Why Some Decisions Don’t Make Financial Sense
Managing your money and making sound financial decisions is difficult. We budget and save and try to invest our money wisely, but sometimes we make choices in our everyday lives that don’t make financial sense.
Related: Why Do We Save?
Here are some of my miscellaneous musings.
Why is it that –
- Single income earners whose spouses raise their children at home qualify for less of a mortgage than two income earners with their children in day care?
When we applied for a mortgage on our first home, the mortgage lender qualified us using only half my salary. Apparently the theory then was that I would leave my employment once we started having children.
Since I was noticeably pregnant at the time it was probably a reasonable expectation, but these days it would be considered incredibly sexist.
But let’s think about this. Mortgages are approved based on current gross income. Realtors love this.
How much are you pre-qualified for?
We’re approved for a mortgage of $400,000 and have $25,000 for a down payment.
Great! Let’s start looking at these houses in the $450,00 – $475,000 range.
And before you can catch your breath, you get sucked in to the excitement of house hunting.
A house purchase is a long-term commitment and you don’t want to end up house poor. It would be advantageous to discuss future expectations and perhaps buy a smaller house and take on a lesser mortgage amount that would be more comfortable in the long run.
Why is it that –
- People moonlight for a for a few extra dollars to make ends meet, and then go out to eat or buy convenience foods because of lack of time?
In many cases a second job – evenings and/or weekends – will not pay a great deal. When you take into account the travel to and from your employment, perhaps special clothing needs, a quick stop for a fast food supper – and increased taxes if you get bumped to the next tax bracket – you may want to rethink the type of employment you moonlight at.
Why is it that –
- Some people will drive across town to save a few bucks on a small purchase?
You see this often with people who will go out of their way to a distant gas station to fill up their vehicles. Grocery shoppers will visit several different stores to take advantage of sale prices from the flyers.
This used to drive me crazy when I stayed with my parents for a few months to help them out. Almost every day we drove all over town to buy one thing at this store, another thing at that store, and yet another item at a different place. Then we’d go home, unload and start all over again!
There’s nothing wrong with comparison shopping and picking up good deals – but make sure the savings are worthwhile, or that you’ll be in the vicinity of the stores in question.
Why is it that –
- People don’t donate money to charity but will buy over-priced merchandise they don’t need because it’s for a good cause?
The worst offenders for this type of sales are schools and children’s activity groups. I realize fundraising is important in order to pay for the various programs, activities and field trips.
Perhaps they feel it builds good character to turn youngsters into little salespeople when in reality it becomes up to their parents to flog the items at their workplace.
I would much rather donate the cash to a worthwhile cause than buy yet another scented candle, Christmas ornament or case of grapefruit.
Why is it that –
- People will order a big iceberg lettuce salad for a diet lunch, then pair it with a double chocolaty frappucino at 500+ calories?
Final thoughts
Everyone wants to save money, or earn a little more – but you need to use good sense (and the right tactics) or you’ll end up wasting time and still not getting any further ahead.
Why is it that some people shop online to get a better deal on an item, but neglect to factor in shipping which makes the item more expensive?
And worse still, some people will add an item they don’t necessarily need to their online shopping cart in order to reach the free shipping threshold.
@Echo: That’s a good example. It gets even worse when you buy something from the US and get dinged with a hefty customs charge.
Before I purchase something online, I compare the price in store first. If it’s too big of a difference, then I buy them. Or I look for a free shipping code that I can use.
I wanted to yell at the TV the other day. I was flipping through the channels and property virgin was on in the background. She had just finished congratulating the couple on taking advantage of the RRSP home buyer’s plan… and the size of their downpayment. Then said “why do you want to stay below such a low price point” or similar.
When I was in elementary school, I was one ridiculously confused and perplexed by some friends who were girl guides. When people gave them extra donations with their cookie purchase, the kids turned around and used that money to sell the cookies at a discount for other people. Holy defeating the purpose batman. If I had given them the extra money, I would have been sooo upset. Plus, the parents were in on this. *idiots*
@Anne: People like realtors and mortgage lenders are dealing with a one time sale for them so they are not bothered by possible future problems. When the deal is done, it’s done and they pocket their commission and move on to the next deal.
Home buyers these days seem to want their dream house on the first purchase. What happened to buying a lower price starter first? That way you can build up some equity and know from experience what features you want in your next home. Our first house didn’t have a garage, and after scraping my car windows for several winters I knew a garage would be high on my priority list for the next house.
As for the GG cookies I not only would be upset if I had given the cash, if I would have paid full price for their expensive cookies I’d be choked to find out others got a discount 🙂
I laughed at the last one, although it’s actually pretty sad. I think some people simply don’t think at times, or are unable to plan more than a couple of days ahead. Emotion is another thing that overwrites thinking a good majority of the time.
@Anton Ivanov: I guess you could offset a high calorie treat with a no-cal lunch, but I find if I just eat a plain salad I’m starving within an hour or so and looking for anything I can stuff in my mouth – especially Boston Cream donuts 🙂
It sounds funny for sure, but maybe they are all wise enough to add up the total calories. However, this is a financial column and without some numbers it is hard to comment on the choice. (Personally I think it is a shame to add milk or sugar to a nice cup of coffee regardless of price!)
Sometimes you have to wonder at some peoples logic.
Some years ago we moved my parents from their house into an suite in our house.
LONG prior to the move we suggested they downsize their stuff and in fact GET RID OF ALL OF IT because almost everything was 60 years old and worthless. The cost of having their stuff moved cost over $4500. They could have bought all NEW stuff that would have fitted their new suite at Ikea for half that price.!!!
In the end after they went it cost me money to get rid of their stuff………….. NO CHARITIES were interested in any of it.
PS re the above……… these were the same people who would buy 5 lbs of cheap tomatoes etc. because they were on sale and then throw 4 lbs away because they couldn’t eat them before they went bad !!!!
After they went I also threw away OVER 85 empty glass jars…….
@David W: Did we have the same parents, or is it a generational thing? How often did your parents use the magic phrase “It’s still perfectly good”?
@David W:
@Gerard:
I hear you. My mother-in-law used to dig through her giant freezer and pantry to give us “perfectly good” food that I swear she bought on sale several decades ago judging from some of the price stickers. We’d just thank her and toss the items in the garbage when we got home.
While going through my own junk I say to myself “Is this item worth paying to move?” and that helps me get rid of a lot.
I’m in my mid-twenties and many of my friends still live at home, complaining they don’t have enough saved up to move out. Yet they will go out drinking on weekends, charge it to their credit cards (which they don’t pay off in full each and every month). They won’t pay more than the minimum on their student loans. I try to talk sense into them, and even refer them to this website frequently, but they just don’t listen/get it. I think they (and many others) have an ignorance towards their own lack of money discipline. I don’t have a good feeling they will grow out of it any time soon either.
Two confessions:
1. I’ve caught myself (a week or two too late) once or twice buying items at Safeway just for the Airmiles. [“We’ll use the Tylenol some day” — Four bottles of the stuff??]
2. When moving back from overseas, I paid to have a very heavy exercise bike shipped home. I do use it occasionally, but it would have been a lot smarter to have sold the first one, and bought a new one in Canada.
On the other hand, I don’t waste money on a cell phone that I really don’t need, so I guess it evens out in the end.
I highly disagree with your remark about school fundraisers, or buying an overpriced item because the proceeds go to charity. I think however you want to give is the way you want to give. I view my child’s school as one of the most important “causes” in my life. This is the building where my two kids go every day. Do I want it to be safe and sound? These are the resources my children will be using every day. Do I want them to be the very best and the most advanced there are available today? Of course I do. And as for the parents that get stuck selling the goods at school? That’s their problem. Any fundraising my girls get from school we go out and scour the neighbourhood together. Not only is it a good teaching lesson (not to make them salespeople, but to see that in order to get a little you’ve got to give a little,) but it also gets us some fresh air, and some FREE quality time together. Sure we could just go to the park, and we often do. But if we can help out the school, and ourselves, at the same time, how is that a waste of money, or a decision that doesn’t make good financial sense?
Why is that people have a $10K emergency fund at 0.1% a $20K worth of credit card debt at 19.9%?
Does not make financial sense but some need the peace of mind.
Nice post. The thing is investments are only part of being financially responsible. Buy decisions also have financial implications that most people do not take into account as you aptly point out with your examples.