Money Mistakes: The Cost of Convenience
Sometimes we are willing to spend a little extra for the same product/service because of convenience. While sometimes this can work out in your favor (if the time or cost of gas benefit out-weigh the price difference), sometimes the convenience has a hefty price tag that is not offset.
I hate to pick on my family, but here I go again... I have an aunt that lives on a small income and has prescription drugs she must take for her health. Several time she has complained about the cost of these drugs, and since she doesn't have health insurance due to the travesty of our health care in the U.S. (don't get me started)... her medicines take up a large chunk of her monthly budget. I decided that I would try to research if she could get any of her medicines through one of the many drug companies or drug assistant programs. She read me the names off the medicine bottles and I began searching the internet. I didn't find anything particularly helpful, and then I thought about Wal-mart. She was getting her drugs from a small locally owned pharmacy, so I wondered if by chance any of these medicines were on the $4 list. Lo and behold- they were! Everyone of them! I was so excited, I wanted to jump for joy. I could help someone I love save about $100-200 dollars a month. So I called her up and told her the good news. Only it wasn't good news from her perspective. She said that she hates going to Wal-mart, and feels unsafe going there. I was dumb-founded, she would rather pay $60+ per Rx for the convenience of going to a small pharmacy that is maybe 4 miles closer.
I am the exact opposite when comes it to convenience. I would drive half-way across the world to save $0.50. I'll withstand 30 people deep lines, kids yelling in my ear, parking lot from hell.... all to save a buck.
This week I brought my dog to the vet. It's the cheapest vet in town, and they have good service. I drove my car an extra 20 miles to get to the vet. It took me an hour getting there in hellacious traffic and a half hour getting back. My dog barked the entire hour and half just to let you know. In my ear. And secreted her lovely anal secretions of fear all over my jeans... Thanks minnie. I endured all this to save $20. Was it worth it?
Since I love math, lets do a quick calculation. Say your hourly pay rate is $20/hr. Say it takes you an extra hour in hassle. Say you save $20 total on this vet visit. You've just broken even and now you have a headache that won't go away from the annoyance. On the other hand, if you're saving $60 instead of $20, the savings is more clear.
The bottom line is that it's a good idea to really think about what you are saving versus loosing. You could be valuing your convenience at a much too steep price, like my aunt. Or you could be selling your valuable time and convenience for much too cheap a savings, like me. As with all things in life, a nice balance between the two should save your money and your sanity.
Money Mistake: Upgrading your Home
Never upgrade your home beyond the level of your neighborhood. I found this one out the hard way earlier in the year. We used to live in a small condo/townhouse that was in college-dorm shape when we bought it. It was in a great neighborhood and perfect location. However, It had never been upgraded since it was built in the early 1980s. White walls, cheapest fixtures, cheapest floors-- basically everything was cheap and plain. So, of course we wanted to renovate and upgrade our home to meet our very discerning standards.
We put down beautifully engineered mahogany wood floors over the cheapest ceramic tile Home Depot offers. We painted every room to a more elegant, white-truffle hue. We replaced the plywood staircase-o-death with a fine new cypress staircase. We put down tall, regal baseboards and crown molding. We changed every light fixture we could get our hands on. And of course the horror of a project my husband will never let me forget-- the kitchen. I thought new cabinets and granite countertops would be simple, boy was I wrong. Around the time we discovered the electrical ran through the fur-down of the cabinets, I thought my head would be spiked on a curtain rod outside our condo as a warning to other over-ambitious renovators.
Granted, we did everything DIY and spent a fraction of what you would expect all of this to cost, largely due to my helpful and handy in-laws. We thought we were doing great. In the end, it looked beautiful, we were proud, and it certainly made it easier on the eyes while we lived there. But eventually we outgrew the 795 sqft. and wanted a back yard for the doggie.
The day after I put it up for sale on the internet I had someone come look at it and immediately put in an offer very close to my asking price. Woo-hoo, we are awesome, I thought. I had several other people come look at the condo during escrow or comment from the online ad and all said how beautiful and home-y it looked.
Then, the mean-ole appraiser came into the story. God, how I hated him. He appraised the house at over twenty thousand LESS than the offer price. I cried, I begged, and I pleaded with him. It was not pretty, trust me. The problem was that we were the only people in our complex who upgraded, so our home was well beyond the rest of the "neighborhood" and therefore just couldn't appraise for what my beautiful baby truly deserved. In the end, we had to bite the bullet and take the cut (it was very complicated and I will spare you the details, for now). It did teach me a valuable lesson, and so far I have only put the $20 it cost me to buy new cabinet knobs into this house. This time I will wait for the neighbors to start their improvements before I start mine.
Money Mistake: Store Cards
One financial blunder I will never live down is opening a stupid bebe store credit card. They make it so enticing...you are about to check out, thinking about how much this will all cost, and they offer an oh-so convenient way to save 15% (or maybe it's 10% or 20% depending on the store). I made this egregious mistake while I was in college and had no right to be spending $100 on a single piece of clothing at bebe! What you don't think about when offered this one time discount is the interest rates this new card will now tax you with. You also don't think about how much more money you will spend with the store simply because you have a branded card for the store.
Ever wonder why the stores offer you these cards? Retail stores aren't in the banking business. They want loyal customers who come back time and time again to their store. Research has shown that if a customer owns a store branded card, they are more likely to return and to spend more at the store. Anecdotally speaking, this has been true for me. I got a Victoria's Secret card, now I buy things from them JUST because I have a coupon if I spend $50 or because I get a cute tote bag with...the Victoria's Secret logo plastered all over (great, now I'm their walking billboard).
But let's get back to the bebe card. I opened the card while I was purchasing a skirt and a pair of earrings. The skirt was expensive but the earrings were on sale and only $8. So with my 10-20% discount I might have saved $10 that day. After I got home and tried on the skirt with my shirts, I realized I didn't like it so I returned it. I was new to credit cards at the time, and I didn't understand how returns worked on the credit card. So I get a bill for maybe $108. I call the phone number on the bill to ask about what to do since I returned the skirt and the bill should only be about $8. They told me they would send me another bill right away. Stupid me, I don't know why I didn't just pay the minimum payment (more than the cost of the earrings) and be done with it. Instead I let it linger, waiting for an updated bill, the skirt didn't get removed, so on and so forth... (plus I was bad at checking the mail at this time, so let's be clear- this was MY money mistake and not bebe's). In the end they sent it to the credit bureau. After the dust settled they did remove the skirt from the bill, but only AFTER my credit score was dinged! I will forever refer to this pair of earrings as my $500 earrings because god know how much they actually cost me when you consider all the problems it caused. And all for a $10 discount!
The moral of this mistake: THINK before all your financial decisions, even the small ones can turn into giant hair-balls if you don't use your brain.
Money Mistakes: Annual Fees
Credit card companies are already raping you with interest rates. Why oh why would anyone want to say, "Here credit card company please take $X per year from me because I am a sucker. Thank you."
Now, I have to admit that I am a credit card point whore...I'll do anything for those little points, don't test me. So I signed up for 2 American Express cards that had annuals fees just to get the points. However, they waived the fee the first year. So I diligently counted my months and right before time I called them and cancelled one and got them to remove the fee on the other.
Lately, American Express has been sending me letters every week about how I am "invited" (don't you love the terminology) to fork over $400 of my hard earned money every year for a super-shiny, ultra-exclusive platinum card. I get a good laugh at how they try to market these to customers by making you feel oh-so-special and playing to our natural desire to be better than those average folks with average credit cards. Then I swiftly throw the letter into the trash.
A few weeks ago my mom tells me she got a posh new card that has so many benefits. Of course, my poor mom fell for their gimmick. She's only human and was particularly enticed by the offer that you get one free plane ticket with every ticket you purchase on the card. Oh, and did I mention you get to go into the airport lounge? Once again, pandering to our desire to feel special. I told her this was a bad idea, but she didn't believe me. She said she would call me from the fancy-pants lounge with her mimosa in hand to tell me how absolutely fabulous it is. She was happy with her decision, until she found the catch.
Her platinum card didn't get her a free ticket with every run-of-the-mill ticket she purchased, nope. She had to purchase a business class ticket to get the free one. And since business class is well over double the price of low-life-coach, this is really not a deal at all.
BTW- My mom isn't the only one who fell for this, apparently Tina Fey did as well.
Money Mistakes: The Series
In this series of posts, we will poke fun of and laugh at our mistakes. We all have made money mistakes some time in our lives, and I find having a hearty laugh at our embarrassing oopsies can help us avoid them in the future. Feel free to share your own money mistakes through the series- your personal financial blunder may help others...that is after their judgmental laughter subsides.
“Don't ever make the same mistake twice, unless it pays.”
-Mae West
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