Don’t take the bait!
Years ago when I was a newly minted executive director of a professional association, I was mentored by a wonderful public official who had been on the board of the organization for many years and was the President/Board chair for a while too. During that time, we spoke every week. Her name was Elizabeth D. Puddington, but had been nicknamed “Sue” as a child by her mother for reasons unknown even to Sue and that is what everyone called her. She was the CEO of an Intergovernmental Risk Pool. Kind of a nonprofit insurance company for public entities. She had a lot of accumulated wisdom much of which I still draw on. Once, in a casual conversation, she gave me a rule of thumb that I still often apply today.
We were chatting and somehow the subject turned to rental cars. We started discussing the then new scam of the rental car companies to pre-sell you a full tank of gas at a reasonable price per gallon at the time you rented the car. This supposedly would have you avoid paying the car rental company to top off the tank at an absurdly high price per gallon, if you returned the car less than completely full. The problem with this is that now if you returned the car with more than an empty tank, you were paying for fuel you didn’t use. The solution, of course, was the same as it had always been. Decline the pre-paid tank and return the car full. It is, of course a pain to stop on your way to the airport and fill the tank. But that 5 minutes of time could be worth $50 dollars to you or your organization. Of course, the car rental companies were pushing this pre-paid fuel hard along with the insurance that you probably didn’t need because it was provided either by the credit card you were using or covered on your own auto policy. Why? They make a lot of money on these “little” add ons.
Sue then said the prophetic words I remember to this day:
“If they want you to do it, it’s probably a bad idea.”
Say this to yourself the next time someone is trying to get you to buy something extra or to pay for it in some way other than, you pay in full and walk away with the thing you intended to buy and all business concluded.
Yes, I know good companies don’t just want a sale they want a “relationship” with you. They want to take you on a journey. But if I may be cynical for a moment here, the only journey that is being undertaken is the journey of money from your wallet to their corporate coffers, executives, and shareholders. Buy your books from Amazon (if you must) but get your love at home.
Here is my partial list of probably a bad idea.
Pre-paying for gas (or anything) on a rental car.
Paying for extra liability or collision insurance on a rental car Check your home auto policy or credit card to make sure you are covered so you are ready to decline if you can. Have proof of insurance with you. The rental company may ask for it.
Leasing a car, instead of buying it outright (this almost never makes financial sense)
Purchasing the “extended warranty” on a vehicle. Car companies make a ton of money on these, paying out just pennies on the dollar. The fact that they pressure you heavily to do this reflects exactly what a horrible deal it is! One time, I was buying a new car and refused the extended warranty which would have added $1,500 to a car that cost $12,000 (yeah, it was a few years ago). When I pointed out that my other car was more than 5 years old and I had never had an issue with it, the salesman actually told me that the car I was buying from them wasn’t as well made as my old car. Way to inspire confidence! I declined the extended warranty and drove that car for 22 years until pieces of it started falling off from rust. Never had an issue that would have been covered by the warranty.
Buying or selling stocks or other securities in response to market conditions. Adopt an investment strategy you can live with and ignore the market. Brokers and money managers charges fees, sometimes hidden, when you trade.
Paying someone a percent of your total assets to manage your money. How did this become a thing? Can you imagine if you went to an attorney to prepare your will and they wanted 1 percent of your total wealth to do it? Or you paid your car mechanic a percentage of the value of your car for each repair? If you must pay someone to manage your money for you, choose a fee for service type model. The percent of assets under management model can cost $100,000s or millions over the course of 30 years of investing. Find someone else. Better yet, learn to do it yourself. It’s not that complicated.
Buying a house with less than 20 percent down and paying mortgage insurance. Yes, I got suckered by this one years ago. Horrible deal and a good chance that in a down market you will end up owing more than you can sell the house for and be stuck if you need or want to move.
Buying a Whole Life or Universal Life insurance policy as an “investment” instead of just the term life you need. Insurance is a risk management tool. Not an investment. Buy inexpensive term life and invest the rest properly.
Buy now, pay later. No! Do not! Save up for what you want and pay for it all at once. I don’t care how expensive it is.
Adjustable rate mortgages, if you have one of these right now, you know what I mean.
Cashing one of those idiotic checks credit card companies are always sending or taking one of those introductory no-interest for 6-month deals. (Shred these without opening the envelope.)
Giving your email address or phone number in order to get a 10 percent discount on your first order. They will pester you incessantly until the end of time. It’s not worth it.
All rewards credit cards except those offering simple cash back and then ONLY if you pay in full every single month without fail.
Signing up for a credit card at check-out to save whatever percent. You have enough credit cards, don’t you? Many too many?
Almost any product that requires a subscription to use. Yes, I have a few of these. A cell phone, an emergency beacon for the backcountry, trail maps software, financial software. They are hard to avoid these days. Make sure you are reviewing them monthly or annually to make sure that they are still something you value. When my SOS beacon subscription came up for annual renewal, I checked what they were charging me against the website for what they were charging new customers. New customers were paying far less. I called the company and they lowered my price to the price on the website saving more than $100. Subscriptions are easy to buy and hard to cancel.
Any item that is displayed on the aisle endcap at the grocery store unless that exact item is on your shopping list. ‘Nuff said.
Product ‘protection’ for anything including AppleCare! AppleCare used to make some sense for laptops back in the days when they often broke at least once during the first 3 years. The cost of repair for a broken display or dead hard drive could be many $100s. I used to buy it and it paid off maybe half the time. Now Apple computers almost never break within the first 3 years unless you drop them. My MacBook Pro is in its 8th year. I have only ever paid to have the battery replaced in 2020.
iPhones are very sturdy these days. If you are reasonably careful, you won’t break it. They are even waterproof! A good case costs less than AppleCare and seems to me reasonable insurance. Some people hate cases and are just careful.
That is a short list. I can think of many more and I am sure you can too.
Generally speaking when someone asks you to add something to your purchase that is different from what you originally intended to buy, your first impulse should be to say no. If you are tempted, stop and do your research to determine if it makes sense. The more dollars involved the more research you should do. If you want to impulse buy the extra value meal because they pushed it or an appetizer that sounded good, well ok. But before you lease a car make sure you understand why they are pushing you to do it. What’s in it for them?
It’s all about that journey.