Frugal Red Herrings: Money-Savers That Cost You in Other Ways

by Paul Michael on 30 July 2012 13 comments
Photo: Jasonlegate

We all love to save money. Regular readers of Wise Bread are exceptionally good at it, actually. But that doesn’t mean we’re not prone to making mistakes. I, for one, have fallen victim to some money-saving misnomers, and in a recent article I talked about some of the ways we think we save money that ends up costing us more. (See also: 10 Things You Do to Save Money That End Up Costing You More)

However, it’s not always the case that our frugal ways cost us MORE money. Sometimes, we “break even” or lose out in other ways. So I decided to compile a list of frugal red herrings — those little things we do to save money that, for one reason or another, just don’t pay off.

1. Standing In Long, Long Lines for Freebies

Now, if someone said you could stand in line for one hour and be guaranteed a free PS3 or iPhone at the end, no strings attached, it would be worth it. However, that never happens. Never.

What does happen is that Ben & Jerry's gives away a free cone, Chipotle hands out free burritos, or Starbucks gives out a free coffee. Suddenly, the stores are inundated and the lines stretch around the block. And for what? A $3-4 ice cream cone or a small coffee?

Think about this rationally for a second. If you’ve got nothing, and time is abundant in your life, maybe it makes some kind of sense. The homeless and hungry, or the very, very poor, may stand to benefit from this. But I have been to a couple of these giveaways in my life, and the line is usually populated by people like, well, me. People who like a bargain. Is it really a bargain to waste so much of your time on something that ordinarily costs so little? If you stand in line for 45 minutes to get an ice cream, what does that equate to — maybe the equivalent of around $6 per hour? That’s not even minimum wage.

2. Buying Cheap Shoes

No one "needs" a $2,000 pair of shoes. But at the same time, skimping on your footwear may save you cash but cause you back pain, foot pain, or other problems. If you have arch problems, you’ll need to invest in shoes with good arch support. Sure, those $14 shoes on sale at the outlet stores may be fine, but more than likely they’ll give you bad posture and lead to pain and discomfort. Do yourself a favor. Invest in good shoes, your body will thank you for it.

3. Dining at “All You Can Eat” Buffets

If you’re really hungry and short of cash, those buffets can be a pretty good deal. They’ll never take the place of a good, home-cooked meal, though, and for what you pay you can buy groceries that will get you through three or four meals. The problem with buffets is that they are meant for one meal, not leftovers. You’re only “up on the deal” if you eat enough food to outweigh the price of admission. That turns the average sane person into a food maniac, piling up plate after plate with food in an effort to get their money’s worth. I’ve often said that these places should really changes their names to “gluttony restaurants” because that’s what they promote. Some people say they’re eating for two meals, but the body doesn’t work like that. You’ll be hungry again later, or if you starve yourself prior to going, you’ll get full faster than you think. And if you only plan to eat a small amount of food, and not pig out, then you’re spending more than you need to anyway.

4. Refinancing Your Home for a Cheaper Rate

We’re always being hit with offers for lower rates on mortgages. But remember, there are fees associated with a refinance, including:

  • Mortgage Application Fees
  • Origination Fees
  • Attorney Fees
  • Title Search and Insurance Fees
  • Prepayment Penalties
  • Appraisal Fees

It’s very easy to spend $4,000-$5,000 in fees to refinance a mortgage, and if you’re only saving a quarter of a percentage point, it could take a very, very long time to recoup the costs you paid out upfront. What you need to do is find the BEP, or break-even point, and decide if it’s worth your time and a huge chunk of your money to do the refi. If that break-even point is just a few years, then maybe it’s worth it (if you’re not planning to sell any time soon). But if it’s a long way out, you’re probably better off keeping the cash and waiting for a better deal to come along.

5. Trading in Your Car for One With Better Gas Mileage

We all feel the pain at the pump these days, and when you’re driving around in a monster gas-guzzler, it can be very tempting to trade it in for a new car with great gas mileage. But wait. Is it actually going to save you money, or will you actually fail to break even or lose money?

What you need to do is look carefully at the MPG of your current vehicle, the MPG of the one you’re considering, and the costs involved in trading in the car and your new monthly payment. Even if you plonk down cold hard cash for the new car, you still have to work out if you’re actually going to break even or save money over the life of the new car. Most of the time, the costs involved in moving up to a better MPG vehicle far outweigh the costs of buying more gas.

6. Making Do With a Cheap Mattress

When times are tough, it’s easy to scoff at the high prices of quality mattresses and get yourself a $200 special. But consider this. You spend six to eight hours of every day in bed. That’s up to one third of your life. You spend more time sleeping, or laying down, than you do any other activity in your life. So skimping on a mattress that will give you truly rested sleep and good support is like building a home with a shoddy foundation. There are some things in life that really do need the best that money can buy, and a mattress is one of them. Most manufacturers will offer flexible payment plans or other incentives, and you will get at least 10 years out of a great mattress. Even if it’s $4,000, that’s just $400 a year, or $33 a month. Chances are, you spend more than that on snacks and coffees.

7. Going Large When You Don’t Need To

I know so many people who do this, and it continues to make me scratch my head. I’m talking about food of course, or beverages, and it’s one of those strange tactics that plays on your desire for a bargain.

Usually, whether it’s Burger King, Starbucks, Dairy Queen, or any other place that sells food in sizes, it will be a little bit cheaper to get a lot more food and drink.

For instance, let's take Starbucks.

A tall (12oz) Caffé Latte is $3.55. A grande (16oz) is $4.25. And a venti is $4.55. (Those prices are correct as of May 2012.)

Your first 12oz costs you roughly 29 cents per ounce. But the move up to grande is just 70 cents more for an extra 4 ounces. That’s cut your price per ounce almost in half, to just 17.5 cents per ounce for the extra coffee. And if you choose a venti over a grande, your cost for the additional 4 ounces is just 30 cents. That’s a paltry 7.5 cents per ounce for the extra 4 ounces, which is 75% less than the cost of the original 29 cents per ounce.

If you want to do the math a different way, it goes like this:

  • A tall Caffé Latte = 29 cents/oz
  • A grande Caffé Latte = 26 cents/oz
  • A venti Caffé Latte = 23 cents/oz

We may not do the math to that extent, but we all know that there’s a deal to be had by going large. The same is true of ice cream bowls, fries, sodas — you name it. However, it’s not a deal if you’re only ready to drink a tall sized coffee. You’re throwing the rest away, and this is something the chains count on. They know you have eyes for a deal and will spend the extra money to go large, even if you don’t want it.

Do this over and over, you’re throwing hundreds of dollars away year after year because your brain made a deal that your body couldn’t keep.

9. Buying in Bulk and Letting It Rot

I’ve been guilty of this one way too often in my life. The big warehouse stores offering gallons of mayo, sofa-sized cartons of cereal, and enough cakes to feed an army offer amazing value for the money. But only if you use it all. Quite often, we’ll see bargains that cut the price of our regular grocery items in half, or even less, and we buy them. However, sometimes we go overboard and just cannot get around to eating it all before the sell by date. Remember in "Seinfeld" when Kramer fed his Beefaroni to a horse in a desperate bid to get rid of it all? Well, if you’re at the point where you’re looking for ways to get rid of food before the ticking time bomb of the sell by date comes around, you’ve become the victim of another frugal red herring. It’s good to have a full fridge or pantry, but it’s not so good to have one full of old and rotting produce.

Those are my top eight frugal red herrings. Now, over to you. Which money-saving tips have you followed, only to realize that they weren’t such a good idea after all?

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Guest's picture

Yes! Number 9...One of my roommates in college would always buy in bulk, lecture us on our ignorance for not following suit, refuse to share any of his surplus with us and finally throw everything away when it spoiled. Amazingly, he never seemed to learn anything from this--the whole process was on repeat for a full year.

Guest's picture
Beth

Good article! I have found that running your dishwasher if it's hooked to hot water drains a lot of cash. My dishwasher has it's own heating element and was hooked to hot water. We ran through propane insanely fast. We were paying for propane to heat the hot water AND electric to heat the water MORE. I did a test for 1 month and hand washed my dishes and our propane lasted us almost 2 weeks longer than usual. 2 WEEKS! Hubby asked about it, and the propane dealer said that they recommend the dishwasher be hooked to hot water for extra "hotness" to disinfect the dishes. I asked hubby how the dishes were disinfected for people who do not have a dishwasher...he rolled his eyes. The answer to that would be using detergent and drying completely. When there is extra concern, like an illness, add white vinegar or use a bleach solution. Most dishwasher detergents themselves have disinfecting ingredients added.

Guest's picture
Guest

Cheap clothes ended up costing me a lot more than I realized.

When I was a young adult I worked at a major second-hand store and regularly blew my paycheque on cheap clothing, made even cheaper by my employee discount. Every month I would spend hundreds of dollars and come home loaded down with huge bags of clothing.

I'd be surprised if I found even one article of clothing purchased back then in my closet 5 years later. Because the price was so low, I ended up buying many low-quality, trendy items instead of things that would last. The low prices also made it more likely that I would donate things once they lost their appeal, so the cost-per-wear was actually really high.

I spend more on clothing now, but before I buy something I consider how versatile it is (I rarely buy anything I couldn't wear to work) and ask myself if it is special enough for me to want to keep it for years. As a result, I am no longer in the cycle of buying things only to donate them within a year.

Guest's picture
Deb

Buy-one-get-one for half price when i really only needed or wanted the first item.
Before I take advantage of that deal now, I make sure I have plan (interested friend or gift) for the second item.

Guest's picture
Kayla

Thanks for these tips! They were helpful...I am definitely guilty of #7!

Guest's picture
John Schmoll

Great article! I find that often times doing the math, like you show in your article, helps see what is the wiser decision. The thing that comes to my mind is when at Costco, they pitch their Executive Membership for an additional $55/year. They try to incent with getting a 2% reward at the end of the year. Getting cash back is great, but you need to spend almost $300/month to breakeven. If you spend less you'll still get some money back, but less than the extra $55 you plunked down. If your goal is to get more than you put in then it might tempt you to spend more than you normally would.

Guest's picture

Sometimes it depends on what you buy. We regularly spend about $400/mth at Costco (this year), so it has made sense for us. With our daughter no longer using formula, we probably won't spend that much next year, so we'll skip the upgrade. If you're already spending that much - go for the upgrade, but don't get the upgrade just because of the 2% back.

Guest's picture

Thank you #1! To me, my time is the most valuable thing that I have. I wish more people would start treating it as such. It is crazy to see people line up to get a free doughnut/coffee/knicknack. Does the product have more value because it is free? No. You wouldn't wait in line for it if it wasn't so why do it just because it is free?

Guest's picture
guest

Can I add one? Shopping multiple stores to do get the best deals while grocery shopping. I used to do this every week--spend hours planning the grocery list, making up a menu based on these items and then it took ALL day to go from store to store. I've found that it's much better for our family to shop at whichever store has the best deals that week, and plan a menu based on their loss-leaders. I may miss a great deal one week, but I save the time and the gas, and chances are it'll be on sale again soon.

Guest's picture
Julian

In respect of the point about how queuing up for a free Starbucks just isn't worth it: I've seen you make this point before with regards to not washing your car, and I'd agree in that it's always good to think about things in terms of their hourly rate and the opportunity cost of doing them. I find it useful to think about this for a whole range of things. For example, if I know I can walk to the shop that's an extra 30 minutes to get a cheaper loaf of bread, I think about how much my time is worth in the given context and might opt for the nearer, but more expensive, option on the basis that I'll actually be making a saving when I factor in the monetary value of my time.

Also, good point about mattresses - we do spend a hell of a lot of time in our bed across our lifetimes! (Now to go and replace my god-knows-how-old lumpy mattress).

Guest's picture

I have fallen into the letting food rot trap. Although it involves a lot of planning and effort, you really need to plan every single meal to ensure you are using up the ingredients you have. I don't know how many times, we have found rotting produce in the fridge because someone forgot they bought it. It is such a horrible waste!

Guest's picture

Great article and some very valuable tips to help people save more and spend less!

One more I would add to the list is "Coupon / Deal Sites" (we all know them) ... With all of these deals, did you really save money over the last year? Or, is it possible that you spent more than you normally would have by eating out at more restaurants (the deals never allow alcohol and typically cap the amount per person), more at the grocery store (you buy stuff you really didn’t need), and more at the department stores (picking up extra items until your closest is in the brink of explosion) than you had expected to you in your annual budget. Has couponing made us spend more in a given year even though the amount per item was less than normal price?

Guest's picture
James

I'm always falling victim to #7 at Starbucks. Since, the price difference is very small between tall and venti, I always buy a venti but I can't really finish it.