It sounds ironic, but being cheap can actually cost you more in the long run. Here’s why.
There’s a fine line between being frugal and being cheap.
I’m sure we all know of that one person who comes across as being an extreme cheapskate – he/she hoards chilli packets from McDonald’s, loots toiletries from hotel rooms, hovers around event promoters for free samples, and even hangs out at unrelated events for free food and drinks at the buffet… you get the idea.
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Most of us aren’t that cheap (thankfully), but sometimes, we can’t help but indulge in the occasional act of penny-pinching – like asking for extra lobang to be thrown in when we buy something.
There’s nothing wrong with it so long as you don’t take it to the extreme, but what I’ve come to realise over years of observation is that often, being cheap doesn’t pay. In fact, it can end up costing you more in the long run.
Not convinced? Let’s take a look at some examples.
1. Visiting bargain stores
Singaporeans love shopping, and we love getting a good bargain too. Put the two together and you don’t wonder why bargains stores like Daiso are perpetually crowded. But believe it or not, shopping at bargain stores usually spell more trouble for your wallet than actually shopping at regular stores, because of two reasons:
- It is convenient to buy everything under one roof, so you feel tempted to browse more.
- Because the items are pegged at low prices, you feel you can afford to buy more.
When Big Box first opened at Jurong East, many people swarmed there in hopes of bagging heavily-discounted shopping deals for their groceries and household items. But when I visited one weekend, I noticed an interesting trend happening: quite a number of shoppers tend to drift from their families and gravitate towards the consumer electronics and furniture/home improvement sections instead.
I even overheard an older uncle arguing loudly with his son because he wanted to buy a new sofa, even though they still had a functional sofa at home. Obviously, the son didn’t agree. Can’t say I blame him, because the sofa cost $3,000 plus, and was an eyesore to boot. That’s money that you certainly don’t want to be spending.
[Photo Credit: Chew Seng Kim, The Straits Times]
Megastores like Big Box are “dangerous” because their under-one-roof convenience – they tempt you into buying things you normally would not have purchased, just because they seem like a good deal. So my advice is, either avoid browsing at bargain stores, or go armed with a shopping list (together with a strong sense of discipline!).
2. Getting discounted items in bulk
At the supermarket section in Big Box, I noticed several families buying a few pushcarts’ worth of groceries, presumably to cut down on grocery costs by buying in bulk. That would have been understandable if they were stocking up on dry goods, like cereal and canned food, but they were also buying tons of fresh food like seafood, milk and fruits. I couldn’t help but wonder, would they really be able to finish all that within a couple of weeks? Why not buy less each time but visit more often so that you get fresher groceries?
Like Budget Babe, I advocate shopping wisely and using up your pantry. Be smart and only buy enough to use. Otherwise, you’re just wasting precious food and money if you have to chuck the excess or expired food away.
Furthermore, items sold in bulk aren’t necessarily cheaper, as in the case of McDonald’s Double Filet-O-Fish burger. (Or even if they are, the cost saving isn’t much.) Don’t just assume buying bundle packs will work out to be cheaper – I once fell into that trap, paying $4.50 for three packs of pocky sticks that I could have bought for $1.20 individually. That’s an additional 90 cents that could have been better spent on something else.
3. Buying the cheapest option
When faced with two similar products with different price tags, do you hesitate and weigh the pros and cons of each? Or do you just grab the cheaper one, even if it’s less ideal?
[Image Credit: 40+ Style]
Many of the cheap people I know will do the latter, no questions asked. But in my family, we have a policy that it’s about cost per use (for items), or cost per wear (for clothes and shoes). If it’s something that you use/wear frequently and will hold up over time, it’s worth spending more on. Think about it: there’s no point in spending a smaller sum of money on something if it breaks apart the first time you use it, shrinks after the first wash, or doesn’t work well in the first place. You’ll just end up spending more money to replace the faulty item.
4. Going DIY
For the more hands-on type of people, you might think that making an item yourself is the most budget way of getting it. That’s not always true. When you factor in tools and supplies – not to mention the time and effort required – the bottom line might not work out as well as you expect.
Let’s take my dad as an example. Like many men of his generation, he enjoys fixing things around the house himself rather than hiring a professional repairman. While that does help in saving some costs, we also wound up with an excess of paint tins, duct tape and fishing accessories, all of which are still collecting dust in the storeroom. Excess supplies = wasted money, plus they take up additional storage space. So save the DIY method only for projects where you already have existing tools and sufficient supplies, lest you end up spending more.
5. Spending time to save money
Many of my guy friends are guilty of this. They have no qualms about going to five different stores just to look for the best offer price for a camera, or driving a longer route home just to avoid ERP. The question is, is it really worth spending all that time just to save a few dollars? Or would the time have been better spent on something else more worthwhile?
Time is precious, even if you may not realise it. As we’ve mentioned before in “10 Tips to Trick Your Brain into Spending Less“, think about the monetary value of your time to help put things in perspective. For example, if you earn $3,500 a month (assuming you work 8 hours a day for 23 working days), the value of your hour is around $19. This means that if you spend the whole afternoon camera-hunting, you’re effectively wasting around $100, give or take. Unless the cost savings on your camera is more, I’m going to say: don’t bother.
The same goes for taking a longer route home to avoid ERP. Chances are, paying the $2 toll fee is going to be less painful for your wallet in the long run than paying for the extra petrol consumed and the time wasted.
So there you have it – the many ways being cheap can end up making you broke. But this doesn’t mean you should swing in the other direction and start spending frivolously – no. Instead, look at your spending habits again to see if you’re really being frugal with your money, or just trying to be cheap. There’s a difference.
Cheap people care about the cost of something. Frugal people care about the value of something.
Cheap people try to get the lowest price on everything. Frugal people try to get the lowest price on most things, but are willing to pay more for things they care about.
Cheap people think about short-term savings. Frugal people think about long-term savings, so that they can put the money towards their big-picture goals and dreams.
There’s a fine line between being frugal and being cheap. Have you crossed it yet?