If something looks too cheap then it probably is
We all have experience of buying things that were very cheap – a laptop, a car, a washing machine – only to find they soon ‘failed’ and repairing or replacing ended up costing us more!
This page deals with financial false economies as well as some flawed ones that you might get away with, or you might not!
Financial False Economies
Paying the minimum amount off on your credit card each month is a big mistake – the credit card companies will love you! If you must buy something when you haven’t the money, there are many cheaper and better ways of doing it.
If the financial penalty of not having insurance is massive, then only a fool will take the risk. A mortgage company will only lend if there is insurance in place should the house burn down or be destroyed. If you own you own house outright, there might only be a one in several thousand chance of it getting destroy but why take the risk? Bizarrely though, there are people who go abroad without travel insurance even though the consequences of being ill or having an accident could cost them a small fortune!
Not having breakdown cover for a car is a little more of a controlled gamble if you are prepared to shell out potentially £300+ if you breakdown. You might also have to accept being stuck by the side of a road waiting for a local breakdown service for many, many hours. If you perhaps pay a third or a quarter of that £300+ amount up-front to avoid this potential situation, it is probably sensible.
If you have a partner and/or children or big responsibilities like a mortgage, then it makes sense to have life insurance. Life insurance will pay out a lump sum on your death, so not to have it when you have dependents is a genuine false economy!
A final insurance false economy is lying on your insurance form. Aside from the morality of this, if you get caught you won’t get a payout when you need it and you might find yourself almost unsuitable in future.
Thinking about price with no regard to quality
These are some of the best examples of where something could be such low quality that they won’t last long. In the case of shoes (or clothes) if you only need them for very occasional use, you might be ok:
- cheap car
- cheap shoes
- cheap trainers for running (as opposed to fashion!)
- cheap paint
- cheap toilet roll
- Almost anything where you only consider the price and not quality!
- Trying to escape baggage charges on budget airlines!
- Gym membership – so often a waste of money when you can get exercise from so many other (free) activities… cycling, walking, taking the stairs
DIY & Home
- Anything to do with electrics (unless you are qualified)
- Anything to do with plastering (unless you are a plasterer)
- Not having a house surveyed before you buy it
- Not having your boiler serviced regularly (but beware some expensive
Shopping and Consumables
- Multi-buy (eg 3 for 2 offers) when you don’t really need them
- £1 shops unless you are specifically looking for something
- Cheap moisturiser – possibly any cheap cosmetics (what’s in them; how or if they were tested!)
- Suspiciously cheap fruit (or meat) at a market
- Cheap perfume
- Counterfeit goods
Cars and Motoring
- Not getting breakdown cover as mention earlier (but definitely shop around for the best deals)
- Cheap engine oil
- Not getting your car serviced regularly
This list is by no means complete and there are certainly a lot more grey areas where you sometimes win or lose. If you have any more great examples of false economies, we’d love to hear from you!