Spending Money to Save Money? When it Makes Sense to Invest Up Front

Spending Money to Save Money? When it Makes Sense to Invest Up Front

Frugality can seem like a no brainer — avoid frivolous purchases and shell out as little as possible on necessary items.

But sometimes, it makes sense to drop cash up front to conserve more money in the long run. Here are four savvy household examples:

Credit card payments

It’s tempting to pay just your minimum monthly payment when money’s tight, but this will cost “future you” much more. Most credit cards offer a grace period that allows cardholders to avoid interest when they pay their statement balance in full and on-time. When they seek to save money by paying less than their entire month’s statement balance, they lose their grace period and must pay interest charges on the average daily balance of their account.

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Energy conservation

Home developers have little incentive to invest in energy efficiency, as few buyers will pay much attention to it. Unfortunately, this can leave the future owners wasting money each month on heating, air conditioning and electricity costs.

To save money on energy costs, you can choose to retrofit your home. According to the US Department of Energy1, the typical U.S. family spends at least $2,200 a year on home utility bills, which can often be lowered by up to 25 percent by making small investments such as installing a programmable thermostat and purchasing energy efficient light bulbs.

So even if you spend $1,500 on additional weatherproofing, insulation and energy efficient light bulbs, a savings of $550 a year will allow you to come out ahead within three years. And as energy costs inevitably increase over the long term, you’ll enjoy tremendous savings in the future.

Maintenance

When it comes to your car, house or any other expensive purchase, you will always save money by investing in proper maintenance. For example, homeowners who try to save money by postponing repainting their homes may discover that the siding has weathered and must be replaced as well. And drivers who fail to change their oil and perform other scheduled maintenance items will eventually face large repair bills as a result. So to protect your largest purchases, it makes sense to spend a little money over time on proper maintenance.

Renting versus owning

In many cases, it’s an easy decision to rent something rather than purchase it, such as when you rent a car during a business trip or weekend getaway. 

Consider that millions of homeowners currently pay their cable or telephone company $10-$20 a month to rent their modems, which can often be purchased for under $150. In addition to electronics, it is far less expensive to purchase furniture than it is to rent it.

1. http://energy.gov/energysaver/energy-saver-guide-tips-saving-money-and-energy-home

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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