Lets say your oil in your car needs to be changed every 5,000 miles. It costs about $35 each time you change the oil in your car at your local shop. You drive 20,000 miles per year, so you are changing your oil 4 times per year, costing you roughly $140 per year. You are thinking you would like to save 50% of the oil change money, which gives you $70 savings per year. Over the years, your engine begins to run less efficiently and begins to wear. Eventually, you are going to need to replace your engine entirely due to the poor maintenance upkeep. This will end up costing you thousands versus hundreds for regular oil changes. This is what I would call penny wise, dollar foolish.
I am all about saving money, but never at the cost of being dollar foolish. It is a well worth investment to use your money to keep your stuff working. When I say stuff, I am talking about your car, house, clothes, boat, or whatever you want to keep around for a long time. The other thing you want to keep in mind is to get exactly what you want. For example, if you are out to eat and you see an item on the menu you want. The item costs $21.99, but you do not want to spend this much. You see a similar item, which may not be as enjoyable for $19.99. Just get the item that is $21.99 and enjoy yourself if you can afford the extra $2.
You are working hard to generate an income and doing your best to budget this money. Make sure you are not saving a few pennies up front, which will cost you dollars down the road. Not only are you spending dollars down the road, but you also spent the pennies up front. I will talk about one last example involving your home. A home is not typically something you buy and sell quickly. Usually, we live in our homes for years, which is exactly why we need to make sure we are taking care of it to get the most use out of it.
Imagine you need a new roof on your house, but you do not want to spend the $15,000 for the materials and labor. You push it off, but really do need a new roof. If you push it off too long, you may start getting leaks. Not only do you need to spend the $15,000 on the new roof, but now you are going to have to spend extra money fixing the interior if there is any water damage from the leak. You can avoid this by getting the new roof installed when you need it.
When someone says penny wise, dollar foolish, I immediately think money is being spent that did not need to be spent. It is typically not the dollar portion that was not needed to be spent. It is more of the quick fix penny portion that did not need to be spent. In most cases you will need to spend the dollars. We need to be aware that if we do not manage it appropriately, we can be adding more expense to the overall cost. These are just a few examples and thoughts we should be thinking about when moving forward. It does not always pay to be cheap.