Stupid things people do in the hope of saving money

My parents are brilliant at personal finance. When they see or hear an advertisement trumpeting how much money they'll save if they just buy this, that or the other thing, they're smart enough to say, "I know how to save even more money!" How? By not buying that money-saving "miracle" product being advertised in the first place! While this may sound obvious, it's nonetheless a hurdle that many of us keep stumbling over.

How can you avoid the "spend money to save money" trap? Read on, as we outline nine "deals" that really aren't.

1. The membership. Membership has its privileges ... but mostly, it has costs. Warehouse stores like Costco and Sam's Club cost $50 or more annually to join, and for that privilege, you get access to enormous quantities of groceries and high-value items for less. But does this really save you money? Hardly. Psychology says the more you spend, the more you feel you've gotten "your money's worth." So you'll find yourself spending more each month for groceries, buying more of things (like snack food and sweets) than you really need, and shopping more simply to justify the cost of the membership. What's a better option? If you shop sales at grocery stores, or belong to a food co-op or (grassroots) buying club, you may end up finding better per-unit prices, and you won't buy three times what your family really needs to consume.

2. The cash-only trick. Several personal finance experts encourage the concept of a cash-only financial "fast" in which you put away all your plastic (even debit cards) and checkbook, and live only on the cash you've budgeted for yourself. It's based on some solid principles. But the side effects can be costly. Take gas: if you put only as much cash as you have left in your tank, you may be encouraged to drive less until your fast is over. Changing your driving habits long-term is a great way to save; short-term is not so much. You'll be more likely to cause damage to your car, requiring a fuel pump replacement. You might only buy a little of something that costs less in large quantities; we use (literally) gallons of honey in my house, and it's cheapest purchased in gallon containers. If I only have a little cash, I'm likely to buy a pint, whose per-ounce cost is nearly double that of the gallon. You'll also be more likely to spend exactly what you have; perhaps, if you'd just created a budget for yourself, you wouldn't have spent the last $10 on stickers at the street fair just because the cash was there.

3. The lease. Leasing a car might cost less per month than buying a car new -- and you'll spend less upfront, too, right? Well, sure. But guess what's even cheaper? Buying a reliable used car. And you won't have to give back your "asset" when your term is done. If your car has used up its value by the end of two or three years, but you've only spent $4,000 or $5,000, you can give it to charity and then pat yourself on the back for all of the money you saved.

4. The refinance. Refinance deals offered by mortgage brokers and banks are done not because these institutions are extraordinarily altruistic and you seem like such a nice person, but because they make money for mortgage brokers and banks. Even if you'll save a few percentage points, or can roll all your debt into your home loan, or get cash out for home upgrades, you should think long and hard before signing any papers. First, you'll be paying points upfront -- cash that won't come out of pocket, but will be added onto the loan. This could easily wipe out any savings on interest. Second, you'll be encouraged to increase the total size of your mortgage, which will increase your opportunity to spend money you don't need to be spending, as well as upping the chance you'll default. Don't risk the roof over your head to keep up with the Joneses.

5. The coupon. You've all seen the five o'clock news crew following a woman who's learned to keep her grocery costs to $20 a trip thanks to her brilliant use of coupons. And then you've gone to the coupon insert and started clipping with a vengeance. I've done this, too, but then I've taken a closer look at what's advertised in these great coupons. The vast majority of savings are for newly-introduced products, and they're nearly all for highly-processed foods and snack foods, or for personal care products you don't already use. Sure, you're saving money off the retail price. But you're buying empty calories, excess packaging and a high-priced alternative to a whole food. You may spend less than me on groceries, it's true, but you'll end up with a bunch of food that's not that good for you. Skip the coupons, and buy some fresh fruit and vegetables and a few big bags of dried beans and organic whole grain flour. You'll be better off in the long run.

As for those personal care product coupons, let's really think about this: You're likely being sold something for a great deal with the hope you'll get hooked. You can probably live just as well (and beautifully! and sweet-scentedly!) without it.

6. The BOGO. Or, more often, the buy two, get one free offer. Walgreens and Kroger seem to love this concept: Take a product that won't sell (even in quantities of one) and offer a deal on three! Inventory is moved; profits roll in. The buy two-get one free deals are frequently offered on products that are very cheaply made and not needed to begin with, like plastic toys and seasonal items (knock-off plastic shoes, holiday decorations, gift kits). As someone once said on Twitter: You do not need three of them. You probably don't need one.

7. The shipping is free. My personal financial nemesis is, oh ye of the "Prime" membership, in which two-day shipping is free on all orders (for a wee little fee of $79 a year). The $25 order limit, above which shipping will be free, is now common among online retailers, and is the gateway drug, a rationalization to all manner of unfortunate things we do in the name of saving money. Many, many times I've added a book or CD to my order, spending $30 or $35 in the name of saving $4 or so in shipping charges. If you go "Prime" on Amazon, you'll find yourself justifying the decision by buying a book here or there, every week or two, and you'll find yourself in possession of much more media than you need. Find a local bookstore -- or better yet, your local library -- and skip the shipping altogether.

8. The event. If you should receive an invitation to an event at which things will be sold, just say "no." Of course, there's the occasional exception for the truly good cause -- the school auction, say -- at which you'll surely buy something you don't need, but at least the recipient is deserving of your wasted cash. Otherwise? Yes, you'll always buy something you wouldn't have purchased otherwise, had your wallet's haunches not been flogged to a sweat-spotted sheen by the excitement of it all. Auctions are the worst, closely followed by "trunk shows," fashion shows and any other event at which you'll be encouraged to sport fashion's cutting edge before your neighbors. Another dangerous event is the doorbuster, a key contributor to Black Friday mayhem each year. Do not break down anyone's door to spend money you can't afford.

9. The throwaway. Summer seems like prime time for super deals on items you know (if you think about it) won't last more than a season. I agree: $3 for a pair of floral flip-flops is a super deal; those $5 sunglasses make you look cool; the kids will have a ton of fun this afternoon with that 99-cent water gun. But they're not going to last more than a few months; some will even break before the sun sets. No, you aren't out any more than that iced chocolate mint coffee drink. So think about not just the dollar cost, but the "external" cost -- the price the world paid for that cheap item. In China, the government routinely allows mountains to be blown up to level the ground and make factories. In the Gulf, oil is gushing, in part because we're so eager for fuel to get those cargo vessels across the ocean. In many countries, labor laws are lax and kids could very well be making those super-cheap water guns. It's cheap. Today.

A nice consistent rule of thumb is that "savings" gives us the justification we need to make purchases we probably shouldn't. Ask yourself if you would buy the thing without the deal, the hype, or any other rationalization you can think of. Ask yourself if you'd buy the thing if you had to walk to the store and carry it home. If you still want it, maybe you need it. If not? Consider hiding your credit card until you're strong enough to say no.

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