Penny Wise and Pound Foolish: Real Life Examples of Wasting Money While Trying to Save
Don't Waste Your Money!
Take care of your pennies and the pounds will take care of themselves.
The English proverb "Take care of your pennies and the pounds will take care of themselves" is an accurate one. It may be hard to come up with $5,000 at one time, for example, but if you put your loose change into a jar every day, it wouldn't take very long to collect the funds you needed.
However, there comes a time when we wind up focusing so much on the pennies that we lose our focus on the big picture. We may saving our pennies while the dollars are slipping out of our pockets without our noticing. We become, from time to time, "penny wise and pound foolish" according to another English proverb.
Penny Wise and Dollar Foolish
In this article, I've listed some examples of situations where we can be penny wise and dollar foolish. When we can recognize these types of situations where we have lost sight of the pounds while watching the pennies, we can fix them and stop wasting our money.
How Much Did Your Savings Cost You?
When you manage to snag a deal, you may have some associated costs that you are not considering in order to get the savings:
- shipping and handling
- storage costs
- additional gas, wear and tear on your car, or transportation
- membership or subscription fees
- your time to process, clean, and maintain the item
I've subscribed to magazines and newspapers solely for their coupons. I then found a job that took a great deal of my time, so I wasn't able to clip the coupons. I had good intentions to clip the coupons so I kept the subscriptions, but in the end, I had not only the wasted cost of the subscriptions, but had also wasted time in dealing with all the paper.
When calculating the cost of an item, these factors do need to be taken into consideration. Sometimes these costs are worth the savings, but you do need to factor them in when you consider how much something costs, so you can make sure that they are still providing the savings you expected.
Buying in Bulk or Volume
When we find a great deal, sometimes we may go overboard in our savings and buy too much. This isn't a problem if we are able to use the product in a reasonable amount of time and we have the space to store it. But sometimes we are not able to use it timely and wind up having to throw it away, and end up wasting money instead of saving it.
One family went to a fruit farm to pick peaches. They meant well and ate them daily, planning to freeze any extra, but by the time they realized what part was extra, the peaches were spoiled.
Sometimes when we spot a good deal, we feel like we can buy extra to use later, share it with others in the family or give it to charity. An impulse purchase to give to family or charity can be fine if you can afford it, but you didn't plan for it, it could cost you when you don't have funds leftover to pay your bills.
Haggling for Pennies and Losing the Deal
A woman was offered a job in another city and the company agreed to pay for her moving expenses. She called to ask them whether they would pay her cash and she would move her belongings herself. They called her back and told her they had found someone else for the job.
When we go out to dinner, I have a friend who insists on calculating everything to the penny. She doesn't want to owe anybody any money, nor does she want to pay an unfair amount. She is actually a generous person, often giving impulse gifts. What this means is that she is taking the time to do calculations when everyone is tired and just wants to get home. It also makes people feel like she doesn't trust that they aren't out to con her. By being this tight with her pennies, she is losing her relationship with her friends.
Trying to save money, many people have avoided getting health, auto, or renters insurance, only to be stuck with big bills when something went wrong. To avoid paying too much, some drivers run away after they have hit someone. This causes them much guilt, and if they are caught, there will be legal repercussions as well as financial ones.
Time Value of Money
A woman was remodeling a house for resale. There were many different types of jobs that needed to be done. In order to do so, she tried to get three estimates for each project so she could get the best deal. This took a long time to coordinate schedules, get them all to come out and look over the project and send an estimate. Then, sometimes a contractor would have a different idea about how to do something, and since the scope of the project changed, she felt she needed to get a changed estimate. All of this took a lot of time and significantly slowed down the progress of the work in the house, costing her more in loan interest, insurance, and utilities.
She also had less time and energy to do other things, like focus on her career.
Automatic Annual Renewals
When I choose a supplier of any product or service, such as cable, internet, gas supplier, and phone, I generally do spend the time to find the best ongoing rate. Sometimes though, at the end of the year, the contract gets renewed, either for another year or on a month to month rate. Since it is just a renewal, sometimes I forget to compare prices again. The new rate is almost always significantly larger than the old rate, and the companies expect you to not do anything about it because of inertia. When I finally got around to checking rates, I found I had lost a significant amount of money over the past time period, because I hadn't bothered to check that I was getting the best price for the service.
The same thing happens when a Certificate of Deposit (CD) matures. If you don't do anything, the CD automatically renews to the same time period of the original CD. However, the rate is almost always the lowest rate you can get. You have to consider your options and make sure you are investing your money mindfully. This was something that almost happened to me, but I was able to get to the bank at the last minute before my CD was locked in for another year at an abysmal rate.
Home repair is a place where we wind up being penny wise and pound foolish. Since we don't expect our houses to break down, we don't have the money to pay for a repair, and often don't know qualified people who can repair it for us. In an effort to get the best price on home maintenance, we sometimes try to do things ourselves or take a chance in hiring someone who can offer a good price
I have heard stories of people who made things worse with their do-it-yourself efforts and wound up paying more than the original project would have cost.
For one home improvement project, a contractor was willing to do the work for a low price. However, because he wasn't familiar as with the job as he said, he took a great deal of time to research how to do things, and when things went wrong, he didn't know how to fix it. He did two things for me, at the same time, and both of the jobs were done with poor quality. Although the ceiling is patched and the bathtub has a new surround, both of them looked bad, and needed to be redone.
I also had a contractor who took out the steps on my front and back porch and replaced them. He took several months, because he simply didn't show up for a long time, and when he did come back, he used inferior concrete. The steps became crumbly and needed to be redone.
Both of these happened a long time ago, and since then, I have the internet and know that I can find reviews and get referrals for good contractors.
This happens most often at car dealerships. We work really hard at negotiating and trying to get the best deal on one aspect of the purchase but the dealership makes it up somewhere else. One man negotiated the best trade-in value for his old car, but wasn't able to negotiate a good price for the new car. I negotiated the best price for my new car, and then was so tired that I didn't negotiate the best interest rate for the loan. Some people get talked into buying those extra features they don't want or need like under-body coating or stain resistant spray. Instead of looking at the overall value, since each part is separate, we may focus on one or another and miss the big picture.
Expired Coupons and Rebate Forms
There have been times that I bought a product that was free after rebate. This product wasn't something I would buy otherwise, but decided to give it a try since it was free. I forgot to fill out the form, mail it in, or save the UPC before the expiration date. I also couldn't return the product since I had already opened the box and started using it. This meant that I wound up paying full price for a product I really didn't want. Since then, my rule has been to not use the product until the form has been mailed, and to mail in the form the same day.
There are things that require maintenance, like regular oil changes, regular physical exams, and the annual furnace inspection that we sometimes put off because we don't have the time or money to pay for it. It seems unnecessary when nothing seems to be going wrong. But these decisions can come back to haunt you if things go wrong.
It's On Sale!
One of the biggest money wasters is the sale, and it is something that almost all of us have fallen for it. When there is something you need and were going to buy, it is a good idea to look for sales and try to get the best price for it. However, it is so easy to splurge on items you don't really need or hadn't thought you wanted until you found out it was on sale. If you are simply buying something because it is on sale, you are wasting money. Why save 25%, 50% or even 75% (pennies) when you can save 100% (the whole pound) and keep all of your money.
The video on the right is an English lesson on this English idiom, and provides many additional examples of how people, even governments, can be Penny Wise and Pound Foolish.
Percentage of Savings
We tend to be blinded by the size of the savings. While we may go across town to save $20 because an item is 50% off, we may not be willing to go across town to save $40 when the item is only 5% off.
More Money from Your Job
In order to earn enough money to pay my bills as a single parent, I asked for more work and more overtime, hoping I would also get a raise or a promotion. I also looked for another part-time job, even though it took even more time away from my baby and I had to pay a babysitter. I then found out that other people around me, particularly the men, were following a different route to get the money. They simply asked for a salary increase or a promotion. Instead of getting an extra hour's worth of pay, they were increasing their pay for the entire 40 hours they were working, and not having to give up any time. There have been studies that show that men and women approach salary differently.
Saving Money on Fast Food
As a single parent, working two jobs and going to school, I didn't have enough time to cook a lot of food, so I had to eat out. Since I didn't have a lot of cash, the cheapest meal at the closest fast food restaurant became my lunch of choice. My health suffered because of it, and now I have to break bad habits, exercise more, lose weight, and take medication to make up for the way I treated my body when I was younger.
Are You Penny Wise and Pound Foolish?
Saving Pennies and Letting the Dollars Trickle Away
It is easy to lose sight of the dollars while we try to pinch our pennies. After all, there are more important things than money, and we have other things to do with our lives. We're busy so we should forgive ourselves for losing track now and then. But we can wind up costing ourselves so much more when we are desperately trying to save money.
It is helpful to consider our big-picture situation from time to time to make sure we aren't falling in these financial traps.
Questions & Answers
Is it better to save for emergency cash, or use extra money to pay off high interest credit cards?
Since you have credit cards that can be used for an emergency, I would recommend paying off the high-interest credit cards. You will have a balance available for emergencies and reduce the amount of interest you are accruing. I would also recommend limiting new purchases on the credit cards to make sure you have a balance available for emergencies.