The following post comes from Len Penzo at partner site LenPenzo.com.
If you ask most folks, they hate to overpay for anything. Even so, many people do it all the time and don’t even realize it. After all, frivolous spending is something that we’re all guilty of at one time or another.
The good news is, getting the urge to splurge under control makes it possible to save significant amounts of cash that can be used to stretch your household budget.
Here are several things people often overpay for…
1. (Premium) gasoline
Two years ago I conducted an experiment where I ran premium gas in my 1997 Honda Civic for 30 days and actually averaged 1 mile per gallon less than when I was running lower-octane unleaded. Premium gasoline is intended for use on a narrow niche of cars. Unless your owner’s manual calls for high-octane fuel, it isn’t necessary.
2. (Overly-generous) tips
Never mind that tip inflation has caused the average bonus for good service to increase from 10 percent in the 1950s to, depending on who you ask, 15 or 20 percent today. Some people give overly generous gratuities simply to make a good impression on the server. Even worse, they’ll often leave average tips for poor service because they don’t want their server to dislike them. Both practices make little sense, especially for folks on a limited budget.
3. (Organic) produce
Many non-organic fruits and vegetables, such as onions, avocados, and corn, are grown with significantly lower pesticide loads than others, which is why some organic produce isn’t worth the steep prices it typically commands. In many cases, you’re much better off buying the conventionally grown varieties and then carefully washing them.
4. (Non-generic) medicine
The U.S. Food and Drug Administration‘s drug approval process holds generic medicines to the same high standards that they hold brand-name medicines, which is why they maintain that generics perform just as well as their brand-name counterparts. Yet, many folks insist on paying a lot more for brand names anyway. Why?
5. (Bottled) water
Believe it or not, here in Southern California, where water is supposedly in short supply, I still pay one-half cent per gallon for the water that comes out of my tap. Despite that incredible bargain, I recently bought 20 gallons of bottled water that was approximately 200 times more expensive. I know. But like I tell my kids, “Do as I say, not as I do.”
6. (Faster) shipping
One of the hallmarks of financially responsible people is patience. Consider the enormous price premiums for expedited shipping. I recently purchased $10 worth of business cards from a company that offered next-day shipping for $54.25 and two-day shipping for $23.65. Meanwhile, the no-frills, standard shipping for people who were willing to wait an extra one to three days was only $5.77. Guess which option I selected.
7. (First-class) airline tickets
Unless you’re flying on an extended trip overseas, it’s hard to justify the price premium of a first-class airline ticket, which can often cost two or three times the price of an economy-class fare. If the thought of sitting in a coach seat for any length of time is unbearable, consider premium economy class, which can often be had for a premium of $100 or less.
8. (Brand-new) automobiles
Almost everybody loves the smell of a new car, but that doesn’t change the fact that, financially speaking, you can’t beat a used vehicle. This is primarily because new cars typically lose upwards of half their original value over the first three years of ownership.
9. (Whole) life insurance
Unlike term life insurance, whole life insurance couples the term policy’s guaranteed death benefit with an additional investment product. Yes, whole life may sound like a better deal – the trouble is it’s the least cost-effective option because you end up paying for both the insurance and the fees associated with the investment component. In most cases, you’re better off buying term insurance and then investing the savings.