The economy is not out of the woods yet. Companies are still laying off employees; the automotive industry is just getting started. For many families, the pressure is on to find ways and make decisions to save more money in order to prevent going into or going deeper into debt.
The situation presents a good opportunity to review spending across the entire budget, optimize income, and decide where to draw the line between necessities and luxuries, true needs and wants. The opportunity exists to choose poorly, to cut back in spending in ways that seem to make sense in the short term but may be harmful later on. Some struggling families have no choice but to focus on the short-term, immediate survival, but these mistakes should be avoided whenever possible.
Delaying visits to the doctor and dentist, especially for children. If you have no insurance or can’t afford the copyaments or coinsurance, you may feel like you have no choice to ignore your “regularly scheduled maintenance” appointments with health professionals. I admit that I don’t visit my doctor for check-ups as often as I should, regardless of the cost. But if you put off these visits now to save money, it could end up costing much more in the long run if health problems — some that you may not know about — are allowed to grow. A few years of skipped dental hygienic appointments, saving anywhere from a hundred to a thousand dollars, could result in several thousands of dollars in corrective work.
Choosing cheaper, poorly-made products. When I was younger and had very little net income to work with, if any, I tried to save money on clothing by shopping where clothing was the least expensive. After a few years, I realized how the cheap clothing I was purchasing, for example jeans from Old Navy costing ten dollars, did not last more than a year. I could spend twice as much at a store that offers better quality clothing and the purchases would last five to ten years.
It’s similar with cars. I drive a Honda Civic now. It was comparatively inexpensive when I purchased it, but I haven’t had any problems until this week when the fuel door stopped functioning. That is apparently a common problem for Civics, and it was not free to have fix. I chose to get it repaired because I am willing to spend more money rather than do it myself, do it wrong, and cause more problems. But rather than purchasing a Civic, I could have purchased a similar car from a different, lower-quality maker and saved money. But according to reviews and statistics, I would have spent more money to maintain any number of other cars due to lower levels of reliability.
Consumer electronics are similar. Cheaper products might save money for the initial purchase, but if the electronics must be replaced or returned for service after the warranty has ended, you will end up paying more.
Buying products in smaller packages. If you have six dollars in your wallet and you need to buy toothpaste, you can buy a package that will last six months. If you only have three dollars in your wallet, however, the only option to you is a smaller tube that will only last two months. At the time of purchase, you’re saving money by buying a smaller tube, but the price per ounce is going to be better if you have the six dollars to spend. Sometimes you don’t have a choice, but smaller packaging is not the best way to save money.
This is true for bulk purchasing, as well. When the economy is strong, people are more likely to buy in bulk, with an eye towards the future. But if you do not know where your next pay check is coming from, focus shifts to the short-term.
Opting to enroll in store credit cards. It is tempting to open an instant credit card in order to receive 15% off your purchase, a common offer in department stores. While the immediate discount sounds nice, by adding a credit card to your arsenal, likely a credit card with a high interest rate, you could end up far exceeding the price you would pay if you chose not to open the credit card. That is what the credit card companies are counting on.
It is not always possible to avoid the decisions that hurt your wallet more later than they do now. But when it is possible, or if you can find a way to cut back in other areas of spending that do not have long-term effects, you will have more opportunities to make the better decisions as described above.
Photo credit: bcmom
Published or updated June 4, 2009.