Is what you believe about spending helping or hurting you? Find out what mistakes to avoid.

There are a lot of beliefs about spending and some are out-of-date, don’t work or are simply misguided. What you believe about money could be hurting you financially. Keep reading to see if you’re making mistakes based on bad financial advice.

Mistake #1: Buy the cheapest option

When is a bargain not a bargain? When the product costs more in the long run.

Buying the cheapest cars, clothes, appliances, or equipment can cost more because they may not last as long as you need them to. Buy cheap things and you’ll buy them over and over again.

Fast food might seem like a frugal move until you consider the long-term health effects. Healthy food is cheaper than managing long-term diseases like diabetes or paying for weight loss programs.

A cheap mattress that quickly sags can create back problems that can be painful to both your spine and pocketbook.

Cheap doesn’t necessarily mean less expensive.

Mistake #2: Buy because it’s on sale

50% OFF … BUY ONE, GET ONE FREE … FLASH SALE!

Offers like these are designed to motivate you to spend. If you were already planning to buy the item on sale, enjoy the savings! However, many of us are enticed to spend just because we see something on sale.

If you find it hard to resist sales, you need a pre-shopping plan—whether you’re getting goods online or in a store.

Make a list before you start shopping and stick to it. If you come across a deal that catches your eye, ask yourself:

• Would I buy this even if it weren’t on sale?
• Do I really need it?
• Is it really a sale, or were prices inflated to make it seem like a sale?

Mistake #3: Go without insurance

The cost of insurance can take a significant part of anyone’s budget. Together, annual premiums for auto, health, and homeowners/renters insurance can run in the thousands. While it can be tempting to eliminate some of these expenses, it’s not often a good idea.

First, in Michigan it’s a misdemeanor crime to drive without auto insurance. Get caught and you’ll be fined and could get jail time. If you’re an uninsured driver who gets in an accident and injures someone, you are personally held responsible to pay any damages. Michigan also has a “No Pay, No Play” rule, which means if you don’t have auto insurance at the time of an accident, the types of compensation you can receive for injuries is limited.

Going without health insurance is legal, but this move can be financially risky. Even healthy people get injured and have accidents that require medical care. There are no two ways about it, health insurance can be expensive. However, possible medical debt and bankruptcy can be even more expensive, not to mention more stressful.

Damage to a home from fire or natural disaster is not something most of us are prepared to cover. Another benefit of homeowners/renters insurance is its financial protection if someone is injured at your place.

Instead of going without insurance, find ways to minimize its cost. Here’s how:

• shop around for the lowest rates
• increase deductibles
• lower coverage limits
• as a Consumers member, you’re eligible for insurance discounts through our partner Nulty Insurance

Mistake #4: Buy extended warranties

Warranties might seem like a good safety net, but often they’re not a good deal for consumers.

Consumer Reports says extended warranties are overpriced. Hefty markups of 50 to 60% make warranties a big money maker for retailers. With profit margins like that, it’s no surprise that warranties, also called protection plans, are offered on everything from hair dryers to automobiles.

The price of warranties is generally about 25% of the price of the item—that’s a hefty price sum. Who shells out money for them? The Kellogg School of Management says people buy extended warranties because they “believe that a product is far more likely to break than it actually is.”

Before you shell out your hard-earned cash for an extended warranty, arm yourself with information:

• How likely is this product to fail? (Check sources like Consumer Reports.)
• What does the standard warranty cover?
• Does my credit card offer extended coverage?

If you’re considering a car warranty, check out Edmunds’ five questions to ask before you say “yes”.

Stop making the four money mistakes above, and you’ll keep more money in your savings account.

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