The Saving Money Trap That’s Costing You Thousands
Written by
Brooke Barley
Edited by
Rebekah Evans
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When you’re trying to save money, you might be tempted to start using coupons and bargain hunting. While that can save you some money in the short-term, experts argue that it’s not a very effective method. Here’s why couponing might seem like a prudent financial decision, but might actually be costing you in the long run.
You Miss High-Impact Financial Changes
Christopher Migliaccio is the founder of Warren and Migliaccio LLP which deals with estate planning, debt defense and bankruptcy. Migliaccio said when consumers focus so much on small impact money-saving tactics like coupons, they miss out on strategies that could yield more impact.
“Every small discount takes considerable mental effort, and can cause stress and distraction, with mitigating focus on the high impact decisions,” he explained. “As a preventative, I will counsel my clients to focus efforts on high-impact opportunities with real dollars and cents considerations first.”
Migliaccio suggested prioritizing paying off debt and accounting for necessary large expenses. After those are tackled, start saving and potentially automate deductions from your checking account to your savings account.
You Only Win in the Short-Term
When you chase small savings, you might feel good for a little bit, but the excitement and the impact quickly fades away. Michael Benoit, financial and risk management expert and founder of Contractor Bond, said he sees his clients enjoy small winnings, but miss where they could have really helped their bottom lines.
“A contractor may spend two hours in a very hard negotiation with a supplier in order to save $100 on materials. They feel good about the fact that they ‘won’ that negotiation. But that contractor will ignore their renewals on general liability insurance or workers compensation. They just pay the renewal bill without reviewing the coverage. Their focus is on the immediate $100 savings. They ignore the potential $5,000 in annual savings shopping their insurance could uncover.”
Benoit said to, instead, take time to strategize solving complex financial problems. This includes reviewing refinancing offers on debt or an insurance policy.
You Could Be Reducing Your Earning Potential
When looking for small deals in the meantime, you might overlook a surefire way to increase your earnings and that’s asking for a raise.
“People ignore wage negotiations,” said Vitaly Yagodkin, CEO of PhotoGov. “A raise of $5,000 to $10,000 a year earns more than hundreds of small discounts a lifetime.”
While the conversation to ask for more money might seem intimidating, Yagodkin said it’s worth it for the potential to completely change your financial landscape.
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