Money Saving Tips

Busting the Top 10 Money Saving Myths

Busting the Top 10 Money Saving Myths
Written by Irina Vasilescu

Money may be a taboo subject for some, especially when it comes to how you personally handle it. But because of the lack of information about proper money management, a lot of people fall into the trap of having more debt than what they can actually handle.

Lack of financial planning also leads to a person’s inability to save for the future, especially for emergency or unexpected expenses. Another thing that makes things even worse is the persistence of money-saving myths.

When you’re offered a “Buy one, get one free” deal, for example, are you really saving money? What if you don’t necessarily need the extra item? Or maybe the sticker price was merely marked up so that you’d think that you are getting the extra item for free – when in fact you are getting it at almost the same regular price.

In the end, we would all make bad financial decisions at one point or another especially when such tempting deals are offered by business owners. But if you know how to look behind the real value of the deal and you know the truth behind some of the most money-saving myths, you’ll have a better chance at successfully managing your finances.

The Truth Behind the Top Money-Saving Myths

A lot of myths abound when it comes to the issue of saving money or managing your finances. Some have surfaced just recently while others have been around since the generation of your grandparents’ parents. So what’s the real score behind these money-saving and money management myths? Take a quick look:

1. The more you spend, the more you save

Whenever you enter any kind of retail establishment, remember that the goal of the management is to entice you to spend as much as you can on purchases.

Let’s say that you are looking for a dress to wear to a cocktail party. There’s an on-going sale at your favorite store and on the entrance, it says “The more you spend, the more you save!” Which part of this message is a myth? Basically, the store owners will tempt you to buy more items than you intended because of the supposedly bigger discounts that they offer.

However, the reality is that you really will not end up saving anything if you are spending more than what you originally intended. If you entered a store with this sign on the door and you intended to buy just one cocktail dress – but you end up buying four dresses and a pair of shoes which are on sale, you’ll simply go home with a drained wallet which is not worth the savings at all.

What’s worse is when the charges end up being on your credit card, and you find yourself still paying for the purchases months later.

2. This [insert item name here] is a must-have!

Save for basics like food, shelter and clothing, there’s really no such thing as an item that you cannot live without. This is just a marketing ploy used by retailers to make you part with your hard-earned money. If you see an item in the stores which you personally consider as a must-have, ask yourself first if it falls under the category of want or need.

It most likely is a want instead of a need, which means that it’s a luxury that you can definitely live without. If this is the case, there’s the 30-day rule that you can follow. Once you see an item that you’d really love to buy, hold off on purchasing it and promise yourself that you would go back for it after 30 days. Once the waiting period is over, you can go back and buy the item if you still want it. By then, the urge to buy should have gone away and you’ll realize that you never really wanted it in the first place because there are more important things that you can use the money for.

3. If a website offers free shipping, I’m saving a lot of money

Financial experts say that retail websites entice you to spend a certain amount of money so that you can get free shipping. Doing this, you are not really saving money but spending more than what you actually intended. It’s probably fine to buy more in order to get free shipping if you really need the additional items.

If you’re doing your holiday shopping online, for instance, you can maximize the free shipping offer by meeting the minimum amount to qualify for such deals. But if you only need one or two items, you’ll probably end up saving more by simply paying for the shipping fee instead of meeting the required amount for free shipping.

4. My money can be safely hidden in a savings account

If you are exerting the extra effort in saving money, the biggest myth that you should not believe is that it can be safely stashed in a savings account at a bank. Sure, there is absolutely no risk in keeping your money there, but most banks only offer a 1% annual interest. Considering inflation, your savings will not be worth anything at all five or ten years from now.

If your goal in saving is to secure your future, most of your savings should go towards bonds, the money market or stocks. Depending on the amount of risk that you’re willing to take, you will have a much higher return of interest in these investment instruments.

5. When making a major purchase, I need to pay extra for that warranty

Buying a refrigerator, television set, an air conditioning unit or a washing machine would qualify you for extended warranties. If it’s just a small appliance like at TV, you are better off saying no to the extended warranty. Buying a new unit ends up being cheaper than paying for the extra warranty.

Of course, you still need to be a smart shopper and make a comparison of the brands and models available when buying a major appliance. This way, even without the extended warranty, you can rest assured that you can maximize the use of whichever item it is that you bought.

6. It’s okay to pay for a vacation after I get home

After working tirelessly for months or even years on end, you will feel as if you deserve a long, luxurious vacation in an exotic destination. You really should think about taking a break, but not go through a scenario where you are still paying for the trip two or three years down the line. You will appreciate every sip of that margarita on the beach more if you have no debts to worry about. As such, you should find ways to save on your vacation by saving up for it way ahead of time and making sure that you are taking steps to plan a more budget-friendly trip.

7. Buying in bulk is always better

Perhaps one of the most common money-saving myths out there is that it is always better to buy in bulk because it will save you more money. This is not always the case.

To determine if you are getting more bang from your buck, always compare the unit price of the bulk items with the per-piece price of the retail item. Which one will give you the best value for your money? It usually depends on how the bigger item is packaged.

If the manufacturer spent more on packaging a one-gallon product, for instance, its unit price might end up being more than when you’re buying smaller quantities in retail form.

8. I only need to pay the minimum amount on my credit card bills

Yet another money-saving myth that persists up to now is that you only need to pay the minimum amount on your credit card bills. By doing so, you are letting the interest accrue and you are not paying off the capital or the main amount that you owe.

A good rule of thumb to follow for you not to fall into credit card debts is to only charge what you can afford to pay. Credit cards are a good financial tool if you know how to use them wisely. Otherwise, it’s a debt trap that is just waiting to happen.

9. The cheaper the item, the more I will save

When you compare the prices of brands A and B, you will usually choose the cheaper brand. However, there are times when it pays to invest in a more expensive brand with better quality so that you would not need to replace it as often.

10. I need to diversify my investment portfolio

Finally, if you have investment instruments, you might have heard of the advice that you need to diversify your portfolio. This might have been true a few decades ago, but not anymore.

When you focus on just one kind of investment, you will master the ins and outs of the market and maximize your earnings there. Of course, it’s better to seek the help of a financial expert for this but if you do have the funds to spare on investment instruments, diversifying may not necessarily give you the earnings you want.

How about you, which among these money-saving myths do you still believe in?

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Busting the Top 10 Money Saving Myths

About the author

Irina Vasilescu

Irina Vasilescu is our crafty designer. She joined the team three years ago and is also involved in the writing process.

20 Comments

  • I don’t quite agree with point 9. It really depends on the type of product being bought as well as the expected longevity of it.

    Lets say the item is something like a laptop – you can easily get a top of the line notebook that costs $3k that’ll do everything and more than you want of it, but it’ll only realistically last 3 years or so. Alternatively, you could buy a cheap one that’s only a few hundred dollars that’ll need to be replaced every other year. Overall, you’ll probably “save” by buying the cheaper option in this case simply due to the nature of computing.

    This doesn’t really translate to something like say, a stove, where a more expensive and higher quality item will pay dividends in efficiency and repair costs down the road. Your stove is an item that you’re expecting 10+ years of service from, and therefore has the time for its quality to really show compared to the relatively short service life of a laptop.

    • Well, a laptop can last far more than three years, unless you’re not properly maintaining and cleaning it. Basic maintenance will keep a higher end laptop performing like a brand new device for five or six years at the minimum, barring any accidents or mishaps. There’s no reason that an expensive laptop should crap out after just three years or so. That means you’re doing something wrong with it.

  • I have to often watch out for this when going shopping at retail stores, because some of their deals can be really enticing to dig into. Sometimes I’ll go into the store with only one or two items to buy, but then there are all those deals like buy one, get one free or pay half the price and it targets me as customer because the value is great for a product I really desire to have more of. But if you look at the bigger picture, they are neatly taking more money out of your pocket every time. The shopping trip might save you from having to shop another time too soon; however, at that time, you are left much more empty handed than you went in.

    • Stimulus spending! It’s the worst especially when they can convince you to buy more than what you need to hit a breakpoint for a deal. (Like, one of those buy 4 items and get the 5th one X% off). You figure that it’s worth the savings to just get a 5th item because you save the %, but end up spending a lot more than originally intended. It’s tough not to fall victim to these though, the companies spend a lot of money to ensure these strategies are profitable.

  • I agree on # 8. The offer of banks to allow card holders pay the minimum due is not entirely helping them. In my experience it is just enticing card members to charge more on the card. It is something difficult to resist. In the end, the bank gets many of the benefits leaving the card holder in a big credit mess.

    • Well, obviously. It’s not the banks’ faults that consumers are unintelligent enough to pay more than the minimum balance on their credit cards. Most creditors spell out in simple terms on the bill payment charge how long it will take them to pay off their balance with minimum payments compared to a higher payment amount. Consumers just ignore this information and pay only what they have to.

  • On item # 1, the more you spend, the more you save can be best applied in business. But to personal effects, I don’t think so.

    In business, the more you spend on business items especially on discounts, the more profit you can get from it.

    But to personal effects, you end up stocking things that you don’t really need.

  • My experience with item #2, I believe being frugal and thrifty is still the best policy.

    Actually when I go to shopping malls, I go direct to the section where the stuff I want to buy is located.

    It’s part of my discipline. Although sometimes I stroll around, but only if have the extra budget for something.

  • I have always been a victim of item #9. It is something that I have to really change.

    My wife has always been telling me to be a smart buyer and not frugality as a strong consideration in buying.

    Many of the stuff I buy don’t last long – as expected.

  • On item # 10, diversifying investment portfolio is a sound decision

    I know of someone who has got a real investment, a stock investment, a mutual fund investment and is into forex investment also.

    If one goes down, others are still standing up. Although he spends most of his time in his real investment- a school investment.

  • On item # 4, now a days, it is not so wise anymore to put all savings in the bank. Banks offer very low interest rates. Although Central Banks have good reason for it among others – to encourage entrepreneurship.

    To still enjoy modest income, there are bonds and mutual funds among others which are classified as lower risk investment portfolio,

  • On item # 6, I believe vacation must be well planned. It requires a lot of financial planning. If part of it is charged to credit, payment relative to it must be properly identified and not based on sheer speculations that it is forthcoming.

    I also believe good vacation can wait than leaving behind with big credit which can be a possible spoiler of your needed relaxation.

  • Number four is so true. So many people think that savings accounts are the answer to their problems and that they’ll yield enough gains for a comfortable retirement over the years. That’s no longer the case, and investments are necessary and mostly safe if you know what you’re doing. Too many people are fearful of any type of risk whatsoever, though.

  • I definitely love that you added the section about how free shipping does not equal savings in every case. A lot of websites will offer ‘free shipping’ when all they have really done is jack of the prices of the item you are buying in order to cover the original shipping costs and then some. You really have to be careful and know what you should be paying for shipping before you make any purchases.

    • Well, that’s not exactly how the free shipping offers work. Most retailers don’t recoup their shipping costs by raising prices artificially. They simply know that people will try to add extra items to their order in order to reach minimum amounts for said free shipping. Therefore, consumers wind up spending more money than they need to, and the companies benefit from the extra sales.

  • It helps a lot when you get tips like this, thank you! But the most important thing is one’s self control and discipline in handling money. Most of the time it is easier to loose your money in malls specially during Christmas season when all enticing ads are posted all over the place. Just spent on what is needed and in my case, before going to the mall, I usually tell my children that we can buy some important stuffs but we have a strict budget to observe.

  • Great tips in this article!

    There are honestly so many little things that we believe about spending or money saving and so many “myths” out there. Quite frankly, it’s quite hard at times to know what to believe in.

    This at least cleared some of it up I think for alot of people.

    Thanks! 🙂

  • Very sound advice — I can hardly believe that a vacation is worth the debt! Better to save before the vacation, because then the vacation feels like a reward, rather than an enslavement!

    Also, I’ve also learnt too many times that cheap quality is not cheaper in the long run. I found many online “finds”, cheap items that I thought myself lucky to be getting so cheap — and then they broke down or had problems so quickly that they were garbage fast. Really, really, really not worth it. Sometimes investing in something that will last you for years and years, even if pricey, is the less expensive option!

  • Diversifying is safe, and that’s primarily what people who diversify get from it. It’s far from efficient though. Imagine if you had an investment that returned a 10% annual interest and you want to diversify. Naturally you’d take some of that investment money and invest it in another, say, one that’s only netting about 8% annually. If you decide to split the money if half and invest in both, half of the money will earn an 8% interest as opposed to just putting it all in the 10% interest investment.

  • I really should look into the different between money market accounts and savings accounts. I’ve had a savings account for some time, it doesn’t have much in it though, but it certainly isn’t growing in any way, but it isn’t enough to invest in anything either. It’s kind of just sitting there for emergency purposes only. Maybe a money market account would be a better place to put it.

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