HOME > BLOG > Budgeting and Saving > Saving habits that can cost you more

We all know living beyond your means and not having an emergency fund can potentially spell financial disaster. While some money mistakes are obvious, some blunders start with good financial intentions.

Here are some savings habits that can backfire and end up costing you.

Because it’s on sale

  • Sales can be tricky because some items may be on sale for an absolute bargain, but do you really need it? Have you ever bought something you didn’t really need just because it was on sale? Sales are meant to tempt you to buy, but if you weren’t planning to purchase that item, why spend your hard-earned money on it?

    Bulk buying is a great way to look at cost vs. value. If you are going to use all of the items you’ve purchased before their use-by date, then it is worth saving a little extra on bulk items, but if you are just going to throw away the excess items, then you are really throwing away your money. A discount may seem like a good financial decision, but only if you are actually going to use that product.

An unrealistic budget

  • Every where you go you probably hear about how important it is to create a budget and stick to it and although this is good advice, it is important not to be too strict.

    Budgeting is for reality, not for wishful thinking. You need to make a plan based on your current circumstances, not what you want them to be. For example, if you are hoping for a salary increase at the end of the year, don’t start budgeting now with that anticipated income.

    Although the point of a budget is to help cut down on unnecessary expenses, if you cut out too many luxuries, you may be setting yourself up for a splurge. It is better to give yourself a little bit of breathing room now, to help avoid a major spending splurge down the track.

Signing up for a store credit card for a discount

  • You may think that you are signing up for a discount on big ticket items, but these store cards can often cost you more in the long run.

    Store cards usually have a higher interest rate than other cards and can often tempt people to buy more than they would have as they will be receiving a discount. Unless you plan to pay off the amount owing quickly and then canceling the card, it is probably not worth getting a store card just for the discount.

Cheap, cheap

  • Being smart with your money is about more than just looking at the price. You also need to consider the value of the items you are buying. For example, if you need a good pair of work shoes, you may think that buying the cheapest pair will save you, but you may have to keep replacing them regularly so that they look respectable. However, if you were to go for a better brand, it may cost you a little more, but you would get a few more years wear out of them than the cheaper pair. You can take clothing purchase costs and dividing it by the number of times you wear them to get a "per wear" cost. If you did this calculation every time you purchased a new item, then some items will look very cheap whereas others will be very expensive if you only wear them a few times. Imagine the cost of a $120 pair of jeans worn weekly for 3 years compared to an impulse dress buy that you seldom wear.

    When making purchases, you should look at more than just the ticket price. Consider how long the item will last, warranties and how often you would use it. For some purchases, cheapest is not always the best choice.

Interest free deals

  • Interest free finance is when a retailer lets you take products home before you pay for them. Retailers team up with a finance company to provide ‘buy now, pay later’ finance. You may often hear the term ‘No deposit and 2 years interest free’ or something similar on the radio or TV and this is an example of interest free finance.

    What some people don’t realise is that an interest free deal is actually a loan. Although initially you don’t pay anything, once the interest free period has ended, you will be making repayments (with interest) to pay off the amount owing and store cards often have a higher interest rate compared to other credit cards. Another danger with interest free finance is that you will have to fill out a credit application and the finance company will look at your credit file, which means an enquiry will be left on your credit report, even if you are declined. This can have an impact on your borrowing power if you decide to apply for a home loan or another loan in the future.

  • Use a calculator to get an estimate of how much you can borrow.
    Try one here.

  • See if you qualify. To get a more accurate idea of how much you can borrow with State Custodians,
    click here.

  • Call our Lending Specialists and they can do the calculation for you over the phone plus answer any questions you have at the time. Talk to us on 13 72 62.