There’s an old British saying that goes: “Penny wise, pound foolish.”
You have probably heard this before. It simply means being frugal and thrifty with small amounts of money, but wasteful when it comes to large amounts.
To avoid this trap, try to focus on the bigger picture when drawing up a budget. Often, you are too busy feeling good about reducing little costs here and there, that you do not realise you are actually losing more money.
Here are 10 ways you should be undertaking to avoid this psychological trap that many people fall into without knowing.
#1 Don’t Scrimp On The Quality Stuff
A pair of good-looking shoes at a budget store might tempt you into buying, because of its price tag. However, how long would they hold up? Often, it is financially sensible to invest in good quality items although they may seem expensive.
If you spend more for better quality, your purchase won’t require replacement soon, if ever. Buying cheap might find you making the same purchase more than once, when the items wear out.
#2 Don’t Go Out Of Your Way For A Sale
You found out that milk is 50 cents cheaper at the supermarket 5km away. The extra time and petrol you waste to travel to buy at the reduced price probably would likely exceed 50 cents.
However, it might be worth it if you are picking up that carton of milk on the way home from work, or if you can plan one shopping trip to take advantage all of the sales.
#3 Have The Necessary Insurance Protection
It may be tempting to cut your expenses and not pay for insurance.
But saving money this way fits right into the “penny wise and pound foolish” trap. You will feel even worse when a health emergency lapses and you have to pay a large sum of money out of your pocket.
#4 Don’t Get Drawn In By Discounts
Stores love to lure you with hefty discounts. The prerequisite of these discounts is having to spend a sum of money before you can take advantage of these discounts.
An example would be, “Enjoy $100 off with $1000 spend”. How many people have fallen into such traps?
In order to enjoy that $100 off, you had to spend $900. However, it might be worth it if you were intending to purchase and the discount came at the right time.
#5 Don’t Try To Scrimp On Parking Expenses
Have you ever parked your car and “just running in” without displaying the necessary parking coupon? And you return to find a parking ticket attached to your windshield. That parking fine could have bought you some parking coupons.
|Types of Offence||Range of Composition Amount|
|Parking without displaying valid coupon(s) or sufficient valid coupon(s) to meet the prescribed parking charges||$6-$50|
#6 Don’t Spend Hours Completing Online Surveys For A Few Bucks
I have tried it and it was a complete waste of time to fulfil that thrill of earning some money.
For all it’s worth, your time could be better spent improving skills to land a better job or developing a business plan.
#7 Don’t Scrimp On Buying Time For Yourself
Why do everything yourself in a bid to save money, when you could be using your time more productively by hiring someone else to do the lesser skilled jobs?
Or refusing to hire an expert or professional and then losing out on money making opportunities because you have no idea what you are doing.
#8 Don’t Scrimp On Skills Upgrading
A major career mistake that Singaporeans make, among a few others!
You could have earned a bigger paycheck had you opted for attending training and certification for your career.
This is a classic “penny wise, pound foolish” action that we often regret in the later parts of our lives.
#9 Don’t Avoid Investments Just Because You Need To Pay
One of the common grouses of undertaking an investment plan is having to fork out money to invest.
You could have forgone chances to grow passive income because you feel the pinch of putting money in something and growing it.
#10 Don’t Buy A Cheaper House At The Expense Of Location
More often than not, the houses that are far away from the MRT station or lack of good schools for your kids, sell at a cheaper rate.
It may be tempting to purchase a cheaper flat, but do take into consideration that you may have to spend more money and time travelling.
Are you a victim of one of these traps? Do you know of other trap that you think should be added to this list? Let us know in the comments section below!