Beware the Free Lunch!

Unfortunately on the road to build wealth, there are those who would attempt to slow us down with less than upfront sales tactics. I’ve talked at length over the past several blogs about stretching nickels into quarters by looking for bargains in nutrition or other basic needs.

This week, I want to share some thoughts and personal experiences about a pitfall the frugal minded person must watch for while bargain hunting. It is horribly clichéd but simply put, a deal that sounds too good to be true, probably is. Avoid the “free lunch”!

I am using “free lunch” not in the literal sense, although food is sometimes the hook. Rather, “free lunch” is meant figuratively as any offering that promises a lot for a little, but ends up costing more in the long run.

Let me start this word of warning with an exception to the rule.  Community sponsored “free” events are highly recommended to keep monthly entertainment bills reasonable.

Community fireworks shows, free concerts, free days at state parks, company holiday parties or picnics and other community sponsored free events are all great opportunities to mingle and have some fun on the cheap.

Beware the “free lunch” refers to any business that is luring customers through their doors with free stuff, services or seemingly outstanding deals.

Once in the door, expect to be bombarded with high pressure sales. Just do a quick search of any on line market place to peruse the countless timeshare properties offered by people who were lured with a “free” vacation into a high pressure sales event and succumbed to the pressure. Closer to home, any time a car dealer offers freebies they are just trying to get customers on their lot. Expect to be engaged by a salesperson.

Although I love to haggle, I don’t have the time or patience for high pressure sales. If you don’t mind high pressure sales and can say “no” regardless of the pestering, by all means take that “free three night vacation” to Florida’s newest resort.

Just know that a lot of folks thought they could and then suddenly find themselves at the end of the weekend signing on the dotted line to buy a timeshare they’ll rarely use. Mistakes like this can derail a financial journey.

The extended car or house warranty is another type of deal that offers a lot for a little but really only serves to suck away a hard earned paycheck. The basic premise on these extended warranties is they will cover repairs on a home or car after the factory or home builder warranty expires.

When we read the fine print on these arrangements, typically the extended warranties only cover the most severe repairs such as complete engine failure in the case of a car or major structure repairs in the home.

The truth is, motors (especially on newer cars) very seldom give out. Similarly, most home repairs are not major structural issues and would therefore not be covered under the extended home warranty. Many major home repairs may even be covered under a home owner’s insurance policy.

The monthly fees paid for these extended warranty products could exceed the cost of many repairs, assuming it is even covered in the first place! If extended home and car warranties were truly a good deal, they wouldn’t have to resort to robo-calling! 

I am embarrassed to confess, I was duped into purchasing an extended warranty for our vehicle many years ago. The $50 a month was really starting to get on my nerves and when I finally sat down and re-read the fine print on the contract, I realized the warranty was only good if the motor or transmission failed completely!

I immediately cancelled the extended warranty but the damage was done. Several hundred dollars that if I had just invested, would have helped my family build wealth and achieve our financial goals a little sooner!  

I mentioned last week about the trap that is “Black Friday” sales. In my mind, this is possibly the biggest “free lunch” to avoid. Most people understand black Friday gets its name from the point in a fiscal year when most retail stores get into the “black” or profitable. Do they do this by selling low quality TVs at near cost? Heck no! They get it from the ten other things we buy without a deliberate thought process once in the store. Don’t fall into the trap.

Another free lunch to look out for is when service providers, such as streaming entertainment, offer free or discounted service for a trial period when an automatic payment method is provided. The service providers also promise the ability to “cancel at any time” to sweeten the deal. Seems harmless enough to take advantage of a free premium subscription for a few months, then cancel?

But the catch is most of us forget to cancel the subscription and get charged at least one month’s full price subscription fee. I’ve fell into this trap a few times before. Back in the day, I’d fall for the “10 CDs for a penny” hook every time! I learned it just isn’t worth the couple of months of free service if you have absolutely no intention of staying subscribed.  

These are just a few examples to watch out for. I learned the hard way. Like everything in wealth building, it’s not personal, it’s strictly business. No need to hate on the companies trying to sell extended warranties, premium service plans and timeshares using “free lunch” tactics. Just simply pass them on by and put that money saved into an investment!

Next week I’ll do my best to not sound preachy and reflect on another important part of personal finance, controlling vices.   

If you’re interested to learn more about the financial truths that successfully guided my family’s finances, check out my new book “Millionaire on a Worker’s Budget: Five Financial Truths to Build Wealth” on sale at Amazon! 

The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

Use the links in the about section below to follow on social media or subscribe for emails to receive updates on the latest weekly blog at www.normspivey.com!