Trying to cover all your living costs, plus save for emergencies and retirement can be a daunting task. Sometimes, the challenge is downright overwhelming. Being frugal can help, but don’t confuse being cheap with frugality. Being frugal means using your money wisely to make the most of it. Living cheaply means foolishly cutting costs now that may lead to paying more down the road. Does it make any sense to pinch pennies if things fall apart or your family’s personal needs are neglected?
Here are 5 expense categories where it is foolhardy to cut back on spending. Eventually, it will catch up with you in the form of expensive repairs or maybe even health problems.
Check your owner’s manual to find the proper mileage between oil changes. Gone are the days when you can assume an oil change happens every 3000 miles. While my partner’s car needs oil changes that often, mine is every 7500 miles.
Skipping oil changes; however, is a really bad idea. Even though you may save $35 now, you will likely have to replace your engine sooner than later. Now we’re talking a major expense of several thousand dollars. If you rely on your car (and why have one if you don’t?), treat it well so it doesn’t let you down.
A related item is your car insurance. Trying to skate by on the cheapest insurance can come back to bite you if you actually need your coverage. NEVER reduce your liability coverage. You could be sued for damages that exceed your policy limits if you cause an accident. You would owe that money personally on top of the policy limits paid by your insurer.
A better idea is to go with a higher deductible. And, if your car is over 10 years old, you could drop collision or comprehensive coverage. But be sure to research how those changes affect your coverage and potential costs if something goes wrong before changing your policy.
Home Maintenance and Insurance
It’s never a good idea to cut back on home maintenance. Maintaining your home prevents it from falling into disrepair. Once disrepair creeps in, repair costs far exceed maintenance costs. A home that is falling apart is also worth less. And often costs more in utility usage.
Remember, you always need enough insurance to replace your home and personal possessions in case you have a catastrophic loss. Again, you can cut premium costs by raising your insurance deductible, and shopping around to compare rates. As with car insurance, be sure to have the deductible amount in savings in case you need it.
If you’re saving money, good for you! I applaud your foresight and good financial sense.
But if you’re also carrying heavy credit card debt at 18% interest (or higher), you are foolish to make only minimum payments on the credit cards. Think about it. If you are lucky, you may be earning 1% interest on your savings balance. Yet, your credit cards will grow by 18% every month with all that interest piling up. Better to pay down credit card balances now with some of that savings.
Then, stop using credit unless it is absolutely necessary. Paying down debt doesn’t help much if you continue to build balances every month by using plastic. Ask yourself “do I really need this item?” and give yourself twenty-four hours to think over the purchase. You may decide this isn’t what you really want. While spontaneity can be a good thing, impulsivity is not – especially when it comes to spending!
There are very few times in your life when you will be offered free money. One of them is when your employer offers a match to your work retirement plan. If this is the case, be sure to contribute the minimum required to qualify for that match. If you can do more, great! Do it and keep doing it for the rest of your working life. You’re taking care of your future and giving your retirement funds time to grow.
Your Medical and Dental Health
Regular preventive dental and medical care can prevent serious health problems in the future. Practicing good oral hygiene, like daily brushing and flossing, can save big money, maintain a healthy smile, and prevent long hours suffering in a dentist’s chair.
The same goes for medical care. Even if you feel good, regular check-ups can find small hiccups before they become big problems. And don’t you always feel a sense of relief after getting a clean bill of health from your doctor?
If you take medications, ask your doctor about cheaper substitutes or generic brands that work just as well. Ask for free samples to give medications a try. You can also contact the drug manufacturer to see if you qualify for discount pricing.
If at all possible, buy health insurance if you don’t get it through your employer. If you are low-income, check with your state department of health to see if you qualify for public coverage. If not, even a high deductible major medical plan will help if you become injured or get sick.
Would you like more ideas to improve your financial situation? Call LSS at 888.577.2227 or GET STARTED ONLINE now. Our Financial Counselors can help you create a realistic budget and provide you with an action plan to get you on the road to financial stability. Don’t wait – take action today!
Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and she specializes in Bankruptcy Counseling and Education.