Someone’s “dumb deal” is another’s false economy

Personal finance, and the difference between good and bad deals, are always a matter of context.  What could be a great deal in one context could be a lousy deal in another.  Sometimes spending more money is better than spending less; other times, it’s the opposite.

When I read this article on Money Talk News which listed ten “dumb deals” that people fall for, I disagreed with most of them on the basis that these “dumb deals” were actually false economies in disguise.  As in, you feel like you’ve gotten a deal, but it actually ended up costing quite a bit more than whatever money wasn’t spent.

There were several themes to these ten items.  The premises of three of these themes were questionable, which I’ll discuss below.  (That, and ultimatums such as “There’s no excuse for paying to download e-books” just encourage me to say: “Challenge accepted.”)

  1. Libraries.  The premise: “Why buy ebooks / books / DVDs / magazines when you can just borrow them from the library for free?”  Why it can be a false economy: Well, here are several reasons:
    1. You have to go there twice — once to pick up the book, and another time to return it.  That takes time, and probably takes gas.  The county library is more than a 15-minute drive away, and the bigger one in the neighboring town is more than a half-hour away.  That doesn’t sound anything like “free” to me.
    2. You can expect to wait a while for the popular books.  My wife waited four months after the release of the latest Rick Riordan novel to check it out from the library.  The library bought twelve copies, and she signed up prior to the release of the book, and she was 95th on the wait list.
    3. Same thing with DVDs:  You have to go there twice.  It doesn’t take too many trips there to make a Netflix subscription cheaper.  Those DVDs are delivered to your door, and the selection of what you can watch far exceeds what any county library can offer.  If you love to watch movies, there are frugal ways to do it, but going to the library is at the bottom of the list, as far as I’m concerned.
    4. And once again, with magazines.  The only subscriptions we get in our house are ones we read cover to cover and got through a discounter, or ones that I got free with airline points that were about to expire.
  2. Generic vs. name-brand.  The premise:  “Why buy name-brand medications or name-brand anything else when generics are cheaper?”  Why it can be a false economy:  Sometimes the generic version is not only not “just the same,” but also can be detrimental.  It’s not one-size-fits-all:
    1. I know for a fact that sometimes the generic version of a medication has side effects different from, or is less effective than, the brand-name medication.  We had to get a formulary tier exception for one medicine my wife was taking because the generic wasn’t doing as it should.  She did research and her doctor agreed.
    2. Generics sometimes are just not a substitute.  Generic foods have a different, usually cheaper, composition.  Generic batteries leak and corrode the insides of your electronics.  Sure, give generic or store-brand a try, but it’s silly to go generic at all costs.
  3. Free vs. paid software. The premise:  “Why pay for antivirus software / phone apps when there are free ones out there?”  Why it can be a false economy:  It ignores the cost of free.  Pay with money, or pay with time and frustration.
    1. Using some free antivirus software, frankly, is a battle of wills.  Sure, you do get some functionality at no out-of-pocket cost, but then the “fun” begins.  Buttons to features that look great, but are only on the “premium” version of the product, or advertisements, or click-through gates that offer you the chance to upgrade when you start up the program.  Every.  Single.  Time.
    2. Some great apps are free, true.  But free or “Lite” versions of apps limit what you can do with them.  There was a free spreadsheet app that I downloaded to my daughter’s tablet to get her to track her cash jars.  It was noticeably clunky, and lacked any of the features that make Excel easy to use.  The result was that it really didn’t work.

Paying for something, or paying a bit more for something, isn’t dumb at all if you’ve discovered the hidden costs of the cheaper alternative.

It’s quite smart, actually.

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize the good deals in life.

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Comments

  1. nessili says:

    I’ll add my experiences with two of your examples.

    Library DVDs: Not only do you have the wait time to get the ones you want, but also (in our system), you can only check them out for 1 week. That’s a lot of binge-watching if you’re trying to get through a full season’s worth of TV. I put a hold on the second season of Castle for my parents in March of this year. Took so long to get them (3.5 months) that I’d forgotten I put in the hold in the first place. When the DVDs did finally become available, the timing was very bad, as neither of my parents had the free time to watch the show. Finally, it’s a $1 fine for every day the DVDs are late (as opposed to $0.10 for books). That gets real expensive real quick.

    Free software:
    I experienced this one the hard way. I’d always used free anti-virus/malware programs. They worked fine, until a couple years ago when I got hit with a particularly nasty virus by way of my bank’s website. Problem with the virus was, none of the free programs could identify it. I did a bunch of research online, desperately trying to find out what was going on, and the consensus of the online community was that the only program that could find and quarantine the blasted thing was Kaspersky. I did use their free downloadable program to rescue my computer, then promptly bought a subscription to get the full protection.

    And don’t even get me started on Open Office vs. MS Office. I did try Open Office, but quickly became willing to pay the (outrageous) price for the real deal rather than continue to sit there and struggle with OO to get it do what I wanted. I don’t have the time to waste with stuff like that.

  2. John Wedding says:

    Thanks for your comment!

    Yeah, pretty much exactly.

    At least there are relatively current shows in the DVD section. But, with all of that hassle, it seems to be not worth it.

    That, and there was an eBay auction for Castle Seasons 1 through 5 NEW (not used/abused by anyone who has a library card) and it went for $32 + shipping. This is to OWN all five seasons. And when they get sick of it? Back on eBay it goes!

    As for OpenOffice, yes it’s free. And MS can be very inexpensive if your workplace participates in Microsoft HUP.

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