I love saving money!
I’m pretty sure you do too.
I’m not talking about extreme cheapness.
I’m not talking about no-spend challenges.
I’m talking about normal, measured saving methods.
Things such as:
- Using coupons
- Signing up for free trial offers
- Prepaying expenses
You know, steps that anyone can take.
You don’t have to be a financial savant to do them.
Anyone can cut a coupon from the Saturday paper.
Anyone can sign up for a mailing list to get be sent discounts.
Anyone can sign up for a free sample or trial.
And anyone can make a one-time payment to get a disconnected rate on whatever it is they are buying.
There’s no need to have “connections” or know any insider secrets ?
However, it’s not all gravy.
There are some pitfalls if you aren’t careful which can cost you if you…
Signing Up For Free Trials May Hurt Your Wallet
Get a free credit report!
How about a free month of streaming movie service!?
Like downloading music, get 30 days free.
How about books?
You see these offers in your email, and on millions of websites.
In reality, they can be great for testing out a service and getting an idea for whether or not you would use it them enough to justify paying for them.
They are also great ways to get something you need at no cost to you (as in the case of the free credit score offers).
Be very careful though, since the drawback to these offers can often times come back to bite you in the wallet.
These types of offers are rampant among rewards sites as well as various other sites and direct email campaigns.
The companies invite you to take a free trial of their services for a set amount of time–usually from 7 days to one month–in exchange for you registering and providing a credit card.
Sometimes you have to pay a $1 registration fee to take advantage, which isn’t really so bad in relation to the rewards you can earn for doing so, in addition to having access to the service for this trial period.
But at the same time, there is a caveat included which normally states that if you do not cancel the free trial before the predetermined expiration date, your card will be charged a recurring monthly fee until you finally do cancel.
What’s worse is, if you are the type that isn’t diligent about going through your bank or credit card statements, it me be quite some time before you even realize that you have been charged these amounts.
Additionally, service providers will not be very accommodating about giving your money back since they provide the disclaimer about what happens when the trial period is over, and thus putting the burden on you to make sure you stop the service before getting charged.
There are a few ways, however, to avoid getting caught in their trap:
Don’t Sign Up For These Offers At All
Many of these offers are designed to entice you to join their service, but by expressly stating that the trial will automatically convert to a paid plan, these companies are hoping that some of the people who accept will indeed forget to cancel.
What can be better for them than to have someone paying for a service without that service actually being used?
The remedy here is easy as pie; if you don’t take the chance of forgetting about the conversion to a paying plan you will never have to worry about it!
Cancel As Soon As You Sign Up
As soon as you sign up for a free trial offer, go to the help/FAQ page and fill out the cancellation form.
Many of the companies will make you call their “customer service” number which is simply another way to say pushy sales people department in order to terminate the free trial.
All you need to do is tell them that you aren’t interested in anything they have to say or offer you, that you simply want to cancel.
Since many services will continue through the entire term, regardless of when you cancel, it ensures that you will be able to take full advantage without worrying about having to pay anything later.
Just remember to get the cancellation confirmation number just in case they screw up and end up charging you.
Set A Calendar Alert
In the case of some free trial offers, like Netflix, the trial period ends the minute you cancel.
If you want to use the entire trial period, but still want to make sure you get out before you pay, all you have to do is set a calendar alert to go off the day before the trial period is set to end.
If you don’t use some kind of computer-based calendar, and who doesn’t these days, just leave yourself a bunch of reminder sticky notes all over the place to cancel.
Like most things, these free trial offers can be very useful, if used properly.
All you have to do is plan accordingly and you won’t ever have to worry about being burned by these programs ever again.
Coupons Can Actually Cause You To Spend More
You’ve seen them.
They come in a variety of forms and sizes.
Like the big cardboard mailers Bed Bath & Beyond sends out.
Or the credit card like design used by Office Depot.
The standard old thin-stock magazines that come in the weekend paper.
I’m talking about coupons.
They’re seen as a way to save money on a wide array of items.
Some people have even made a side hustle of collecting and selling coupons on the web.
A few have even developed methods of using coupons to get stores to actually pay them.
Still others have made small fortunes teaching people how to be an “extreme coupon” clipper.
You do, however, need to be careful, as sometimes coupons can cost you both time and money rather than saving you.
Coupons can be a tremendous help in reducing household expenses if used properly.
Unfortunately, they can also trap you into a false sense of saving.
You can make coupons work for you and maximize the benefits received by incorporating them into your shopping routines and paying close attention to the drawbacks:
Buying More Than You Need
There are plenty of coupons for grocery items online and in print; they’ve never been really difficult to find.
Now, however, there seems to be a new method of issuing coupons by the manufacturers as opposed to the old time standard of requiring only one item to be purchased.
Multiples of the same or group of items on a singular coupon.
What that means is that instead of purchasing only the amount of an item you actually need, you will now be forced to spend extra money on these extra quantities in order to use the coupon.
It’s fine, so long as you normally need more than one of a particular item, but in many cases, the result will be wasting money and possibly having the additional products going to waste.
On the other hand, if you don’t need them, the cost of purchasing and wasting those items may very well any savings achieved by using the coupon.
Spending Unnecessarily To Reach Coupon Limits
The marketing departments know that many people will spend money just to “save” money.
That is why when you receive a coupon for “dollars off” of a purchase, it it generally accompanied by a minimum spending amount.
They know that many people will spend whatever it takes to be able to use a coupon, not wanting to let it go to waste, and still feel good about the purchase because they “saved money”.
In cases like this, the idea of saving money supplants the idea of spending more then they would normally have.
In some instances, you can spend even more than just the minimum purchase price to use the coupon.
Quite often, the additional money spent will exceed the coupon savings which would make the store very happy indeed.
Think about it:
You go to do some shopping through Rakuten and notice there’s a coupon for $10 off–but you you need to spend $50 and your purchase only totals $30.
You’d have to spend an additional $20 to get that $10 savings.
Negating Other Offers
Lots of online stores offer free shipping once yo reach a specified limit.
Many of the office supply stores will give you free delivery when you spend $50.
Every store has its own limit.
But, what happens if you have a coupon code that would bring your purchase to below the free-shipping cut-off?
If you said that you have to pay for shipping you are absolutely correct.
What ends up happening is you may have added just enough to your card to receive your order with this free shipping offer, figuring that your actual order is enough and then the coupon/discount will be applied as a form of payment.
Unfortunately, what the stores do is adjust the prices of what you purchased when applying the code entered, and subsequently it takes you below the free shipping limit.
So, in order to avoid having to pay to have your order shipped, you either remove the coupon, or the more likely scenario, shop for more items which may cost more than the actual shipping charges.
Time Is Money*
I actually loathe this saying but you can read all about why I think time and money aren’t the same
Sometimes people get so obsessed with saving money that they will disregard to time factor when it comes to searching for ways to save even the smallest amount of money.
Searching the internet for any coupon to use in your grocery shopping for the week may only yield a savings of $1 or less.
If it will take you an hour to compete your search, you need to decide whether or not that one hour of your time is worth the total saving you may find.
Sometimes it’s not easy to predict, or something that is even considered beforehand.
What is your time worth to you?
That is the trade-off you need to think about in these situations.
And, if you happen to be one of those extreme people, let’s not forget what happens when you actually get to the cashier at the grocery store: the time it takes for them to scan and verify each and every coupon, the frustration it causes not only for the cashier but for the people behind you who just want to pay for their stuff and be on their way.
Some people can handle it, others are very thin-skinned and probably can’t take the looks and the harsh words in this situation, so don’t forget to consider this as well.
What it all comes down to is your preferences.
You can’t allow an advertisers claims lull you into a false sense of saving.
Just like you can’t think that one person’s successes can be duplicated just because they make it seem easy.
You need to look at the big picture and take into account the time that will be involved in this undertaking as well as the costs of printing tons of coupons off of the web as well.
Can you save money by using coupons?
Can you also end up with a whole bunch of worthless pieces of paper as well as hours of lost time?
Prepaying Expenses May Not Be Your Best Option
The way things are going these days, it seems like every family and business is re-evaluating its spending in an effort to trim the fat and add more to the bottom line.
Businesses cost savings are coming from cutting payroll or looking at cheaper alternatives to current expenditures.
Individuals are cutting out what they deem as unnecessary entertainment, taking steps to reduce energy costs, and reducing housing costs.
Both groups are even looking to prepay their regularly occurring expenses in an effort to get their spending under control, even if there is no, or minimal discount involved in doing so.
Unfortunately, when it comes to prepaying expenses, even if you do get a discount, the benefits are far outweighed by the drawbacks.
And, in truth I was only able to come up with two really strong (well one really strong and one that’s just ok in my book) reasons to go ahead with a prepayment plan but 5 even stronger ones against it.
Saving Money With A Discount
In most instances, you will not receive any kind of special savings for paying your bill – let’s say 1 year in advance.
Some times, like with insurance, you can save a couple of dollars by paying the premiums up front rather than using a semi-annual, quarterly, or monthly payment plan.
Vonage will give you a discount of up to 20% to pay your phone bill a year at a time, and Phone Power will give you the second year free if you prepay.
This is the only solid benefit of taking this kind of approach, and even then, there may not be much of a significant savings realized.
Less To Remember
With all of the required payments being made up front, that reduces the number of bill payments on a monthly basis.
This also reduces the amount of paperwork (assuming you do not use auto-pay) to be dealt with.
That being said, since many small business owners decide to do everything themselves, it also means that there is less of a chance that you will forget to make a payment as well.
On the personal financial side, it certainly helps those individuals who have trouble with organization and keeping track of their bills (and due dates).
Loss Of Liquidity
You are spending the money up front, and losing flexibility of having those funds available for other, more immediate, and possible emergency needs.
This isn’t like an investment account, where you can liquidate certain items in order to free up some cash in times of need.
You are locked into this purchase for the duration, unless there is some sort of pro-rated refund policy, which to be honest is a rare characteristic of prepaying expenses ore, if there is, it will take time to get that money back.
Individuals will lose the ability to have their money working for them, and even though interest rates are low these days, anything is better than nothing.
Great, you’ve paid your next year’s worth of expenses in one fell swoop.
Did you remember to keep including the bills in your monthly budget or did you remove it since it’s technically not going to need attention for a while?
Whether you are running a business or a household, it is important to keep planning for that expense if for nothing else, then for the sake of repetition and accurately reporting the expense.
The last thing you would want is for the day that you actually have to start paying that particular bill regularly to come, only to realize that you removed it from your budget and now do not have enough free cash to cover it.
Not only is it a pain to deal with, but it also means having to spend extra time reworking that budget and finding a way to fit the expense back in.
Let’s face facts: some people just do not know how to budget and need to keep things as simple as they can for themselves.
Mergers and Acquisitions
Companies merge quite frequently, especially in this economy where the weaker companies have little other options than to allow themselves to be bought.
The problem, is that many times the company that is purchased gets folded into the purchasing company effectively ceasing to exist.
What happens if your company merges with another and you end up not liking the resulting product or service or support from the new company?
Essentially nothing, since you are stuck with them until your prepayment expires, or you get lucky enough to get an opportunity to void the remainder of your agreement.
Every day advances are being made in technology.
Every day new ways of processing information are discovered.
Regardless of what the product or service is, somewhere a company is rolling out a better product or service.
Somewhere, a company is offering better rates for a product or service you or your business uses.
The unfortunate thing about it is that you cannot take advantage of either pricing or quality differences because you already paid for your current services, essentially creating a long-term contract that cannot be broken.
Even in your personal life these things happen, especially if you are tech geek and love having the latest innovations.
The (Very) Ugly:
Bye Bye Company
This is the most extreme and maddening of the negatives.
Any business can go belly up at any time.
Should a company happen to file for bankruptcy protection, the creditors are the ones that will receive the primary attention.
What happens to the customers?
They’re left holding the bag in most cases.
That means you will be not only be out the money you had prepaid for the products or services, but you will also be forced to find another supplier which means paying twice for one thing.
Would it suck should that happen?
But, that is life and that is what sometimes happens in business as well.
Can any of these scenarios happen?
Of course they can.
The likelihood of some occurring are greater than others though.
So, what can you take away from all of this?
Simply put, it may very well be better to spend a few extra dollars in order to have more control over your money both in a business environment and in personal financial situations.
Do you have to listen to me?
Not at all.
This is simply my view of this particular spending strategy and how I view the pros and cons.
You are your own person and are free to choose to do business or handle your personal finances in any way your see fit, and without judgement (unless of course you end up asking someone for their opinion).
Have you ever been in a situation where you thought you were doing something to save money but it ended up biting you in the ass when all was said & done? What examples to you know of that might seem like savings techniques that can backfire on your if you’re not careful?