Don’t Be Pound Wise but Penny Foolish

penny foolish

Coupon clippers and other frugal types are under constant scrutiny by those who are eager to call them “penny wise but pound foolish.” “You might be saving pennies there,” the naysayers say, “but you waste dollars on the big things.” While penny pinchers who overlook big savings are common enough to make “penny wise but pound foolish” a cliché, I more often see those who are pound wise but penny foolish.

In fact, those who love to call others “penny wise but pound foolish” are often the ones who are the most penny foolish. The very act of scoffing at coupons and other means of saving small amounts of money demonstrates a lack of penny wisdom. No, a single dollar-off coupon won’t pay your mortgage, but consistently saving a quarter here and a dollar there might. For most people, the bulk of spending isn’t in a few big purchases but in regular small purchases – a tank of gas, a carton of eggs, a package of light bulbs. Likewise, most savings opportunities are for small amounts.

People who are pound wise but penny foolish shop around for the big items, carefully evaluating each home, vehicle, and appliance purchase, but they quickly spend their savings on less expensive things they don’t really need and never use. It doesn’t matter whether money is wasted on paying too much for a dishwasher or on buying a book that never leaves your shelf; that money is still gone.

Even making large purchases after carefully comparing prices can be unwise (both by the penny and the pound) when those purchases are meant to replace things that still function perfectly well. Unnecessary replacements and upgrades can negate savings when the life of a product is cut short. For example, if you spend $900 instead of $1,000 on a plasma-screen television that normally lasts three years, each month of use should cost you $25. However, if you replace it with a newer model that catches your fancy after only two years, even though the $900 television is still good, that original television costs $37.50 per month of use, and you actually wind up wasting $50 instead of saving $100. (The difference between the two per-month costs would add up to $150 over the year that you’re using the new television instead of the old one.)

Penny foolish people don’t know what prices should be for small items. They say, “Well, it only cost $2.00, so I bought it.” It doesn’t matter to them that most stores sell the same item for $1.00. Dollar stores make a lot of money this way. Shoppers assume they are saving money by shopping there, and they do save on some items, but on other things, they will spend $1.00 for something for which they would only pay $0.59 at the grocery store.

Some penny foolish people ignore the price tags completely. I can’t imagine buying anything without looking at the price, but apparently, it’s a common practice for quite a few people. According to Paco Underhill, author of Why We Buy, fourteen percent of women and eighteen percent of men don’t look at price tags when they shop. Those who don’t look at prices are highly susceptible to paying far more than something is worth.

To best manage your money, it’s important to find a balance. Don’t be pound foolish or penny foolish. Instead, know what the things you buy should cost and take time to find good prices for all your purchases. Buy only things you will use, and keep them until they truly need to be replaced. And don’t laugh at any methods of saving money, whether they save $0.25 or $2500, without first trying them – or at least seriously considering them.

Image courtesy of Jonnny

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8 Responses to Don’t Be Pound Wise but Penny Foolish

  1. Annie J says:

    This is a great post! I’ve written a couple of posts about the small savings being just important as the large ones.

    Every penny counts!

  2. fern says:

    There are too many people who focus an inordinate amount of their time and energy saving a quarter with a coupon or driving 5 miles out of their way to buy some grocery sale items. That may help you pay off your mortgage some day if you live to be 109, but you’ll get there much faster if you focus your energy on saving big, where it counts, whether that’s refinancing your mortgage or shopping around for auto insurance and taking advantage of all the discounts your insurer offers rather than looking for loose change on the street.

    You made a lot of generalizations in your article. I spend a lot of time looking for savings on the big stuff, but i don’t lose all restraint when it comes to everday expenses, either. It’s an ingrained habit, so it’s hard to imagine someone being disciplined about the major expenses and then suddenly letting loose when it comes to smaller things. If you’re frugal by nature, it tends to permeate every aspect of your life.

  3. Meg from The Bargain Queens & All About Appearances says:

    Shannon makes some good points, but I also agree with Fern.

    I don’t advocate going crazy buying things just because they’re ‘cheap’, but it’s very easy to waste too much time, energy, and gas trying to save a few pennies,

    So long as one isn’t buying a lot of small items, I think it’s more important to focus on finding savings for the big items. That’s why I am very, very careful about big purchases, but I don’t tend to shop around for small items. My time is worth more than that.

    As for coupons, I don’t mind using them, but I find it very hard to come across good ones — i.e., coupons for things I actually want to buy from where I want to buy them (especially since I don’t get the paper). So, I usually don’t bother.

    Instead, I buy generics whenever possible. They’re often cheaper than using coupons because the coupons are for the name brands and are overpriced to begin with.

  4. Robert says:

    I agree totally. Just the other day I was looking at ebay just to pass the time and was thinking of gift cards. So I was looking at gift cards on ebay and was quite surprised to see prices on some of the auctions go over the value of the card, not even taking the shipping and handling into account. That just made me wonder if people pay any attention at all sometimes.

  5. Meg from The Bargain Queens & All About Appearances says:

    Robert,

    That’s hilarious!!!

  6. Alexandria says:

    I think there is some middle ground here. I would proudly call myself penny foolish, but don’t identify with most of the article. I don’t think penny foolish people spend hundreds of dollars will nilly. (On a TV upgrade in 2 or 3 years? Are you kidding me? Even my videophile spouse would find that to be crazy).

    But I don’t waste my time saving $1 or less here or there.

    The interesting thing is I did spend much effort pinching pennies in years we were broke or were living on minimum wage. With a high wage today, I am better off forgetting the pennies. Phew. There is certainly a time and place for penny pinching.

    Unfortunately I know WAY too many people penny wise and pound foolish. Way too too too many people. I have doctor clients who do not spend enough time making money because they are wasting their time chasing few dollars. The difference shows. Our docs who do not watch every single penny and focus on their work earn so much more, net. OFten 25% more. But there is middle ground. Of course there are those who pay no attention to their finances and spend willy nilly. They’re just foolish all around. (They also tend to be the ones not bringing in the revenues because they are too busy playing with all their stuff).

    I haven’t really come across anyone as described in your article. I am sure they exist, but I think it tends to sway the other way more.

  7. Debbie M says:

    Robert, I have a friend who sold a gift card on ebay for more than it was worth. When she asked, the buyer had some weird story about wanting this card which he couldn’t buy where he was but which was perfect for a person he knew. But then it turned out to be a scan and my friend never got any money.

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