Saving money is easy, right? Just spend less on certain things. Unfortunately, cutting costs in some areas now will make the financial pain worse later.
Times are tough, and they don’t seem to be getting much better. Fourteen million Americans were still unemployed last month, and that hasn’t changed much since April, according to the U.S. Bureau of Labor Statistics.
Many people are understandably looking for ways to cut expenses and stretch their dollars. There are lots of ways to do that, but some seemingly logical ideas actually end up more expensive in the long run. And let’s face it: Things may still look this grim for many months to come.
In the video below, Money Talks News founder Stacy Johnson offers a few examples of being “penny wise, pound foolish,” along with a few suggestions for smarter savings. Check it out, and then read on for more.
1. Car maintenance
Bad idea: Skipping an oil change. You could save $30 now, but that’s little consolation when you see smoke under the hood because your engine seized up, leaving you with a $5,000 bill.
Better idea: If your car’s running well, cut back on tune-ups instead. Check with your mechanic, but many will say that if your car seems to be running fine, you may not need it.
2. Car insurance
Bad idea: Reducing your liability coverage. Whatever you might save, it’s not worth it in case of an accident. You need enough insurance to cover your net worth.
Better idea: If you’ve got a clunker that’s only worth a few hundred bucks, consider dropping collision and comprehensive. That’s one of several ways to save on car insurance. Another idea? Raise your deductibles.
Bad idea: Skipping or splitting your prescription doses. Even if you’re feeling fine and can halve costs, it’s not worth it if you end up in the hospital.
Better idea: Consult with your doctor about all your medications and see if there’s anything you could stop or cheaper medications you could substitute. Ask about free samples and generic versions – many popular drugs are going generic in the next year. Our recent story Many Prescription Drugs Are Getting Cheaper Soon has details and other ideas.
Bad idea: Cutting back on homeowner’s insurance. As Stacy pointed out, even if home values are dropping, replacement and repair costs aren’t.
Better idea: Raising your deductible. Going from $250 to $1,000 can save you 15 percent or more, and that’s less risky than lowering your overall coverage. Make sure you protect everything inside by having a home inventory too. There are also ways to save on renter’s insurance.
Bad idea: This may be the most obvious bite-you-in-the-butt decision, but don’t ever miss loan payments or pay the minimum. That’s no way to get ahead, even if it gives you more flexibility now.
Bottom line? There are tons of ways to save money – just make sure you’re picking the smart ones. Check out 10 Painless Ways to Save $1,000 for more ideas.