Everyone wants a full wallet, but some money-saving tips and tricks require hours of effort and frustration, while others end up costing you money. The result? Both your wallet and your patience wear thin.
There are two questions that can help you determine whether a money-saving tactic is worthwhile, says Brian Davis, a real estate investor, cofounder of SparkRental.com, and a personal finance blogger for the investor site Bigger Pockets.
First, ask whether the activity will lead you to spend money you wouldn’t have shelled out otherwise. If the answer is yes, just say no.
Second, if the activity actually does save money, calculate the dollar amount saved and the amount of time required. Ask yourself whether you’d work a job for that hourly pay. If not, find a less time-consuming way to save.
If you don’t ask those questions, it’s easy to get sucked in by money-saving time wasters.
Here are five frugal activities that aren’t worth the effort, plus what you should do instead:
Clipping coupons digitally or with scissors can makes sense if you come across one for an item you normally buy. However, serious couponing can cut your free time along with your costs. First, there’s all the time you have to spend finding and cutting coupons. Sites like The Krazy Coupon Lady describe methods of tracking down coupons that require scouring the internet, subscribing to your local paper to obtain coupon inserts (which, of course, costs you money) and even buying coupons. When it comes time to use those coupons, you’ll drive all over town to hit the various stores offering the best deals. Finally, many people who get into coupon cutting find they need to create space in their homes to hold the stockpiles of goods they get on sale but might not use up for years. And all this can backfire. A worst-case scenario: You spends months filling your freezer with meat purchased on sale, then the power goes out in an ice storm, spoiling your stash. “Many people find they spend hours sitting at the table clipping coupons, and at the end they have $10 worth of savings,” Davis observes. Do the math, he advises, and you’ll probably find couponing earns you “a fraction of minimum wage.”
The exception: If you have plenty of extra time and enjoy couponing as a hobby. As long as you’re not spending more than you save by paying for couponing classes, buying coupons, and filling up the gas tank to drive all over town, have fun.
2. Chasing freebies
You could spend hours perusing the internet for free money, where companies give you incentives to sign up for a free service, open a bank account, or complete a survey.
Hunting down these deals and jumping through the required hoops can take hours, and you might wait weeks or months to get your gift card in the mail. Also, there’s plenty of fine print that goes along with these offers, and some consumers fulfill their end of the bargain but fail to receive the promised reward. For example, some readers of the personal finance blog The Penny Hoarder complained they didn’t get the $20 they were promised for opening and using a prepaid card.
If you do get the reward, it might come in the form of a gift card, which can’t be saved in the bank anyway.
The exception: Some banks offer bonuses from $150 to $300 for opening a new account and fulfilling a few requirements. If you were thinking about switching banks anyway, these offers provide a nice incentive, according to Kathryn Hauer, a certified financial planner and the author of “Financial Advice for Blue Collar America.” Just make sure there are no hidden fees or unreasonable rules about how much money you have to keep in the account, she warns.
3. Downloading money-saving apps
It’s easy to load up your smartphone with apps that might save you a few cents or dollars, but they may also encourage you to buy sale items you wouldn’t otherwise have purchased. Many retailers, like Target and Walmart, have their own apps that dangle deals to encourage you to buy, buy, buy.
Money-saving apps also can suck up your time if you experience technical glitches that require patience and many minutes to work around. Some deal apps may eat up so much storage space on your phone that they slow down your device. And although some personal finance experts swear by budgeting apps like Mint for preventing impulse spending, these tend to require a lot of time to set up and maintain, according to personal finance coach Avraham Byers. “Apps can be big time wasters,” he points out.
The exception: Some apps are easy, don’t nudge you to buy items you’re not specifically shopping for and offer a simple set-it-and-forget-it interface. For example, Byers loves the browser extension Honey because when you go to shop for an item online it scans the internet for coupon codes. “You don’t have to do anything and you automatically save money,” he says.
4. Being penny wise
Buying cheap appliances, clothing, tires, and other products, such as insurance, can lead to spending more in the long run than if you had invested in a quality item or service from the start. Cheap goods may break or fail to work as expected. In that scenario, you’re out more money than if you had invested in a quality item from the start. You’ve also wasted a lot of time with the hassle of dealing with and replacing a broken or malfunctioning product. For example, it pays to buy quality homeowners insurance and car insurance to so you can count on your insurer to come through for you if you have to file a claim. Buying cheap insurance can backfire if you’re forced to deal with slow claims, poor service and skimpy coverage. Another example that many people don’t think about is shoes. Cheap shoes can cause foot problems, and result in a trip to the podiatrist, hundreds of dollars in medical bills and the need to spring for the quality pair you should have purchased initially. “Buying cheap shoes to save money may have worked when you were 25,” Hauer points out. “It doesn’t work when you’re 55.” The exception: you plan to use an item rarely, or only once. If you live in Arizona and need a rain poncho for a one-time trip to Seattle with the grandkids, it’s probably smart to buy a cheapie.
5. Extreme frugality
If you ever watched the TLC show “Extreme Cheapskates,” you can see how far a person can go to pinch a penny. Cheapskates featured on the show reuse dental floss, work out for free at sporting goods stores and fry up roadkill for dinner. “I read a frugality blog that seriously asked people to consider dumpster diving,” Hauer says. “That’s unsanitary and unsafe. And if you get some disease or cut yourself, the savings you might have gotten from nabbing a fresh dozen donuts will be far outstripped by the hospital bill.” And less extreme actions like separating two-ply toilet paper into single-ply sheets and reusing ziplock bags might save you pennies, but tend not to be worth the effort.
The exception: Some little actions like cutting off the end of a tube of toothpaste to squeeze out the last dollop can stretch your money a little and prevent waste are fine, in Hauer’s opinion. But beware of those that take a lot of time and risk breaking a law, angering a store manager, or jeopardizing your health.
Money saving tactics that offer big payoff
Instead of frittering away your time and cash on money-saving time wasters, try these easy, proven strategies instead:
Research prices on key purchases. Put your time and effort into saving money on consumer items you buy regularly, and also one-time purchases with high price tags. This offers bigger payoff for your money-saving time investment . For example, you could spend 10 minutes tracking down the retailer that offers the lowest everyday price on the brand of dog food you buy, and your savings could add up to hundreds of dollars over time, a much better bet than spending the same amount of time procuring a coupon that will save you 25 cents once. That’s because regular purchases (and savings) add up over time and comparison shopping on expensive items offers a chance to save $10, $20, $100 or more. For example, Hauer found that one grocery store in her town sells her husband’s favorite hot chocolate for a dollar cheaper than other stores. If she buys it once a week, that’s almost $50 in savings a year.
Treat your savings as a regular bill. Handle saving money the same way you deal with paying your cell phone or electric bill. Pick a reasonable amount and automate the savings through your online banking so that sum goes right into your savings account every week or month. Many experts recommend keeping your savings in an online bank that pays a slightly higher interest rate than many brick-and-mortar banks. If you want to use that money, you’ll need to make a transfer to your main bank, which can take a few days. This cooling-off period can prevent you from spending your savings without a good reason.
Figure out how much you have to spend. Instead of spending hours on budgeting apps, Byers recommends a simple system he calls Your Magic Number. “It only requires 10 minutes a day,” he notes. After you pay your fixed expenses, including funding your savings account, you calculate how much is left for the month and divide it by the number of days in that month. This is your “magic number,” and you can’t spend more than this on any given day. If you have money left over, you roll it forward to the next day. For example, if your magic number is $50 and you spend nothing on the first day of the month, your magic number on the second day is $100. If you spend $95 that day, your magic number on the third day is $55.Using this system forces you to live within your means, save money and make smart spending choices. It also prevents a common situation in which you do your daily spending on a credit card, accidentally spend too much, then use the money in your savings to bail yourself out at the end of the month, according to Byers.
Turn saving into a challenging game. Hold a no-spend day, week or month where you challenge yourself, or you and your spouse challenge each other, not to spend money at all. If you’re trying to go a week or a month, you might have to modify the rules to allow spending on items that are absolutely necessary, like gas for your work commute, personal finance blogger Kristin Larsen advises on her site Believe in a Budget. Stash your savings from that day or week in a special account for that new TV you’re hoping to purchase or that beach vacation you’ve been dreaming about. If you’ve never done this before, start with the smallest goal of just one day.
Any time you spend trying to save money takes away from time you could be spending on other life experiences, in Byers’ opinion. That’s why it’s smart to find a balance between effort expended and money saved. “It really is a trade-off,” he says.