9 Things We Routinely Overpay For

Nobody likes overpaying for stuff. Even so, many people do it without even realizing it.

The good news is, by getting the urge to splurge under control, it’s possible to save significant amounts of cash that can be used to stretch your household budget.

Here are several things people often overpay for:

(Premium) gasoline. Two years ago I conducted an experiment where I ran premium gas in my 1997 Honda Civic for 30 days and actually averaged one mile per gallon less than when I was running lower-octane unleaded. Premium gasoline is intended for use on a very narrow niche of cars. Unless your owner’s manual calls for high-octane fuel, it isn’t necessary.

(Overly-generous) tips. Never mind that tip inflation has caused the average bonus for good service to increase from 10% in the 1950s to, depending on who you ask, 15% or 20% today. Some people give overly-generous gratuities simply to make a good impression on the server. Even worse, they’ll often leave average tips for poor service because they don’t want their server to dislike them. Both practices make little sense, especially for folks on a limited budget.

(Organic) produce. Many non-organic fruits and vegetables such as onions, avocados and corn are grown with significantly lower pesticide loads than others, which is why some organic produce isn’t worth the steep price it typically commands. In many cases, you’re much better off buying the conventionally grown varieties and then carefully washing them.

(Non-generic) medicine. The United States Food and Drug Administration constantly tests and analyzes generic medicines to ensure their effectiveness, which is why they maintain that generic medicines perform just as well as their brand-name counterparts. Yet, many folks insist on paying a lot more for non-generics anyway. Why?

(Bottled) water. Believe it or not, here in Southern California, where water is in short supply, I still pay one-half cent per gallon for the water that comes out of my tap. I suspect tap water is even cheaper in water-rich areas of the country. Despite that incredible bargain, I recently bought 20 gallons of bottled water that was approximately 200 times more expensive. I know. But like I tell my kids, “Do as I say, not as I do.”

(Faster) shipping. Patience is a hallmark of financially responsible people. Consider the enormous price premiums for expedited shipping. I recently purchased $10 worth of business cards from a company that offered next-day shipping for $54.25 and two-day shipping for $23.65. Meanwhile, the no-frills, standard shipping rate for people who were willing to wait an extra one to three days was only $5.77. Guess which option I selected.

(First class) airline tickets. Unless one is flying on an extended trip overseas, it’s hard for many people to justify the price premium of a first class airline ticket, which can often cost two or three times the price of an economy class fare. If the thought of sitting in a coach seat for any length of time is unbearable, consider premium economy class, which can often be had for a premium of $100 or less.

(Brand new) automobiles. Almost everybody loves that new car smell but, financially speaking, you can’t beat a used vehicle purchased from a private owner. That’s because new cars typically lose upwards of half their original value over the first three years of ownership.

(Whole) life insurance. Unlike term life insurance, whole life insurance couples the term policy’s guaranteed death benefit with an additional investment product. Yes, whole life may sound like a better deal — the trouble is it’s the least cost-effective option because you end up paying for both the insurance and the fees associated with the investment component. In most cases, you’re much better off buying term insurance and then investing the realized savings.

Remember, while it’s true that many times you get what you pay for, it’s also just as true that sometimes you don’t. The key to ensuring you always get the most bang for your buck is in recognizing the difference.

Photo Credit: Paulo Ordoveza


  1. 1


    I never understood why people pay outrageous amounts of money for expedited shipping when they don’t need the item immediately. I would never pay those crazy prices for business cards. I’d go find someone who could make them for me locally first.

  2. 3

    pen says

    The generic medicine can have different fillers in it, and some people do have odd reactions to that difference. In those few cases, it might make sense to pay for the name brand.

    • 4

      Len Penzo says

      Interesting point, pen. I learn something new every day.

      Still, I suspect that would be an exception, rather than the rule, don’t you?

      • 5

        Jennifer Bruner says

        One of my daughters has a real problem with generics. Lamictal, in particular, is difficult to find in a generic that works. She has come home with generics from four different companies for Lamictal, but only one of them works for her, and we really had to do some arguing to get the pharmacy to understand that only one company was acceptable, and they still won’t guarantee that she will get it. The other ones just don’t work at all, and Lamictal is prescribed for bipolar disorder. You don’t want to know her when her meds aren’t working, and since bipolar young adults have a really high suicide rate, getting the right pill is a matter of life and death.

        • 6

          Kate says

          My sister has a similar problem with generic drugs, although she is not bipolar (I do have another sister who IS bipolar, and I feel your pain. It is awful.). I believe that everyone has to run their own particular numbers, be a good advocate for themselves and their loved ones, and do what seems best to them. FWIW, My 2001 Volvo runs like a toad on regular gas. Premium results in better mileage, better pickup, and an allover better ride.

  3. 7

    Againstthegrain says

    Regarding organic produce, I think you are confusing pesticide application and use on the crop with pesticide residues on edible portion of the food. There is a big difference. And don’t be misled by peels and removable skins. Chemical compounds leach through into the flesh – those cute EZ peel tangerines that come in big bags and boxes (that kids love in their lunch box) are a good example.

    There are many, many more reasons to choose organic over conventional produce besides pesticide residue levels at the final consumption stage. I’ll list just a few.

    Avoiding GMo crops – GM crops are not allowed under organic certification regulations, so choosing organic is the easiest way to avoid the GMO crops that are used in the majority of the products on supermarket shelves (GMO crops liberally doused with the herbicide glyphosate (Monsanto’s RoundUp), which isn’t benign where it is applied). Many Americans consume a lot of processed foods that include commodity crops such as corn and soy (and/or their fractionated components like corn/soybean oil, protein isolates, HFCS, lecithin emulsifiers, etc.), so they unwittingly consume a lot of GM and/or crops heavily doused with toxic chemicals.

    Pollution/contamination in agricultural regions – Organic regulations also regulate fertilizer applications. Many communities in farming regions now have polluted groundwater because of heavy and prolonged nitrate fertilizers. I have seen many signs over restroom sinks in CA’s San Joaquin Valley (aka America’s Salad Bowl) that warn against drinking the water due to high nitrate content.

    Safety for agricultural workers – Farmers, their families, field workers, and produce handlers in warehouse and distribution centers can be affected by the chemicals used in conventional produce production. Do we not care about others when we make our food choices?

    On a side note, I’ve noticed that the fresh organic choices in typical supermarkets tends to be lacking – freshness, quality, and selection are often poor – and the prices are quite high, so the produce sometimes doesn’t “move” fast enough (I’ll bet a lot gets thrown out). Unfortunately, too many stores stock their paltry organic sections only with items from the huge centralized agricultural regions in CA, FL, etc. so even though the food is certified organic, it’s also long distance and jet-lagged, and probably has lost a lot of nutrients since harvest.

    It’s typically a much better value all around to find local sources of organic produce. Try local farmers markets and farm stands (but check, because many douse heavily with chemicals, too. Some may use organic practices, but don’t certify because of the added costs). CSA* farm share subscription programs, natural food stores, swaps with local gardeners, community garden plots, etc. are also worth checking out. http://Www.localharvest.org is way to search online for local organic food producers (meat, dairy, & eggs, too). Farmers, though stereotypically not gregarious, are increasingly internet savvy if they want to sell direct to the public.

    For more than 5 years I have been a member of a CSA (Community Supported Agriculture) program in San Diego County. No, it’s not a hippy dippy commune thing – most of the members are suburban families who drive minivans, actually). In exchange for an advance quarterly payment direct to the farm (@ $30 per box in this program), I receive a weekly box of extremely fresh organic vegetables and fruits, usually picked only 12-14 hours before, and grown within 60 miles of my home. It’s a *much* better value than the same organic items purchased in a supermarket (& so much fresher than any produce that travels 100s or 1000s of miles away). Checking the weekly pick list online Sunday evenings makes planning my meals and any additional food shopping much easier and faster (so does stocking my extra freezer with meat bought in bulk from ranchers). CSA programs vary in their details, but many offer different size/price “shares”/boxes for different size households, weekly and bi-weekly schedules, farm or local pickup sites – some even offer door delivery. Find local CSA programs with the zip code locator at LocalHarvest.Org. Urban and suburban regions often have have multiple CSA programs, so in larger metropolitan areas it should be easy to find one to suit any budget or schedule. Additionally, buying local produce (organic or conventional) keeps your food dollars local, which supports local economies. And when your produce is picked within hours before you receive your share box, the produce is at the peak of freshness, nutrient content, and especially flavor. That’s always a good value.

    *Community Supported Agriculture

    • 8

      Len Penzo says

      Fair enough. I understand a lot of folks are passionate about the benefits of organic produce. For what it’s worth, my recommendation concerning certain organic fruits and vegetables came direct from the non-profit Environmental Working Group. As far as I can tell, the group seems to be a pro-organic organization — so the recommendation seems like a fair one to me. :-)

  4. 11

    Allyn says

    I opened the post all fired up to respond to the organic produce point, but Againstthegrain has already addressed it far better than I could have. Produce should be purchased from local farms as much as possible. The crap available in the supermarkets is all part of the ‘industrial diet’ we’ve become accustomed to and is slowly killing us.

    My other response is to tipping. You wrote, “Some people give overly-generous gratuities simply to make a good impression on the server.” You bet I tip to impress the wait-staff, but only at places I frequent because I want that wait-person again the next time — and they do remember me and I get excellent service and extras, like free sidedishes and desserts. I’m paying extra to get the service I want. I’m not apologizing for that.

    You also wrote, “Even worse, they’ll often leave average tips for poor service because they don’t want their server to dislike them.” I don’t. If I’ve had ‘average’ service, I’ll leave an average tip. If I’ve had poor service . . . really poor service, I leave a penny. That tells the wait-staff that you didn’t forget to tip; you didn’t like the service. If you leave no tip, the wait-person can believe you forgot to leave a tip.

    • 12

      Len Penzo says

      I hear ya, Allyn. I guess the operative term in my tipping paragraph was “overly-generous” (as opposed to “generous”).

      The point I tried — but failed — to make was that we can make good impressions on our servers without having to go overboard. At least that’s been my experience! :-)

      Naturally, if someone is trying to influence the wait staff to the point where they’ll hand out free sides and desserts, you’re definitely going to have pay extra.

  5. 13


    But, to you folks espousing the benefits of organic shopping on local farms – I can get much of what you guys are buying at local farms in the outer aisles of my own supermarket. Not only that, but I have a much greater variety of foods than if I limited myself to local sources.

    I’m no fan of the so called Standard American Diet, but purposefully handicapping yourself to only eat things grown locally is counter-intuitive to me. There is a reason the global food supply chain exists – it allows a much greater variety of food year round. Stick to the outer two aisles and you’ll be much better off than most of the country.

    • 14

      Allyn says

      PK, I’m not saying that you should buy exclusively local (and I’m not sure why you consider that to be a ‘handicap’ to do so. There is a reason certain foods are traditional at the different holidays because that is what was in season at that time of the year.) I’m saying that the stuff you get in the supermarket is not as fresh and nutritious as the stuff you get locally. As Againstthegrain pointed out, “…too many stores stock their paltry organic sections only with items from the huge centralized agricultural regions in CA, FL, etc. so even though the food is certified organic, it’s also long distance and jet-lagged, and probably has lost a lot of nutrients since harvest.” Sure, I like having the flexibility of buying produce in the supermarket that is out of season, but the produce that is in season is fresher and more nutritious bought locally. Once you eat something that was picked that morning, you will definitely tell the difference. The stuff in the supermarkets is really old by the time it gets to the market. You say there is a reason the global food chain exists. That reason is to produce as much food as possible. The quality of the food is not really a consideration. All they care about is quantity.

  6. 15

    Tim says

    Generic and name brand are often QUITE different–for example, Advil goes through an extra refining step to change the percentage of left-hand vs right-hand molecules, while generic does not.

    Genetically modified wheat is growing as a suspect in all these late-onset gluten and wheat allergies. Legacy (or heritage) versions are being brought back my many farmers. Try milling your own organic corn once, you’ll never go back.

    I wanted to leave whole life alone but I couldn’t: buying term and investing the rest is an awesome philosophy that apparently America just can’t do.

  7. 16


    THe only one here that I might disagree wtih is the non-generic meds. My wife takes this one med and the generic gives her hives.. the name brand is just fine. ??Who knows what the deal is there, and so while I’m sure the generic would do what the name brand would for it’s intended purpose, you can get differetn side effects, depending! (although it’s true that people shoudl at least TRY generics before ruling them out!)

  8. 17


    Mutual fund management fees is another area where people grossly overpay. If you use the S&P 500 as an average (which it is) you’d expect half the managers to do better than the average and half to do worse, right? Yet something like 75% do worse, and it’s not the same 75% every year. Which means that over time, less than 20% or so do better than the S&P. And for that lousy performance they actually charge you money.

    Much better to go with a simple no-load index fund. Far less (or nothing) in management fees and better performance than 80% of the funds out there.

  9. 18


    You’ve got to be loving the new Stanford study (out today, I believe) showing that the vast majority of organic produce is costlier with no real benefit. …did you have insider info this was coming out?

    Also, while I agree that buying term is the way for 99% of people to go, I wish people really would “invest the difference in price.” Sadly, people go cheap (as they should) and then usually forget to pocket the savings.

  10. 21

    Fairfax Avenue says

    I’m glad you bought water – you live, like I live – in Southern California. Two earthquakes in Beverly Hills within a week are a good reminder to be prepared for emergencies.

  11. 22


    I buy organic and this post provides me food for thought (pun intended). The recent Stanford study on organic foods is compelling but I think I will still buy organic or locally grown fruits and vegetables on the “organic dirty dozen” list. http://www.organic.org/articles/showarticle/article-214.

    Here’s one item that many people overpay…income taxes. Keep track of your donations, business expenses and other deductions throughout the year. It’s alot harder to remember the details when you compile your information early next year when you pull out your tax stuff and complete the forms. You can be surprised on how much lower your taxes are when you have complete information at hand.

  12. 23


    New cars have been our nemesis, but it didn’t kill us in the long term since we kept the cars for 10+ years each!

    Hubby bought whole life years and years ago, so we aren’t giving it up now!

    Great meeting you and your wife at FinCon12!

  13. 24

    tonia delger says

    i hope you get fired from your job and have to be a server for at least a year! don’t go out to eat where you have to be waited on if u don’t want to tip! dollar menu right down the street. servers get paid 2.01-2.13 an hour! some places the server has to tip out other employees a percent of their sales, so if you don’t tip enough the server will have to pay to wait on you. if you are going to tip bad DO NOT go back because servers remember and talk about who tips bad or good!

    • 25

      Len Penzo says

      Really? I’m offended by your entitlement mentality, tonia. It’s not my job to subsidize your paycheck with 15 or 20 percent tips when you provide me with crappy service because you’re underpaid.

      If you’re unsatisfied with your pay, give your best effort for every customer so you’ll increase your odds of scoring big tips. Short of that, take up your complaints with your employer. And if that doesn’t work … you can always look for a better-paying job.

      • 26


        I tip well, as a habit – generously, but not over generously. And I agree with your assessment of Tonia. Servers are not entitled to tips and when I’ve gotten bad service, I’ve left either a small tip (like a penny) or no tip, and then speak wit the manager. I’ve only had to do that (speak with the manager) twice because the service was so poor. I have no idea what happened to the server, but restaurants deserve to know how they’re being perceived.

        And to Tonia, if you’re an amazing server, you’ll get better tips. If you’re a poor server – maybe serving is not the best job for you.

  14. 27

    Ron says

    My thought concerning tipping is that I double the tax then round up to the next dollar. In my area that would work to 13% plus the rounding. Seems like a fair amount to me. As an example: I recently went out and my restaurant bill came to $42.36. The tax at 6.5% was $2.75. Using my tipping rule it comes to $2.75 x 2 = $5.50 the rounding up makes my total tip $6.

  15. 28

    rubin pham says

    here is another thing people pay too much for, cable tv.
    i have been using a few quality indoor antenna and this may be shocking to many people, i get BETTER picture quality from my indoor antenna than what the cable company can provide.

  16. 29


    Here’s something else: Mutual Fund Fees.

    It astonishes me that in this day of the Vanguard revolution (and all the other brokers copying them) folks still invest in expensive funds.

    Save yo’ money, go index!

  17. 30


    I don’t get the super premium gasoline (like VPower) in my town but last time I was in the capital, I filled up a tank and got far better mileage than with a regular tank. But I guess you really have to run the numbers for an extended period of time to see if it is worth it.
    I like to believe the gas is cleaner and will take better care of the engine, resulting in less maintenance down the road.

  18. 31

    Josh says

    I think some readers have trouble differentiating between general words of wisdom and hard and fast rules for every specific scenario imagineable.
    Your examples of overpaying are good food for thought. Is it really necessary to fill your comment section with every specific example of each medication, fruit, dinner service, etc . . . where your advice does not apply?
    Next time you have advice about overpaying for meds, could you please have an exhaustive list of each chemical compound of every med available and list each example where the generic might not work for each of your readers please.

    • 33

      Len Penzo says

      I’m not sure if your tongue is planted firmly in cheek or not. I hope it is but, if not, then you miss the point of a blog’s comments section: It is to provide a forum for readers to share their thoughts with other readers on the article. Otherwise, what is the point of having one?

      I think the discussion on this topic here has been extremely informative up to this point, whether one agrees with what has been written or not.

      Thanks for sharing your opinion.

  19. 35


    I agree with everything! Premium gas is an especially crazy thing to me. I understand the idea behind purchasing organic produce, but often times, it’s a waste. Really, the only one I am guilty of is over-generous tips, though I leave tips based on the server and the service. Even if the service wasn’t great, I may leave a larger than normal tip if the server seemed to be having a bad day. I know what it’s like to be a server and I know I would have appreciated it.

  20. 37


    Wow. I didn’t even know that. I agree with you on generic meds. Been patronizing it for some time. It is really as good as the branded. I am just lucky that it really has an effect on me. I heard generic has no or less effect on some.


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