Everyone should have some basic saving strategies to ensure they don't overspend — for example, automatically transferring money to savings each month or using cash at restaurants, spending only the money you have on you. But not all money saving ideas work as planned. Consider these six common saving strategies that backfire, costing you more than you hoped to save.
1. Buying the cheapest item
Going cheap may leave you with more money in your pocket temporarily, but foregoing better quality can cost you more in the long run. For example, better quality children's clothing and shoes can extend their use past the time cheaper items are worn out. A higher quality umbrella may last for years while a cheap one could fall apart during its first downpour.
2. Buying in bulk
Sometimes the price reduction from buying in bulk makes you want to buy large quantities. If you have a big family and use things up fast, that's a good idea, but you have to be careful not to buy stuff that will go bad before you can use it. While this is more obvious with food, there are many non-food items like laundry detergent and beauty products that stop working as intended if you wait too long.
3. Buying "90 days, same as cash."
When buying a big-ticket appliance, it is tempting to take financing offers. A common practice among retailers is to let you walk out the door with your purchase and not worry about making a payment for three months. Stores would not do this unless it benefits them somehow. They know that, after 89 days, you'll forget to make your payment, and the small print says you have to pay it back — with interest — backdated to the purchase date.
4. Using charge cards to get discounts
Many stores have their own charge cards and offer discounts if you make purchases with them. They are counting on you to make extra purchases because of the special pricing. If you save 25 percent on your purchase but end up spending 80 percent more from buying additional items, you are not saving money.
5. Skipping on insurance
It is hard to pay hundreds of dollars on insurance premiums every year when there are other bills that need to be paid. For example, if you are reading this, obviously any money you've spent on life insurance hasn't resulted in a benefit. However, insurance is still a good idea. For example, most people who rent apartments do not insure their possessions against loss. They may be saving a few bucks, but they risk losing the contents of their apartment if there is a fire or other disaster. Don't look at insurance as a money investment you can forgo. With insurance, you are paying to transfer financial risk to your insurance company. Let those resources cover claims so you don't have to.
You may not want to spend a few hundred dollars to create a last will and testament. In fact, more than half of adults do not have wills. If you have significant assets, a will may be more complicated than normal and cost more than average. However, this is money well spent so that your loved ones have instructions to follow regarding your assets, especially if you have children who are minors. If your asset situation is not too complicated, you may be able to find a low-cost, legal online will maker for less than $50.
If you avoid these shortsighted saving strategies, you will probably notice your wallet being a little lighter for a while. Don't despair. Not all good money decisions are reflected that way. The saying "penny wise and pound foolish" by English scholar, Robert Burton, is as true today as it was 400 years ago.