For example, this extreme couponing craze has really got my goat. (And up until recently I didn’t even know I had a goat.)
Don’t get me wrong. I use coupons whenever the opportunity presents itself. After all, it often makes good financial sense to clip coupons to save money on groceries. But extreme couponing takes this otherwise good personal finance practice and throws it completely over the top.
Never mind that, oftentimes, those seemingly ubiquitous examples of people getting a thousand bucks worth of groceries for pennies on the dollar, are the arguably the result of coupon fraud. The reality is that folks who are spending more than an hour or so a week clipping coupons are at risk of wasting valuable time that, all things considered, could be used much more cost-effectively doing something else.
People who take coupon clipping to the extreme, whether they want to admit it or not, also often end up buying products they may not want or need. Okay, so you bought 20 bags of frozen lima beans for $2.36; but how many, if any, of those yucky beans will get eaten before they finally become freezer burned? And how much additional money is required to store them?
Coupon cutting is probably the best — but not the only — example of a typically good personal finance practice that often gets abused by taking it to the extreme. Here are a few others:
Saving for Retirement
Is it possible to save too much for retirement? Absolutely. I began asking this question when I reached the annual pre-tax contribution limit for my 401(k) a few years back, which is currently $16,500. After running the numbers, and years of sacrifice by devoting a good chunk of my annual salary increases to bolster my retirement savings contributions, I decided that I had finally reached a point in my life where it was time to start spending more of the fruits of my labor on the present, as opposed to the future. I mean, what’s the point of living a financially responsible life only to end up dying with a million bucks or more in the bank?
Reality Check: The truth is, most people tend to be overly conservative when it comes to estimating how much money they’ll really need in retirement, especially if you consider data from the US Department of Labor that shows most people actually spend less money as they get older – not more — despite higher healthcare expenditures. As a result, a lot of folks end up retiring later than necessary, and/or leaving large inheritances for their heirs.
Making Product Comparisons
More often than not, perfect is the enemy of good — even when it comes to matters of personal finance. This is often displayed when it comes to evaluating products. Many folks are simply not content to investigate a handful of options, instead wanting to vet every possible choice for fear of missing out on the best possible available price. For most people, however, too many choices can be too much of a good thing; the end result is often a type of cerebral overload that leads to wasted time, unnecessary stress, and paralysis by analysis.
Reality Check: Trying to find the optimal solution can often be counterproductive simply because many decisions don’t require extensive research. Typically, a modest survey of three to five samples is all that’s necessary before enough information is available to make an enlightened decision.
Negotiating For Goods and Services
Many years ago I took a hard-line negotiating position with an irrigation contractor. Eventually, despite his protestations, I got the contractor to agree to some extremely favorable terms on my part. I have to admit at the time I was quite pleased with myself. However, that negotiation ended up being one of the biggest money mistakes of my life. Yes, I got a great price, but I paid dearly for it in the end. In fact, for many years after I was reminded of the perils of over-negotiating with every burst sprinkler pipe, a result of the shoddy material that contractor used to cut corners.
Reality Check: Trust me, taking a hard-line negotiation approach that exploits others is absolutely counterproductive because one of two things usually happens, both of them bad: 1) you’ll kill the negotiations, or 2) you’ll unwittingly end up with an inferior product or service that costs you more in the long run.
Pinching Vacation Pennies
There are lots of examples of how to be penny-wise and pound foolish. My own favorite example of this was the first time I took the Honeybee and our kids on a cross-country road trip to see her family on the East Coast. But in order to save a few bucks, we stayed in cramped budget motels and I tried to rush across the country as quickly as possible in order to minimize the days we had to pay for lodging. In retrospect, the start of our vacation ended up being more like a Marine boot camp. The kids were miserable, which made the Honeybee miserable — and when the Honeybee is miserable, the laws of the universe naturally ensured that I was miserable too.
Reality Check: Sometimes it really does make more sense to throw a little caution to the wind and splurge — especially when it comes to vacations. I know that may sound a bit extreme, but you’ll just have to trust me on this one.
Photo Credit: jjconfidential