We all know someone (or is that person) who drives miles upon miles in search of better gas prices, wasting time and money to save - at best - a nickel per gallon. Our focus on saving money can be so narrow at times that it can actually end up costing us down the road.
I, for one, am guilty of renting a car several years ago to go over the bridge to New Jersey to take advantage of the state's 0% sales tax. I spent probably $100 plus gas to get there - that's far more what I would have paid in taxes to buy the same clothes in my own New York neighborhood. What can I say? It happens even to those of us who should know better.
Here are some more common financial traps when we aim to be too frugal.
Falling for 'Free'
It's one thing if we go for a no-strings-attached free promotion, like Ben & Jerry's free cone day on April 12. (That's right; you heard it here first.) But buy-one-get-one-free deals or "free shipping with a $150 purchase" advertisements are just marketing gimmicks to get us to spend money we really shouldn't. As behavioral economist Dan Ariely writes in his best-selling book Predictably Irrational, when something is free, it suggests to the consumer (incorrectly, as it happens) that there is no downside. Unless you had already budgeted for those two hand lotions from Bath and Body Works, that third free bottle is not really a deal.
Overdosing at the Dollar Store
Dollar-store stocks have been outperforming the broader market lately, as consumers seek bargains. But not everything in a dollar store is worth the price tag - and according to Consumer Reports, some items found at dollar stores can actually be dangerous. For example, researchers found that extension cords, lamps and other items may have fake UL labels certifying their safety. Over-the-counter remedies like aspirin may also be on shelves past their expiration date.
Buying in Bulk
The per-unit cost of an item at a Sam's Club or Costco may be less than at a grocery store, but unless you can consume it all, it's a waste of money. And although this might be a stretch, I have to think that the growth in the storage-unit industry is thanks to our culture's obsession with excess. Today, one in 10 households rents a self-storage unit - up 65% over the last 15 years - for which they pay more than $8 per square foot. Are your bulk-buying habits leaving you crowded out of your house?
This week, the TLC show Extreme Coupouning launched its second season. The coupon experts live in homes filled with gallons of housecleaning supplies, closets filled with dry goods and cabinets bursting with toothbrushes, toothpaste, floss and anything else you can find down aisle 7 in CVS. Much of this stuff they got for a fraction of the price - maybe even for free. But I do wonder if all this running around and stocking up is really efficient. After adding up all the hours and gas mileage spent hunting down coupon deals, what's your net profit? And do you really need 18 boxes of laundry detergent just because your coupon let you save 75%?
Dollar menus and fast food may satisfy your hunger for less today, but over time this behavior can carry a much higher price tag. A report by the Cancer Project found that most items advertised on Value Menus are high in saturated fat, sodium and cholesterol. And many items were linked to an increased risk of cancer. And researchers at the Dept. of Agriculture found medical costs stemming from obesity-related problems are about $10,000 higher than they are for those with a healthy weight.
Making Repairs Yourself
Sometimes it's just cheaper to pay a professional, especially for services that take up a lot of your quality time or that require some serious expertise. Some big examples: reflooring or recarpeting your house, changing your car's oil and estate planning.
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