Here’s a riddle for you; When is a money saving habit not a good habit? Answer: When it actually cost you more money than it saves you. All right, we admit that our riddle possibly wasn’t the most original or even fun riddle ever but it does apply to a lot of consumers. While most of us know that if you buy something cheap it’s probably going to break and need to be replaced quicker, there are some frugal habits that people have that actually aren’t all that frugal or all that good for your finances.
With that in mind we put together a little blog today that explores a number of frugal habits that people have that, for the most part, are not actually saving them money but costing them money. Read them, learn from them and, as always, enjoy.
Not writing a Last Will & Testament or trying to write one yourself.
While it’s true that it can easily cost $1000.00 to hire an attorney, even to draft a simple Will, and it’s also true that not writing out a Will won’t actually cost you a thing, if you don’t have one when you die your relatives could well end up getting substantially less of the money and assets that you leave them.
When you pass away without having a Will lawyers call this dying “intestate”. It also means that in order to take care of all of your money and financial needs and make sure that everyone gets what you left behind, they’re going to need to go to “probate court”. Now if the words “intestate” and “probate” make you think “expensive lawyers”, you’re exactly right.
Doing it yourself can be just as bad and frankly, jotting down a few notes on a MS Word file usually isn’t enough if you have a large family, a lot of money and lots of other assets. An excellent example is former Supreme Court Chief Justice Warren Burger. One of the most intelligent lawyers on the planet, Burger actually decided that he would write his own Last Will and Testament and, because of his folly, his relatives spent years, and hundreds of thousands of dollars, in court trying to get things straightened out.
Leasing a car instead of purchasing it.
Here’s the thing: there’s really not a whole lot wrong with leasing except for the fact that, with most leases, your mileage is limited to 10,000 to 12,000 miles a year. If you don’t go over that amount, leasing can be an excellent idea but, if for whatever reason your life or your job changes during the time that you have the lease, and you find that you are suddenly driving much more than the mileage allowed, you could well end up spending a huge amount of extra money on your lease.
If you look at the numbers closely, every extra hundred miles that you drive over the limit will cost you $10. When you consider that just driving around town once or twice a week will quickly eat up 100 miles, the extra amount you’ll be paying on your car’s lease may make you feel like you’re actually riding around in a taxi.
Avoiding the doctor when you’re sick and skipping annual physicals.
This “frugal habit” is not only a money mistake but a health mistake as well. If, for example, you have a health problem that, because of the fact that you don’t go to the doctor for your yearly physical, goes unnoticed and untreated for several years, it might turn from “treatable” to “deadly” or from “acute” to “chronic”. This is especially true for eye exams and dental checkups.
Lest you think that skipping the dentist really isn’t all that bad, in the last decade there has actually been a huge rise in the number of emergency room visits for dental problems. When you consider that the average cost to have preventative checkups twice a year is approximately $700 and the average cost for an ER visit for a dental emergency is just under $6500, you see immediately that dental maintenance is much more palatable to your finances.
Putting away little or no money for retirement.
Lastly, and possibly most importantly, is the fact that less than 45% of Americans put away money for retirement on any sort of consistent basis, if at all. Taking advantage of tax-free contributions from your employer’s 401(k) or even a Roth IRA will net you literally thousands of dollars over a 30 or 40 year span and, if you’re not taking advantage of that, you’re leaving an immense amount of retirement income on the table.