Enjoy Saving Money? Don’t go Broke in the Process…

I’m fairly certain there isn’t a human on the planet who dislikes saving money. There are certainly individuals who seem to be indifferent and will just ‘pony up the dough’ for anything, but if you challenged them and asked if they ‘enjoy’ saving money – I’d bet they would give you a smile and say ‘yes’.

For many of us – those who call themselves frugal – are so focused on saving money and the next big sale, that we end up actually spending more money in the process. This is actually much more prevalent than I think many of us realize. I know this is true for me and I find myself many times falling into this ‘savings trap’. 

So what am I actually talking about? What is the ‘savings trap’?

The ‘savings trap’ happens when you see a ‘mega sale’ on a product. If you need that product, and have it in your budget to actually purchase it, then you’ve saved money (maybe). What if you ‘may’ need the product sometime in the future – did you save money? Also a ‘maybe’… but maybe not. You may have fallen into the ‘savings trap’ and actually expended more money.

Lets look at some examples to see what I mean…

Example 1: (a simple one) You’re at the supermarket, as you turn down aisle 6 you see a huge sale on eggs. Wow, two cartons for $3. Your family doesn’t particularly eat a lot of eggs, but it’s on your list to purchase – even though you usually only purchase one carton at a time due to the expiration date. Since it’s a great sale of only $1 more and you’re saving 50% of the cost, you go ahead and decide to purchase.

Question: Did you save money in this example? Probably not, as those eggs will most likely not be eaten before expiring and you will have to throw them away, essentially wasting the $1 you spent on them. At the time it appeared you saved a $1 and 50% of the cost of eggs, but you did just the opposite.

Example 2: (more complicated) You need to purchase tires for your car. The cheapest tires you can find are on a ‘mega’ sale at $400 for a set of 4, and they have a good tread life of 50,000 miles. There is another set of tires to choose from which are not on sale, they have a tread life of 75,000 miles for $500. Even though you plan to keep the car for a while you decide to purchase the $400 set of tires because it saved you $100.

Question: Did you save money in this example? Not exactly, even though you saved $100 today, you actually will spend more money over time. This is because the price per mile is much less for the $500 tires than $400 tires. See below…

$400 tires price per mile (cost) = $400/50,000 = Cost of $.008 per mile
$500 tires price per mile (cost) = $500/75,000 = Cost of $.006 per mile

In other words, when purchasing the tires with longer tread life at $500, compared to the $400 set – you are actually spending $333 ($.006 x 50,000) for 50,000 mile tires instead of $400. So you are clearly saving money in the long run by paying the $500 today, if you plan to keep the car that amount of time. (hope I didn’t lose you there)

Example 3: (back to less complicated) You’re at the supermarket again and need to buy dog food. You find that there is a great sale that day. If you purchase 2 bags of dog food at $5 each, you get one bag free. Even though you need only one bag of dog food, you go with the deal and purchase 3 bags for $10, saving you $5.

Question: Did you save money in this example? Yes, you did. Even though you didn’t need the 2 extra bags today, you saved money because it was an item you needed and would consume in the future (or I should say – your dog would consume).

Example 4: (what I did yesterday) I was in Target to pick up some needed home supplies. I wandered into the clothing area and found a deal on jeans for $7.48 (70% off – Wow). I purchased a pair because the jeans fit perfect and were super cheap. In fact I went back later and picked up a 2nd pair.

Question: Did I save money? Nope. I’m glad I have new jeans, but I already have 5 pairs, so even though the deal was amazing – I really didn’t save any money – I spent money, albeit happily and would do it again.

So what’s my point already?

There are a couple points that I’ve learned over my numerous mistakes in the past…

The first point I’ve learned is to be cautious when I see a deal. Don’t just go with the sale and avoid thinking about the costs of the other options.

Remember ‘sales’ are used with the primary motivation to make a company money – not save you money. I can’t count the number of times I’ve seen a sale on a product, to find out that the competitors product was actually less money than the sale item.

So, think like the owner of the business remembering that the sale is to make them profit,  and become an investigator. It could be a ‘win-win’ for both of you, but this is not necessarily always true.

The second point I’ve learned is to calculate the expected life of the product I’m purchasing. If it’s food, will it expire before you use it? Will you even use it at all? If its another product, how long will it last compared to its competition? Cost per useful life is very important in saving money over time.

The third point I’ve learned is to compare it to my need and be selective in my purchases. Many times you will come across a sale and be ‘wowed’ by it. This doesn’t mean you can’t spend a little money on something ‘you don’t need’, but something you enjoy instead (In fact I recommend you do just this from time to time to keep your sanity)…

But – you should be selective about every purchase, and remember that every purchase is money you can’t spend on something else.

So think about every purchase, compare it to its peers, and most of all… be selective – I’m certain you’ll be saving real money in no time!

Readers – Your challenge: Where have you seen the potential to go broke saving money this week? Have other recommendations or examples in your own life? Share them below.

Photo Source: Wikipedia