How to Know When Not to Skimp

What if someone told you not to save money? What would your reaction be to that statement? With so much talk and chatter centering on day-to-day, month-to-month saving and an overall penchant by the masses to want to earn more at work, and be able to put more money aside, how can you serious entertain a sentiment that focuses on spending more on a service or product?

Truthfully, and most of the time, that is a laughable statement and one that should be ignored with great prejudice and pertinence when it’s brought to the forefront.

The United States has a money problem, one that goes far beyond our national debt.

This is more about Main Street than Wall Street, as most individuals, particularly ones with lower income levels, are going into debt at record paces, and are spending far more than they make.

For example, the bottom 30 percent as far as income goes make about $14,000 per year, but are spending $25,000, an increase of nearly 200 percent in comparison (182 percent, exactly), while the rich are making $166,000 per year on average and spending far less: $101,000.^[1]

Those statistics are beyond baffling when you look at income to spending levels between both “classes” of people. The middle class is about break even as part of that same study.

Numbers like that would suggest that saving money is at a premium, not to mention the overall debt that an individual or family carries in totality.

The average amount of debt owed is around $141,000, and the top two causes of debt couldn’t be more further apart in importance: mortgage at 65 percent and a whopping 50 percent tallied against credit card debt.^[2]

Another major player in the push toward adding more debt is student loans, which on average is around $22,135 per person, for someone in their 20s.^[3]

The credit card debt is unusual alarming, and goes back to the income sensitive spending of the nearly 200 percent above income the bottom 30 percent are spending.

So, with credit card debt an issue, not to mention school loans and income not aligning with inflation, how can you possible sell the notion that spending more on something makes the most sense? The ideal answer to that is one that you might have a hard time selling someone on, but it has to do with the “long run” sentiment, the idea that if you buy something that is expensive it lasts longer and thus the need to replace it at shorter intervals becomes a moot point.

A product that costs $100 and lasts 5 years can be compared to that same product that costs $20, and you have to replace it twice over that same 5-year period, meaning you’ll spend twice as much ($200) not to mention the constant inconvenience of having to continually buy and replace at an alarming pace.

Suggesting that some products you buy should be top-tier or the best and most expensive available is not the purpose of this discussion but rather finding a balance between spending more over a period of time versus spending more at an initial transaction but having a product with some durability and quality that isn’t constantly needing more money thrown in its direction.

Here’s what to focus on:

Car Insurance: Going low can cost you quite a bit out of pocket

With so many advertisements and assurances in one fell swoop from car insurance companies about low rates and insurance for anyone and everyone, you’d be hard pressed not be lulled into a false sense of financial security when you’re being told you can get car insurance for a $20 down payment or something else that is considered extremely cheap at first glance.

And while car insurance can be found for a lesser cost than the national average, you’re also playing with the proverbial fire when you go too low on your monthly premium as a result.

The national average just three years ago for car insurance was $907 per year.^[4]

That equates to about $75 per month, and that number surely sounds feasible to most.

But car insurance is a unique buy in the same way buying a car can look good on paper. Car sales persons can show you a monthly payment that fits your budget, but the terms beyond that, if you start digging are frightening, which includes a car loan that lasts nearly a decade and interest rates you’d rather forget.

Same goes for car insurance: a company can tell you it’s $600 per year, but what about if something happens? What’s the deductible amount, and do you have full torte (in Pennsylvania full torte allows you to sue for pain and suffering, for example, but it costs more to have) or just coverage on the other drive but not if something happens like hitting a deer or guardrail if you slip on ice.

The average monthly cost from some of the more reputable insurance carriers is anywhere from $104 to $143 per month, which more than you might want to pay but is for full coverage, which on average is going to cost you $600 more per year than having limited.^[5]

That said, consider things like how much you travel or if your car is upside down in its loan (worth more than what it’s worth). Those types of things should play into your decision making but bottom line is you shouldn’t go cheap with car insurance, unless the car is worth less than a deductible would pay out.

Home Repairs: Certain projects should be done properly first time around

The influx of home improvement and do-it-yourself stores and how easy it is to look up “how to fix water damage” or “how to install (insert, well, anything here) and attempt to complete a project or fix a problem on your own suggests that saving money on home repairs is plausible if not downright doable for the average homeowner.

Keep in mind that when you’re dealing with certain home fixes and issues, a trained, certified professional makes more financial sense even if you end up spending more in the initial phase to get it done right.

Think about roofing, water damage of any kind or other applicable home repairs that could cause more trouble in weeks, months or years to come if you aren’t tackling them correctly. A simple fix is one thing, but what about something that can financial cost a fortune in the future.

An example worth noting is the aforementioned roofing needs: the average cost of a new roof is between $6,700 and $9,000.^[6]

Some estimates can get as high, on average, as more than $20,000.^[7]

That said, a simple roof repair done by someone of that trade and craft can go a long way versus the best intentions you might have to fix it. Whether you’re replacing a section of roof that is leaking, shingles and plywood, and assume it won’t be a “big deal “to do so, you still should consider the ramifications if you don’t do it properly or if the water damage becomes worse.

When you consider any sort of home repair and hiring someone, always remember (and this goes for mechanics in some circles as well) that you can control cost by buying your own material (to avoid up charges that could occur) or get multiple estimates to determine how far off pricing might be and perhaps determine if the person you want to do the work is higher that they might come down to earn the business. Those ways of tackling cost make sense versus going too cheap with someone attempting to do the work for you or you taking it on yourself.

Mattress: Sleep well, even if you’re spending more than you want

Often times when it comes to spending money, you assume that all things are created equal.

In this case, mattresses come to the forefront because, despite claims to the contrary, they’re so incredibly different in how they’re crafted, and thus create totally different sleep experiences underscored in comfort and quality versus the opposite end of that buying spectrum: pain and poor sleeping.

The idea of spending $1,000 or more on a mattress might seem crazy, but consider that one that costs half might only have half the shelf life, too.

The average mattress ranges from $860 to $2,300, but using the queen mattress size as an example, you’ll get up to two more years if you spend up to $1,800 on a mattress and three years if you go above the $1,800 mark, which last as many as 8 years.^[8]

Usually, you can find something that falls somewhere in the middle to find comfort both in price and how you sleep.

That “comfort” factor is huge in how you’ll feel in the morning. What comes across to some as a clever sales pitch (i.e. waking up feeling “refreshed”) is actually more truthful and factually rooted than you might imagine.

Overlooked in the mattress and what kind you should buy and price as well is another spending piece you might not consider until the cost is staring back at you.

Lack of sleep and insomnia on any level can be a detriment not only to your career but medical bills as well. The average cost of treating insomnia for example can be anywhere from $200 to $1,200 per year, with a focus on a mattress that should be somewhere in the $1,100 range for buyers who are looking for good sleep but not a reason to spend too much, either.^[9]

Beds that cost in the $300 to $400 range sound appealing based on the initial price tag, but going that route could lead you to spend that same $1,000 (or more) having to replace the bed twice in that eight year time frame or perhaps even a third time, which would put the cost at $1,200. While that figure is the same as springing for quality bed, you can’t underestimate the additional money you’ll lose if you can’t sleep well, can’t function at work and ultimately end up struggling with neck, back and shoulder pain as a result of, quite frankly, a cheap mattress.

Focusing on quality over quantity isn’t about overspending.

This is more a factor that drives spending in a proper manner when you consider replacement cost of a product over time, one that is going to end up taking more from your concentrated effort at saving money rather than helping the cause.

With so much time and attention (and rightfully so) being placed on the amount of debt the average person has, the income levels and spending completely unaligned and the cost of goods going up with a total income level being stagnant, you’d be totally justified in your thinking that spending more money isn’t the way to go.

In 1968, based on costs of goods, the federal minimum wage would have been worth $10.68 in 2015, and although some states are raising minimum wage to around the $10 mark or more in 2018, this still feels like no change in the last 50 years.^[10]

Even with a lot of argument to the contrary, spending more is the smarter choice but again tempered with the understanding that it’s about the types of products and choosing them accurately while exercising impulse spending or allowing that spend more on quality mantra to exist in a vacuum, not as a full-blown reason to buy everything at top dollar.

This isn’t someone telling you not to save money by overspending but rather save on what matters on products that count more as smart buys that frivolousness at its finest.