. but even then, whether it’s BOGO free or BOGO half price, you have to stop and ask yourself, Would I really have bought this much of this item at this price anyway? If you’re shopping for jam and see BOGO free on jam, that’s probably a great time to stock up. But if you’re looking for a new pair of sneakers and see BOGO half off, stop and think. You went out looking to spend $60 on sneakers. Now you’re spending about $100 after taxes. Did you even want two pairs? Will you wear them both? Do you even like the second pair?
Don’t let BOGO make you look like a bozo and have your house fill up with clutter. Get rid of the clutter with Swedish Death Cleaning. You might feel alive again.
Prepaying or Making Additional Payments on a Home Mortgage
Debt might always have a negative connotation, but Jeffrey Sklar, managing partner of Sklar, Heyman, Hirshfield & Kantor LLP, says pre-paying and making additional mortgage payments aren’t smart money-saving tips. How come? Your cash could be put to better use and make you more money. “Most folks don’t analyze if there is tax benefit to the interest deduction, as well as opportunity cost in taking the funds from a potential investment with a better rate of return,” he explains.
Over Withhold on Taxes From Your Wages to Ensure a Tax Refund
Depending on your tax bracket and incoming earning, your tax refund in April might feel like the only way you can save money. But this is a dangerous way to save, since it doesn’t directly benefit you in the way the dollars could if you invested them instead, Sklar says. As he explains, “Every taxpayer is better off investing their funds than providing the government an interest-free loan in the form of overpaying their taxes. It’s much better to have the extra money go directly into an investment each pay period.”
You Need Life Insurance Equal to Seven Times Your Annual Salary
There’s a lot wrong with this statement, according to Deglow. First and foremost, he notes, not everyone needs life insurance. “If there isn’t anyone who would become financially compromised should you pass prematurely and you have enough assets to pay off your liabilities, life insurance may not be a necessity,” he explains. However, if you do have a spouse and/or children, you need to crunch the numbers to fully understand how much you’re setting aside. As an example, John Deglow, CFP, AIF, at Unified Trust Company, explains someone who brings in $100K a year and opts for a $700K life insurance benefit, might be shortchanging their family. “Withdrawing 4 percent of $700,000 would provide only $28,000 annually for your family. A more aggressive withdrawal rate of 6 percent provides $42,000, again much less than the family was accustomed to,” he shares. And to make it more complicated, he notes this doesn’t address other liabilities, such as mortgages, credit cards, student loans, and more. His advice? Your life insurance should be as much as 20 times more than your income. Learn how to save money on homeowners and car insurance without doing much more than lifting a finger.
Being a Bad Tipper
Less practical and more karmic, David Rosen, licensed associate real estate broker, says being a Grinch with tipping isn’t a way to get ahead on your savings goals. “The opportunity costs of being known as ‘cheap’ as opposed to ‘generous’ are great! However, the amount of money you save by skimming a few bucks here and there are not life-changing,” he shares. Ah, you won’t even have to go out when you’ve got a great looking nook like this.
Prepaying Your Taxes
Much like your mortgage, if you use your extra cash to prepay your taxes, Rosen says there are better uses for the extra dollars. While some do this in an effort to avoid paying them late—which carries a steep penalty—he notes a better money-saving tip is to place the funds in a low-risk cash flow investment. “You will come out ahead, and it’s probably a better investment. The government is going to stay in business with you paying on time, there is no benefit to you to pay them in advance,” he explains.
Always Setting the Thermostat Low in Winter
Sure you’re trying to save a few bucks by keeping it chilly in the house during winter but it could lead to you getting sick more often. Feeling lousy in winter only makes it worse. Find out if a Wifi thermostat is for you? It might be great adjusting the temp without having to get up.