20 Frugal Decisions That Often Backfire

Our guide outlines twenty common frugal decisions that often backfire, leading to higher costs and poor outcomes. We explain how to avoid common pitfalls and make smarter financial choices, prioritising long-term value, quality and happiness.

Updated 21 October 2024

Summary:

While you can never go wrong looking for value for money and challenging general spending, there are some traps. Many seemingly frugal decisions to save money in the short term can lead to unexpected costs, poor-quality outcomes and financial setbacks over time.
We've created this guide to help you identify and avoid common mistakes that may appear cost-effective initially but ultimately reveal themselves as 'cheap and nasty' and cost more in the long run.
This guide encourages thoughtful spending habits and highlights the importance of quality and long-term value over short-term savings. It's the first version; as always, we welcome your thoughts on how we can improve it.

Know this first:

The points below focus on quality, but there is also the risk of buying expensive items of poor quality. For this reason, online and user reviews are more important than ever. Price is no guarantee of quality. Word of mouth and recommendations are valuable.
Users on Reddit note the relevance of the Sam Vines Boots Theory, highlighting the hidden cost of cheap goods. Spending less upfront often leads to spending more in the long run, as low-quality items wear out quickly, forcing repeated purchases. Unfortunately, it's often expensive to be poor—those on lower incomes may not have the luxury of 'buying quality' and are trapped in this costly cycle.
Storage costs make housing and 'life' more expensive. Our view is simple - consider the cost of your space when storing items and challenge yourself if it's worth paying for storage to keep things you'll likely never use again. Declutter first - spending money organising or hiding things you don't need isn't frugal.

Skipping Car Servicing

Cars are expensive to own – we argue they're a huge debt trap if you finance on unaffordable terms, and some makes and models offer poor value when you insure them (compared to cheaper models). However, one cost that can't be ignored is regular car maintenance. Services can seem like just another ongoing car cost, but doing them minimises the chances of catastrophic breakdowns, exorbitant repair costs, and safety risks.

Our View: Regular servicing fixes minor issues early before they cause major problems that cost a lot of money and leave you stranded. Additionally, poorly maintained cars often have lower resale values, meaning skipping regular servicing puts you further back if you decide to upgrade later. We believe that regular services is money well spent to keep your car in good shape and pays off through fewer breakdowns and a more reliable performance.

Buying Cheap Shoes That Aren't Comfortable

If you rationalise the 'price per day', buying comfortable shoes that go the distance is an excellent return on investment. Cheap shoes often wear out quickly which means you're spending money replacing them. And so the cycle repeats. This can also lead to long-term foot health issues and greater overall costs compared to investing in durable, high-quality footwear.

Our View: Beyond foot health, poorly made shoes often lack the support needed for your knees, back, and hips, potentially causing joint or muscle pain later on. For anyone who spends a lot of time on their feet, comfort isn't just a luxury – it's a necessity, and the key is to focus on quality over quantity when it comes to your footwear.

Cutting Insurance Costs

Our guide to sum insured explains why it's crucial to make sure you're sufficiently covered for your home and contents. Too often, people don't appreciate the replacement value of what they own and underinsure as a result. The same issue happens with car policies – while third-party policies can be significantly cheaper, replacing a written-off car is getting more expensive and you may not have the money on hand to do so.

However, comprehensive insurance also has the issue around market value vs agreed value, which becomes a problem if you make a claim and find out that the payout is less than you thought. The best approach to getting general insurance is to make sure you understand exactly how much the payout will be should you need to claim.

Life-related insurance such as health, life, income protection, redundancy, and trauma policies can quickly add up in ongoing costs. The best approach is to consider insuring for the highest risks and see if the ongoing cost is worth the potential benefits. Our extensive guides have more information about each type of policy.

Our View: Insurance is about risk management, and cutting costs can leave you vulnerable when unexpected events happen. For example, under-insuring your home could mean having to cover significant costs out-of-pocket in the event of a natural disaster, of which there are more and more in New Zealand. In the long run, ensuring you're well-covered protects your financial future and prevents short-term savings from turning into long-term debt.

Buying Short-Dated Meat

Meat costs throughout New Zealand are high, but buying discounted meat close to its expiration date is, at best, safe and, at worst, a fridge-sitter that you may be reluctant to use. Some short-dated meat may already be passable, which you'll need to throw away if it's already spoiled.

Our View: Short-dated meat is just too risky to be worth the 40-70% discount. You can get sick so easily, and while meal planning and freezing can extend the life of meat, it can easily become a freezer filler.

Investing in Cheap Appliances

There was a time when appliances lasted for 'life', but now many things are arguably made to be replaced so their manufacturers can 'generate more revenue'. It's depressing, but the state of the global economy's drive for 'growth'. We argue that buying low-quality appliances can lead to frequent breakdowns, inefficiency, and costly repairs or replacements, which is a hassle given the essential nature of an oven, fridge, microwave and stovetop. Spending a bit more upfront on reliable appliances that are tried, tested, and have an excellent reputation is likely to save money and avoid frustration in the long run.

Our View: Cheaper appliances also tend to be less energy-efficient, increasing your power bill over time. When calculating total cost of ownership, it's important to factor in not only the initial purchase price but also how much energy or water the appliance uses, and how much time and money will be spent on repairs. Quality appliances are enjoyed long after price is forgotten.

Avoiding Regular Investing

Compounding returns are the secret to having financial freedom. While it's increasingly harder to navigate the high cost of living throughout New Zealand, not investing or learning about finances early on will result in missed opportunities for wealth growth and financial stability.

KiwiSaver isn't compulsory but contributing supports wealth, and the government even gives you up to $521 every year if you contribute just over $1,000. Our guide explains how valuable this can be. New Zealand is increasingly becoming a 'have and have not' society, and while unaffordable housing is a major contributor, not having investments or savings is making retirement tough for hundreds of thousands of those 65+.

Our View: KiwiSaver is low-fee and designed to help you grow your wealth. Our research into compounding returns from just making small contributions shows how far $1,000+ a year can go if you start early enough.

Investing isn't just for the wealthy. In fact, small, regular contributions to a diversified investment portfolio can accumulate substantial wealth over time. Many avoid investing out of fear of loss or because they feel they don't have enough money to start, but the truth is that the earlier you begin, the more time your money has to grow. The longer you delay, the more opportunities you miss for your savings to work for you.

Buying a Cheap Mattress

Investing in a very cheap mattress can lead to discomfort and health issues, while a moderately priced one can offer better long-term value. While furniture shops often offer 0% finance deals, as outlined in our interest-free credit cards review, we are cautious about using such cards unless you have the money to repay the balance when it's due, given the high interest costs. For affordable, high-quality mattresses, our best mattresses guide is a useful starting point.

Our View: Poor sleep can lead to a host of health problems, including back pain, fatigue, and cognitive decline, all of which can affect your productivity and quality of life. By investing in a mattress that supports good sleep hygiene, you're also investing in your long-term health and well-being.

Inexpensive Fast Fashion and Clothing

We're not a fan of wear-it-twice clothing for both environmental reasons and the waste of money they generate. Low-quality, cheap clothing items that fall apart after one wash aren't a 'bargain' and just cost more in the long run compared to durable, higher-quality options.

Fast fashion is often enticing because of the low price tags and the constant stream of new trends, but cheaply made pieces are likely to fade, shrink, or tear after minimal wear.

Our View: Buying durable clothing, even though it's almost always more expensive upfront, reduces the frequency of purchases and overall wardrobe costs. We believe it's better (and cheaper) to build a versatile, long-lasting wardrobe than constantly replacing cheap, disposable items.

Cheap Washing Machines

Low-cost washing machines can be expensive to run, inefficient, and noisy. While the investment for a higher-quality model will cost more, you have a better chance of avoiding the need to replace or repair them. Our guide to proven washing machines is a helpful starting point.

A poorly performing washing machine can also cause wear and tear on your clothes, leading to faster deterioration and additional costs for replacements.

Our View: Cheap machines often lack water and energy efficiency, meaning you'll pay higher power bills over time. Furthermore, the frustration of dealing with breakdowns or inefficient cycles can be avoided by investing in a reliable, energy-efficient model that will last for years.

Underestimating Long-Term Interest Costs

Opting for low or no-interest payment plans may seem like a win initially, but any missed payments will cost you hefty late fees and, often, higher 'penalty' interest rates. When it comes to loans and financing, it's crucial to understand the total cost of borrowing, including any compounded interest over time. Making an upfront payment, when feasible, may ultimately save you far more than spreading it out over time with hidden fees or charges.

Our View: New Zealand is awash with debt. If you are concerned about your financial future, we suggest considering a Financial Coach, Budget Advisory Service, and look at our guide to debt help.

Christopher Walsh shares his thoughts on being frugal and why you need to be careful:

"Cheap solutions often come with hidden costs, whether it be poor quality, higher maintenance, or even risking your health and safety. People may save a few dollars in the short term, but in the long run, those decisions can lead to higher costs. The examples on this list explain how.

There's also a personal and social cost to being overly frugal. You don't want to get a reputation for being cheap, especially when it comes at the expense of quality or fairness. Whether it's in your personal relationships or business, people value those who invest in quality and reliability. Being known as someone who always goes for the cheapest option can erode trust, and that's a cost you definitely don't want to pay.

Another key consideration is the long-term impact of always choosing the cheapest option. Over time, this habit can create a mindset where value is overlooked, and every decision is driven purely by cost. This approach often leads to more frequent replacements, lower-quality experiences, and even missed opportunities to invest in things that can actually save you money in the future. From poor-quality household goods to insufficient insurance coverage, cutting corners can backfire in ways that significantly outweigh the initial savings.

Lastly, frugality can lower your overall quality of life. Constantly sacrificing comfort, reliability, or peace of mind to save a few dollars can affect your well-being subtly but meaningfully. Whether it's health issues from poor sleep on a cheap mattress, stress from unreliable appliances, or the frustration of constantly fixing things, these 'savings' can take away from the joy and ease that comes from investing in products and services you can truly rely on".

Christopher Walsh
MoneyHub Founder

Ignoring Professional Help

Avoiding professional services for tasks like home repairs can lead to subpar results and higher costs to fix mistakes. Professional services ensure quality work and prevent costly errors. While DIY solutions are tempting for their immediate savings, there are times when it's far more cost-effective to hire a professional.

Our View: It may sound obvious, but improper plumbing or electrical work can lead to serious damage and potentially dangerous situations, resulting in higher repair bills later and, possibly, a denied insurance claim if there's a damage event. Professionals come with the right tools, experience, and guarantees, saving you time and money in the long run.

Buying Cheap Electronics

Buying low-cost electronics can result in frequent malfunctions and replacements. Investing in reliable (but sensibly priced) brands ensures better performance and longevity, saving money over time. Cheap (and 'nasty') models may lack critical features or future-proofing, which can make them obsolete faster.

Our View: Proven models - laptops, phones, kitchen appliances - usually mean fewer breakdowns and replacements. You also benefit from trusted warranty coverage and access to customer support. Buying and replacing gets expensive - avoid by buying quality upfront.

Skimping on Home Insulation

While skipping or opting for low-cost insulation might seem like a quick way to save money, it often leads to higher energy bills and a less comfortable home environment. Best of all, per this July 2024 RNZ article, it's not a significant upfront cost. Proper insulation helps maintain a stable temperature in your home, reducing the need for excessive heating in winter and cooling in summer.

Our View: New Zealand's arguably lacking housing standards mean expensive-to-heat and drafty homes. Poor insulation can lead to moisture buildup, which leads to mould growth. Investing in quality insulation upfront ensures long-term savings, a more energy-efficient home, and improved overall comfort.

Cheap Furniture

Low-cost furniture often lacks durability and comfort, leading to the need for frequent replacements. Investing in quality furniture provides better value and longevity. Furniture that's poorly made can wear out quickly, become uncomfortable as it breaks down. While it might be tempting to buy low-cost items for immediate needs, investing in well-constructed furniture saves money over time.

Our View: We are not implying that everyone needs to buy BoConcept pieces, but quality pieces, even if more expensive front, last longer and offer more comfort, making your home environment more pleasant. Well-made furniture also tends to retain some resale value, unlike cheaper options that typically wear out and have no second-hand appeal and end up in a landfill.

Avoiding Professional Financial Advice and/or Financial Coaching

While financial advisors are often seen as either excellent or fee-hungry, financial advice is a valid service and continues to enrich and assist hundreds of thousands of New Zealanders every year. Many people invest independently, which has its risks if there is a lack of diversification. Our list of financial advisers is a helpful starting point for seeing the number of fee-based advisors. It is a list that was helpfully first curated by Mary Holm.

Our View: Too many New Zealanders make poor financial choices, and this leaves them with much less money to retire or holds them back from making significant financial decisions later on in life. Skipping financial advice because you believe you'll pay fees can lead to poor financial decisions and missed opportunities. While there are many advisers operating 'without a clue', trusted Financial advisors can provide guidance tailored to your specific situation, help you set realistic goals, and offer strategies to grow and protect your wealth. Without this professional input, you risk making costly mistakes or missing out on opportunities for financial growth.

Cutting Costs on Fitness

Avoiding gym memberships or quality fitness equipment to save money can impact your health and well-being. Investing in your fitness ensures better health outcomes and reduces medical costs.

While gym memberships and fitness equipment may seem like unnecessary expenses, prioritising your health has both immediate and long-term benefits. Regular exercise helps prevent chronic diseases, reduces the need for medical treatments, and improves overall quality of life.

Our View: Poor fitness can lead to increased healthcare costs, lost productivity, and diminished mental health. Investing in a quality gym or equipment can provide the motivation and tools you need to stay active, leading to better health and saving money on medical bills down the road.

Low-Cost Travel Options

Flying long-haul with 8-hour layovers to save $100 on an airfare can leave you uncomfortable, as can 6am flight departures which lead to a night of lost sleep and being tired. Sometimes paying $50 for a flight after 11am, or even an extra night of a hotel and arriving a day early (if you're leaving after work and/or school) can be more cost-effective as you maximise your time away, don't have early morning wake-ups and arrive refreshed with more time on the ground.

Our View: Cheap flights (not to be confused with cheap airlines, which, if they go direct, are excellent), often means compromising on comfort, with long layovers, inconvenient departure times and added stress. This can lead to poor sleep, fatigue, and a less enjoyable trip. Additionally, while budget flights might seem like a great deal, they often come with hidden fees for luggage, meals, or even basic seat selection. Sometimes, paying a little more upfront results in a smoother, more enjoyable experience and, ultimately, better value for your money.

Ignoring Dental Checkups

Skipping dental checkups may seem like a way to save money, but the long-term costs of untreated dental issues can far outweigh the cost of regular cleanings and exams. Routine checkups help prevent cavities, gum disease, and other oral health problems, which, if left untreated, could require expensive treatments such as root canals, crowns, or even extractions.

Our View: Regular dental care ensures that small issues are caught early, preventing more costly and painful procedures later on. Investing in your dental health is an important aspect of overall well-being, as untreated oral issues can also lead to other health problems, such as heart disease and diabetes. Our guide to dental costs and dental plans cover what you need to know.

Buying Low-Quality Kitchenware

Opting for cheap pots, pans, or utensils may seem cost-saving, but they often quickly warp, scratch, or lose their non-stick coating. This means you're having to buy replacements, and many cheap versions can negatively affect the quality of your cooking, with uneven heat distribution leading to undercooked or burnt food.

Our View: Quality kitchenware is an investment that lasts for years, offering better performance, durability, and safety. Well-made cookware can improve your cooking results, making every meal a more enjoyable experience. A sturdy pan that evenly heats will pay for itself in less stress and tastier meals.

Cheap Paint for Home Renovations

Saving money on paint might sound like a great idea, but low-quality paint often requires more coats to achieve the same finish and may fade or peel quickly. This means you'll be redoing the job sooner than expected, incurring extra costs in both materials and labour. Also, it just doesn't look as good, and you'll likely notice the difference to the point that it will be annoying.

Our View: Investing in high-quality paint from reputable brands may seem expensive upfront, but it almost always offers better coverage, durability, and longevity. It also helps enhance the overall appearance and resale value of your property.

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