Maya Kachroo-Levine , WOMEN@FORBES
I cover personal finance and money issues millennials face.
AUG 17, 2016 @ 11:00 AM
Opinions expressed by Forbes Contributors are their own.
1. Buying cheap household furniture or appliances.
It’s difficult to convince yourself to buy home necessities at full-price, especially because there are an abundance of holidays that large retailers celebrate by offering wild savings on stoves, refrigerators and mattresses. However, buying a big-ticket item for a low price might mean getting rid of it a lot sooner. My first couch was from a discount store in L.A., and while I loved it dearly, we got the comfort level we paid for, which was regrettably uncomfortable. It was about $200. I recently bought a quality, used couch from a previous tenant in my building (for the same amount), and am fairly certain it will last longer than the discount furniture. Sometimes buying used but good-quality appliances and furniture is better than opting for a lower-quality piece.
2. Buying something just because it’s on super sale.
If you’re someone who responds to flash sale emails, and only goes into stores when they have a 50% off sign out front, then your frugal-adjacent logic may still be costing you. If you wouldn’t have bought anything had you not seen the flash sale message pop up in the right-hand corner of your screen, then buying the sale item isn’t saving you money. Buying something you don’t need at a reduced price is still buying something you don’t need.
3. Cutting down your insurance plan.
Those who are insuring themselves under the age of 30 can opt for catastrophic plans, which demand a low monthly payment, but a much higher deductible. U.S. News breaks down the differences between a bronze plan and a catastrophic plan, and while bronze covers 60% of estimated health care costs, a catastrophic plan covers, “three primary care visits and specified preventive services before the deductible. [It] only covers additional services after the plan deductible – $6,600 for an individual plan or $13,200 for a family plan – has been met.” Unfortunately, if something happens, you end up paying a lot more than had you been paying more every month.
4. Ignoring your car maintenance needs.
If you ignore a sore throat, you at least have a shot at it disappearing a few days later. That principle doesn’t hold true for cars. If your brakes need attention, they aren’t going to need less attention if you wait it out. The longer you put off car maintenance for, the higher the mechanic bill can potentially climb.
5. Constantly visiting sites like Groupon and Living Social for deals.
Again, if you’re buying things you wouldn’t ordinarily buy, that’s when it stops becoming frugal, even if it is a great deal. Two on-sale massages in one month may still be two more massages than you would have otherwise paid for. These are handy sites, but one solution might be to only visit them when you’re already looking for a specific service, rather than frequenting them in your spare time.
6. Setting a too-strict budget.
This is the financial version of overly ambitious dieting. If you cut out too many foods that your body is used to eating on a daily basis, you might stick to that plan for five days, and then binge on day six. Similarly, if you go from eating out four times a week to cutting restaurants completely out of your budget, you might not be pleased with the results. Instead of going cold turkey, eliminating things from your budget incrementally will help reduce the chance of binge-spending.
7. Refusing to use your credit card.
If credit cards have gotten you into trouble before, then paying off your debt and restricting your swiping may be the right choice. In fact, after an expensive month, I put my card aside in July and went on an all-cash diet. However, by not letting yourself ever use a credit card, you’re missing out on rewards and a way to build your credit. One solution to this is to only set recurring payments on your credit card. This year, Credit Sesame surveyed 1,000 millennials and found that 60% “do not have a credit card by choice.” Many avoid credit cards because they don’t trust them. While going credit card-less ensures you remain credit card debt-free, it also means you won’t build credit that lenders might want to see, and you’ll miss out on rewards.
8. Spending on fast fashion.
Buying clothes and shoes at incredibly low prices often means you’re compromising on something else. Aside from the ethical issues surrounding fast fashion, the inexpensive clothing may wear out sooner, or you might rationalize getting rid of clothes sooner because of the price. On shopping for cheap clothes, Quartz writer Marc Bain says in his shopper’s manifesto, “That price tag isn’t telling the whole story. Even a gorgeously tailored black dress isn’t worth much to you if you already have 10 just like it. A $15 t-shirt is no bargain if it’s worn out after a few washes. And those jeans on sale aren’t worth $40 if you’ll wear them just twice before consigning them to the back of your closet.”
9. Skimping on groceries.
While it may seem cost effective to not buy foods you really want at the grocery store, buying things you don’t want to eat could prompt you to waste more food (and money along with that). Furthermore, if you’re not cooking a somewhat satisfying meal at home, you’re more likely to buckle and go out to eat.
10. Not contributing to a retirement account so you can keep the cash.
Keeping as much of your salary as you can may seem appealingly frugal, but it could put you at a financial disadvantage later on. If you contribute $5,000 of your income to a 401(k), you may have the option for a company to match that and you get to put the money away without paying taxes on it. However, if you kept that $5,000, you’d only be taking home about $3,500, assuming you’re paying about 30% to taxes. According to NerdWallet, the IRS’ maximum 401(k) contribution allowance this year is $18,000 for those under 50, and 24,000 for those over 50.
11. Capitalizing on promotional rates for your utilities.
When you’re shopping around for a new provider, rates can seem miraculously reasonable because of the promotional rates being offered to you. However, there is nearly always a caveat that doesn’t appear until 10 months later when your promotional rate ends and your internet bill goes up $15 a month. At this point, so many have fallen victim to these promotional rates (myself included) that there are now heaps of forums on how to keep your promotional rate, or fight to get your bills back down after they surge. Here are a few resources to sift through:
12. Buying singular household items because you don’t want to spring for the eight-pack.
Buying in bulk can go two ways; buying eight or 16 rolls of toilet paper is more cost effective than picking up one roll at a time at your neighborhood bodega. However, buying in bulk is also a frugal move that can cost you money if it isn’t executed properly. The key is to know your needs, know your storage space, and always calculate the cost-per-unit. At a bodega near my house, toilet paper is $1.19. On Overstock.com, a 24-pack of Angel Soft two-ply is $22.39 (93 cents a roll), and a 60-pack of Angel Soft two-ply is $63.49 ($1.05 a roll). Obviously, the best bet is the 24-pack. However, if you don’t have storage, either you need to forgo bulk buying or get creative and consider group buying.