When to Spend a Little Bit More
If you’re aiming to stick to a budget and trying to save a bit of money, your first temptation might be to always spend as little as possible. In many ways, this makes a lot of sense. When you spend less money on certain things, you’ll have more money available to make ends meet and – hopefully – some to put aside for emergencies and for the future.
However, there are some instances where it could be a good idea to spend a little bit more now so that you’ll save more later. Here are some examples of situations where spending more upfront will save you money in the long run.
Cell Phone Contracts
Many people opt for cell phone contracts where a new phone is available at a subsidy. For example, your mobile phone provider may be willing to sell you the latest iPhone for $450 rather than the full retail price of $1350 if you sign up for a more expensive monthly plan. However, before you sign a contract, think about whether it is actually a good deal.
Getting the phone for $450 instead of $1350 results in a saving of $900. However, to get that price, you’ll need to sign a 24-month contract and you’ll need to pay more each month. Assume you sign the contact, get the phone for $450, and pay $120 each month for your phone service (and the cost of the phone). Over 24 months, you’ll have paid $2880 in monthly fees plus $450 for the phone, which brings your total to $3330.
However, if you pay $1350 up front for the phone, many phone companies will give you a less expensive monthly plan. Assume you buy the phone for $1350 and then pay $80 a month for service (instead of $120). Over 24 months, you’ll have paid $1920 in monthly fees plus $1350 for the phone, for a total of $3270. This is a saving of $60 over the first option.
That may not sound like much, but keep in mind that, since you haven’t signed a contract, you’ll be able to shop around and switch to a cheaper monthly plan at any time if you find one. Plus, at the end of the 24-month period, you’ll keep paying $80 each month instead of $120, so you’ll save $40 each and every month. If you keep your phone for three years instead of two, you’ll save an additional $480 by choosing to buy the phone outright at the beginning.
In some instances, you can save money by taking a subsidy up-front and getting a discounted phone, but in other cases, you’ll pay more this way. Before you make a purchase, do the math and figure out which option is actually cheaper.
Keeping up with regular maintenance on your car can be costly. However, doing so can save you money in the long run. For instance, getting an oil change when it’s suggested and having your vehicle inspected and “tuned up” regularly might cost you a few hundred dollars every so often, but following this maintenance schedule could save you from having to pay for a big, expensive repair in the future.
The same is true when it comes to fixing a small problem with your vehicle. Often, it pays off to spend a bit of money as soon as a problem is discovered. The alternative is doing nothing and having to deal with a large problem – and an expensive bill – later on.
Buying Quality Items
It can be tough to figure out when it’s a good idea to pay more for an item that will last longer. In many cases, more expensive clothing, appliances, and other items aren’t necessarily more durable. Often, you end up paying more for a certain brand name or design. However, in some cases, spending a bit more now can keep you from needing to buy a replacement in the near future.
Read reviews and talk to friends and family to find out where it helps to spend a little more for an item that will last you much longer. Spending $500 for something you’ll keep for 10 years is cheaper than spending $200 every two years when you need to get a replacement.
Research is Important
As you can see from these tips, it pays off to do some research and put serious thought into your purchases before you make them. If you calculate the overall cost of ownership, rather than just the immediate sticker price, you can sometimes save yourself money in the long run.
However, this doesn’t mean that you should always buy a more expensive item. Stick to your budget, only buy what you can afford without going into debt, and do the right research before you buy. If you do, you might find that you’re able to save a significant amount.