They don't realise it's not worth focusing on saving a dollar here and there, if they then move ahead and overpay for a house or a car (e.g. by not negotiating).
Half the battle is getting a good (or great) deal on expensive, one off purchases, if possible (say everything above $2k). Don't worry about the rest. As with everything: 20% of the "work" gets you 80% of the way there.
You can then not worry about the smaller expenses -- the ones that are generally time consuming and annoying to track -- that tend to make your life miserable.
Yes, Starbucks is expensive, but you're not going to go bankrupt drinking their coffee. You're also not going to get rich by not drinking it.
> "Yes, Starbucks is expensive, but you're not going to go bankrupt drinking their coffee."
I observed people spending 5$ both morning and lunch/day, but for arguments sake stick to 1/day. thats roughly 1300$/year. now imagine living paycheck to paycheck and spending that (very common). they end up taking on dept @20% interest.
in a 5 year window, just that spending on starbucks is effectively costing them nearly 10,000$.
edit: keep in mind, i heard the average 401k savings is ~5k
As someone said, you will not get rich by cutting pennies.
I spend about $50 on starbucks a month, mostly on weekends in the morning, $500/y would be not such a big gain. On the other hand the quality of life I'm getting without good morning coffee would be much, much worse.
If I would need extra $500 that bad, I would consider doing some side work or even changing the job.
It's very easy to go over the top of living frugal and forget what is the sole point of earning money and living your life in a first place.
It really depends. There was a time when what i could have spent on Starbucks was equivalent to at least one main meal, so splurging on a drink like that was a luxury of sorts for when i had extra funds-- this was at tertiary school and got by with a PT job.
They're correct. You should spend the same amount of time to save a dollar on A as you do to save a dollar on B. And you should spend 100x as much time to save $100.
If you're willing to spend 10 minutes to save $100, then you are only willing to spend 6 seconds to save $1. If you can't immediately identify a way to save $1 that would take less than 6 seconds, then don't try to save $1. Each person has a different time/dollar ratio. Some people might be willing to spend 2 minute to save $1, and thus willing to spend 1 hour to save $30.
A house has to appraise at the sales price or else you can't get a mortgage. You can, technically, "over pay" but that would be from savings which most people don't have. Also most first time buyers don't put 20% down so it's even harder to overpay. As for cars you should buy a new car at a low interest rate and hold it or buy a decent used car. You have to figure out the math here b/c after cash for clunkers used cars cost more... then again you can sell your new car for more later as well.
Things might be stricter now, but back when I dabbled in real estate, the appraisal was a farce. The appraiser, the real estate agents, and the loan appraiser could always magically make the numbers work.
Well it's based on comps which is the last 3 houses to sell within your neighborhood. After 2008 things also got stricter. You can also "check" the appraisal by asking your insurance company for the rebuild value of your house. That may have limited utility though but if you have new development of similar sized houses in your area then the rebuild should be close to that and that will set a max prices anyway. Since why buy the old house when you can buy new. Again it's a limited argument but it's another data point.
I believe there are some new regulations that have taken the appraiser out of the back pocket of the bank. I'm not sure if it has made any difference though.
They don't realise it's not worth focusing on saving a dollar here and there, if they then move ahead and overpay for a house or a car (e.g. by not negotiating).
Half the battle is getting a good (or great) deal on expensive, one off purchases, if possible (say everything above $2k). Don't worry about the rest. As with everything: 20% of the "work" gets you 80% of the way there.
You can then not worry about the smaller expenses -- the ones that are generally time consuming and annoying to track -- that tend to make your life miserable.
Yes, Starbucks is expensive, but you're not going to go bankrupt drinking their coffee. You're also not going to get rich by not drinking it.