“If stupidity got us into this mess, then why can’t it get us out?”
–Will Rogers
Saving is essential for financial independence.
So, in the last post, I discussed saving patterns. First, we looked at good or bad actions: 1) people saved money, or 2) were so cheap they unfairly targeted others.
This post will discuss a different issue—self-destructive saving (cheap, sometimes stupid) behavior.
Sometimes what you do to yourself is what hurts the most. Let’s look at some common mistakes.
MISTAKE 1: “SAVINGS” THAT COME FROM BUYING SOMETHING CHEAP BUT NOT DURABLE
Not everything that is low cost is inexpensive. That is why buying durable and reliable items is a solid goal. People who do that save a lot of money in the long run.
Example 1: The cheap shoes that nearly killed me.
It is not easy to find shoes that fit me. I have feet that resemble flapjacks. So, I would go to shoe sales which often featured extra wide widths. But sometimes other shoes were on sale there too, and they fit “reasonably” well. And they cost less. So, I bought them.
Of course, most of those cheap shoes did not last.
I went through shoes at an alarming rate and finally realized that buying high-quality shoes that fit well was a smarter way to purchase. They were more comfortable and lasted at least three times as long. In addition, I had far fewer back and foot problems.
SAVINGS THAT COME FROM BEING CHEAP ON MAINTENANCE
Over time even the most reliable and sturdy items wear out. That can include houses, cars, and many other high-cost items. So, consistent maintenance helps make them last and saves money in the long run.
For instance, cars need their oil filters changed. Houses require periodic inspection for termites, rot, and other issues. And you need to perform ongoing maintenance to deal with those household problems.
It can be tempting to save money by reducing maintenance, but that is seldom a good option.
Example 2: Cheap maintenance and the collapsing house.
We have some friends who did not paint their house for nearly 20 years. I am not making this up. They saved money that way.
You can understand why they did not want to spend much money on painting. The cost of painting a big house could pay for a nice vacation or even about 30 percent down on a nice new car. But, of course, there were other priorities, too: the kids needed to be educated, their medical care cost a lot, a spontaneous vacation beckoned, etc. But still, the painting was a standard task that was put off for a long time. Most people paint every 5-7 years.
Even after 20 years, the house did not look that bad. Unless you looked at it carefully, the lack of new paint was not that noticeable except in a few areas. (We live in a temperate climate). It just looked a bit frayed around the edges.
The fraying was a lot worse than it looked. When they finally got around to painting it, the “painting” cost a fortune. Water had seeped in under the stucco and damaged the wooden studs underneath. Whole sections of the walls had to be replaced. Entire new sections had to be stuccoed too, and there was damage to electrical systems, the roof, etc.
Regular painting costs far less than the repairs needed for the house. My guess is that the repairs cost about four times more than regular, consistent painting.
CHEAP SAVINGS THAT HURT YOUR MARRIAGE
Successful marriages require the input and joint efforts of both partners. That is especially true when a couple plans to drastically reduce expenses to achieve a goal—saving for a house, for instance.
There are moral and practical reasons to try to make most marriages work (with some exceptions). Unfortunately, as you know from reading this blog, divorce is one of the leading causes of bankruptcy. So getting along is critical.
Example 3: The unlikely homewrecker–a bare bones cheap budget.
I am sure you have read about the FIRE movement. If not, see here.
The idea is to save a ton of money for 10-20 years and retire early. But, to do that, you must cut back—way back–and live on a shoestring. It is a solid approach but requires sacrifice and planning.
Well, we knew one couple that gave it a try. The couple’s goal was far more modest than retiring early. It was to save for a house down payment. So, they worked hard and saved everything for two years.
And then…the husband came home with a brand-new car one evening. It was a purchase he made without first consulting his wife.
He was a little too frugal and a little too cheap—except with himself.
There is no virtue to aiming so high on financial goals that it strains and breaks a marriage. It is a lot better to splurge every now and then and ensure you are both on the same page instead.
As you may have guessed, the marriage did not last. I don’t know who eventually got the car in the divorce.
DEMONSTRATING THRIFT TO THE WRONG AUDIENCE
Sometimes you need to impress specific audiences: your boss, a business partner—anyone who potentially affects your cash flow–or from whom you want something. So, while being frugal with your own expenses is okay, it can be a mistake to display the same behavior to others.
Example 4: Business culture: sometimes, only anonymous cheapness is okay.
I used to commute about three hours a day. So, I needed a cheap and reliable car. I bought a red one that fit the bill. It was on sale.
The reaction was immediate when it showed up in my space in the parking lot. Some in our organization felt it was not an “executive car.”
They were right. And I was served up a large ration of grief over it. But the real problem was not other people’s expectations—it was just so visible and red. That was my fault. So, I guess the moral of the story should be–consider the circumstances and who you must impress. And if you are cheap, don’t be public about it.
There is a postscript to this story. I retired about fifteen years earlier than my status-conscious detractors.
There are pros and cons to everything.
SAVINGS THAT SACRIFICE YOUR HEALTH
Medical bills are a leading cause of bankruptcy. So, when people save money on food that is not good for them, their savings are not usually worth the cost to their health.
It is like getting two-for-one savings on a bag of fried cheese snacks. The savings are undeniable, but if you eat enough of them, your life will be shorter too.
Not that I can resist junk food or doughnuts all the time. Moderation is key.
Disclaimer: consult with a financial fiduciary before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.
Main Photo credit: Nick Fewings
Other Photo Credits: Jose Fontano, Jessica Knowlden, Thomas Kelley, and Stefan Butikofer
Licenses: Unsplash