Tightening your belt? Counting your pennies? Reusing the trash bags?
Lots of people are doing all three and more in this increasingly difficult economy. Yet, decisions that seem to promise savings very often yield just the opposite. For example, if you've parked your $25,000 SUV in the garage and bought a Prius, you haven't really saved anything.
If you've installed solar panels on the roof you might have to wait up to a decade before the investment pays off.
Buying toilet paper by bulk might prove unwise if the rolls wind up dripping wet after the basement floods.
John Bitner, chief economist at Eastern Bank, sees lots of examples of false economies as bank balances deflate. "People skip dental appointments, doctor's visits and eye check-ups." The results can be still more expensive. No dentist — "You can get gum disease and cavities."
Some people allow their insurance to lapse. It's a dangerous gamble, he says, whether it's health or home insurance. Or they skip payment on the electric bill or the heating bill. "That can hurt your credit," says Bitner — costing you dearly at some point in future.
On the banking front, Bitner says, people are dipping into their retirement savings, borrowing money against them. Commonly, workers cash out their 401(k)'s when they leave a company instead of rolling them over. Usually, he explains, they buy a new car with the money. Most people need cars, but Bitner points out that he drives an aging Toyota and is quite happy with it.
"Buy a low maintenance car," he says. "You don't need a Mercedes."
Financial planner Dennis Corbett in Salem's East India Square Mall worries about people hurrying to refinance their mortgages without consideration for the long-term savings created by the new rate. It ought to be 1 to 2 percent lower than what you pay now, he says. "Because you've got points and closing costs."
People wanting to sell their homes make a mistake if they believe what they see on television's Home & Garden channel, Corbett warns. Programs hail the benefits of renovating your house, filling the kitchen with gleaming stainless steel stoves and refrigerators, installing high-tech bathroom fixtures.
But those program were likely produced before the housing bubble popped, Corbett warns. "Even then," he adds, "you never got 100 percent back. At most you got 80 percent." The return is much less today. "Most improvements are meant to sell it quickly," Corbett says. "They're low cost. Designed to improve curb appeal."
Home sellers are lucky to get 50 cents on the dollar for their home improvements, he estimates.
At the same time, the energy crisis can be a blessing for some. Corbett chuckles over a news story of a man who drilled for oil in his backyard and is now receiving thousands of dollars a week as a result.
Salem News automotive expert Larry Rubenstein believes that an energy-efficient car can save you money. But contrary to popular belief, even SUVs can be energy efficient — particularly if you know how to care for them. "I keep my speed down and I use cruise control," he explains. Tires are fully inflated and the oil checked regularly. It can mean the difference between 15 miles per gallon or more than 19.
When it comes to air conditioning — no sweat. Leave it on. "The difference can't even be measured," Rubenstein says. Modern units are designed to use a minimum of energy. Moreover, he cites a recent study in Consumer Reports magazine — turning off the AC and driving with the windows down creates enough drag to erase any savings.
A hybrid car can save energy, Rubenstein says, particularly if it runs primarily on city streets where the electric motor is dominant. On highways, unhappily, it may take a few more years to earn back the extra cost of the car. Meanwhile, cheaper gasoline powered cars are increasingly efficient.
He groans at the notion that you can save by skipping a few oil changes. "It makes the engine work harder. It's not a smart move."
Rubenstein points to developments in India where a car called the Tata is being marketed to run on compressed air. It's said to be cleaner and more efficient than gasoline engines, suggesting that perhaps one day you will want a Tata too.
Tom Myers, sales manager at North Shore Volkswagen in Beverly, thinks people are giving up their SUVs prematurely. "If the gas prices stay at $4.50 people will start buying big vehicles again. ... People need them. ... And people get used to paying the high price like they get used to paying high prices for cigarettes and everything else."
Contractor David Lakin of Lakin Home Improvement in Danvers has grown frustrated watching homeowners opt for what turn out to be cosmetic changes when more basic repairs are required to keep homes insulated and energy efficient. "In this economy," he says, "people need to stick to the basics."
One customer balked at the cost of new basement windows, while cold air and water leaked through rotting frames. Another wanted vinyl siding. "They wanted vinyl siding when they needed a new roof," he sighed. The roof, of course, is where much of a home's heat escapes. "I'm thinking, 'Why don't we do the roof first?'"
BOX
Attempting to save money can cost more in the long run. We talked to local experts about the do's and don'ts.
Don't
r Skip dentist appointments
r Skip oil changes
r Cash out your 401(k) when you leave a job
r Update bathrooms and kitchens with high-end fixtures to speed up a sale.
r Simply abandon that SUV. Minor maintenance such as checking the oil and keeping tires fully inflated can gain an extra 4 miles from a gallon of gas.
r Make cosmetic improvements to your house when what you need are energy-saving fixes such as new windows or a new roof.
Do
r All you can to pay your bills on time and preserve your credit.
r When selling your house, make only inexpensive changes to give it curb appeal.
r Consider car improvements like a transmission flush ($100 to $150) to improve mileage.
r Hang onto your old car as long as you can run it economically — new cars mean higher taxes and higher insurance.
r If you have good reasons to think there's oil beneath the backyard — drill.
r Stay calm — we've had worse economic woes in the past.
