Everybody knows that when it comes to investing, you have to take risks to earn big returns. Likewise, when it comes to saving money, sometimes it pays to push your luck and take a risk too.
Unfortunately, many people are so adverse to taking risks that they often end up paying a lot more money than they really need to. I’ve got names for people like that: currency cream puffs; financial featherweights; monetary milksops; numismatic namby-pambies; peso pantywaists. I could go on but, well, you get the picture.
You can’t hang any of those labels on me though, because while I may be a bit cautious with respect to my investments, when it comes to saving money, I’m more along the lines of what you might call , well … a personal finance daredevil.
Here are several examples of products and services that I generally never pay extra for. Yes, I realize I’m taking on additional risk. True, there is always the chance my decisions may not work — but I think the assumed risk is always well worth the reward.
1. Refundable airline tickets. The rules for “non-refundable” tickets vary so it is always important to read each carrier’s policy associated with your actual ticket. Yes, sometimes a ticket is truly non-refundable and you can end up losing all your money. But most of the time, “non-refundable” simply means you can get a full credit for future use on that carrier minus a fee. Whenever I find the price of a non-refundable ticket to be less than half the cost of refundable tickets I almost always take my chances with the non-refundable ticket. With that kind of discount, unless ticket prices are skyrocketing, the odds are fairly good that I can break even by simply buying another non-refundable ticket down the road at the same price if need be.
2. Event insurance. My on-going Ticketmaster love affair has no bounds. That’s because Ticketmaster continually keeps the flame alive with services like their “Event Ticket Insurance” that allows ticket buyers to be reimbursed for the full price of the tickets — plus their annoying fees — if they can’t attend the event for “any number of covered reasons, including illness, airline delays, traffic accidents, and more.” I was recently offered their event insurance for a recent show at roughly $10 per ticket. Because I bought eight tickets the insurance would have cost me an extra $80. Um, no.
3. Extended tire warranties. Extended tire warranty plans cover what pro-rated tire warranties usually don’t: the replacement or repair of damaged tires and rims from road hazards like nails, pot holes, sharp debris, and other hazards found in the road. The thing is, even though I’ve driven more than 500,000 miles in my lifetime — equivalent to 20 times around the earth — I’ve only run over debris that has punctured my tire on two occasions. Not only that, but I can’t see paying $50 for an extended tire warranty for a new tire that costs less than half that amount; the cost-risk ratio is simply too high.
4. Shipping upgrades. Impatience can be costly. Take shipping costs, for example. There have been many occasions where I’ve ordered items and still got my stuff just as quickly than if I had paid extra for the guaranteed two business-day delivery option. One exception: If you do like fast delivery — and order lots of stuff on line — an Amazon Prime membership is well worth the price.
5. Organic vegetables. A lot of folks prefer fruits and veggies grown with minimal or no pesticides — so they go organic. However, when it comes to tainted fruits and vegetables, not all conventionally farmed produce is created equally. It turns out that many non-organic fruits and vegetables such as onions, sweet corn, and avocados are grown with significantly lower pesticide loads than others. That’s why, when I buy my produce, I always take my chances and avoid paying the organic price premiums for at least 15 low-pesticide fruits and vegetables. Of course, I always thoroughly wash all of my fruits and veggies too regardless of whether they’re organic or not, just to make sure they’re really really clean. Hey, I may be a daredevil of sorts … but I have my limits.
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It just takes one time being burned by extended warranties to take the risk instead. On our last HP laptop, the motherboard blew up a little over a month (!) after the 2 year extended warranty expired.
I actually used my tire warranty a few times. I drive a lot and because I’m in a cold climate, pot holes and obstacles are everywhere. It’s usually only an extra $5 or $8 a tire and since the cost of tires is way up, it’s been worth it.
I’m going to do trip insurance from now on too..like 101, all it takes is to get burned one time to see it’s worth the extra money in case weather or another emergency makes your trip fall through.
When I read item 3 I was also very confused by Len’s numbers.
The tire warranties I see are like yours, $5-8 a corner. Tires run from $140 on the low end to almost $300 a corner, so yeah pretty cheap insurance and used all the time up here in the north with potholes and frost heaves.
I like to hear the less cautious side, and I wish more people took your approach. Those warranties at Best Buy bother me too. They cost a third of the product price, and then have a 1,000 stipulations for getting your money back, not to mention most gadgets are technologically extinct by the time you replace it.
check out my fledging blog if you get a chance…im a new yakezie challenge member!
When it comes to buying organic – it’s also worth it to check out local farmer’s markets. Chances are you can find organic foods without worrying about greenwashing or paying for the “organic” sticker. You can just ask the farmer. Plus you are supporting local, small businesses!
Hi Len, I never do #1 or #3, and I never heard of #2! We have potholes aplenty here, but patching a tire cost me $6 last time! My tire is still good 6 months later. I rarely do #4, only if there is an urgent need.
I’m against buying warranties, insurance, etc., for anything other than the biggest expenses in your life (your home, your car and your health).
Most manufacturers make their heaviest profit margins in their warranties — which is how you (the consumer) know you’re getting the raw end of the deal.
For the most part I agree with you. But I promise you, Paula: If you buy your (future) kids electronics, buying the extended warranty for that stuff will be the smartest move you’ll ever make. 😁
Do you buy Earthquake Insurance Len? Trying to decide. Just asked my insurance agent point blank if he buys it for himself and he said no.
No, Dr. P.
I discussed my reasoning on this topic here.
Thanks Len. I must have missed that original article. It was very helpful! Thank you!!!