Personal Finance 

5 Popular Myths That Cost You Money

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One of the fun parts about reading and writing about personal finance and money all day is that you run into a lot of good advice and a lot of bad advice. Over the years, I’m amazed at how much of both is repeated with great regularity.

Whereas some bad advice hurts no one, a lot of money myths are costing some people money (and helping others make a lot more than they should!). So today I’ll be hitting five popular myths that span your entire life, from spices to gasoline, with the hope that it spurs a discussion that helps us all understand why these myths are wrong and why they’re costing us money.

Let AC Run All Day

For most HVAC systems, there is one setting – ON. The system is either running or it’s not. It doesn’t work harder if it needs to raise or lower the temperature more, it just works. If it’s 95 degrees out and your thermostat is set to 85, it’ll run until it hits 85.

When you leave your AC on all day, here’s what happens most of the time. It runs until it hits 85, then it stops. When the internal temperature goes to 86, it turns on again. When it reaches 85, it shuts off. On. Off. On. Off. You get home and everything feels great but your unit has done the equivalent of about a dozen sprints in the time you were out.

Instead, get a programmable thermostat and set it to turn on half an hour before you get home. You won’t be the wiser and your unit will thank you for not jerking it around all day.

Spices Lose Potency

Herbs and spices in your cupboards do lose their potency after time, the statement itself is not a myth. The myth is that you should replace them. Unlike vitamins and drugs, which do the same, it doesn’t matter if your spices lose potency – just use more of them. Spice companies would love you to believe that your spices are crap and that you should replace them because spices and herbs are insanely expensive. (If you fancy yourself a chef that needs only the best, you should be using the fresh stuff anyway.)

Oh, and while you’re at it, go to “ethnic” grocery stores (any store that isn’t your neighborhood grocery store) for spices because they’re a lot cheaper.

Premium Gas is Better

Premium gas is not better. Premium gas is just higher octane gas and higher octane means it can better withstand compression before igniting. Cars that require premium gas will compress the gas-air mixture to a higher psi before igniting it. If you use lower octane gas in a premium only, you’ll get a knocking – that’s the gas igniting before it’s supposed to. If you put premium gasoline into a car that requires only regular, you’re just wasting money.

Your Taxes Are Complicated

There are really only two reasons you should pay an accountant to do your taxes:

  1. Your time is more valuable than the cost of an accountant;
  2. Your taxes are very complicated.

If it’s #1, you will find no argument from me there. You get to decide how valuable your time is, I don’t. Your parents don’t. Your spouse doesn’t. Your friends don’t.

If it’s #2, I’d argue that it’s probably not as complicated as you think and with the sophistication of software packages, you can probably do it in a few hours without messing it up. Before you pay an accountant a few hundred dollars, invest some time in a package like TurboTax. For the packages online, you pay at the end so you can complete your return (which is mostly data entry of forms you have to collect anyway) for free.

Almost Any Rule of Thumb

The problem with rules of thumb are that they try to apply a basic idea to everyone. Rules of thumb like you should save 10% of your income or only spend 33% of your income on housing may sound like a good idea but they’re killing peoples’ finances. My finance situation is different from yours. It’s different than someone in college. It’s different than someone who is retiring.

Should a retiree be saving 10% of their income? Probably not, they’re spending their savings.

Should I retire at 65? Why 65? Why not later? Sooner?

The lesson here is that you should view any rule of thumb with a healthy dose of skepticism.

{ 26 comments, please add your thoughts now! }

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26 Responses to “5 Popular Myths That Cost You Money”

  1. Here’s another one for ya: Buying a new car is an investment.

    I’ve heard so many of my young friends use this line it almost makes me physically sick. First of all, I explain to them that buying a brand-new car is about the most stupid thing you could do because of the automatic depreciation as soon as you drive it off the lot.

    The ones that reply at all to this usually come up with something like, “well it’ll have a warranty and I won’t have to pay for maintenance for, like, 3 years!”

    Others say that they’ll buy this one brand-new car, pay it off, and keep it for 10 years… most of these people can’t stay satisfied with the same apartment for more than 6 months…

    • Courtney says:

      I don’t buy new cars as an investment. Because they’re not. But I am starting to question the ‘automatic depreciation’ myth (what is it, 20% the minute you drive it off the lot or something like that?). I bought a 2011 Ford Focus late last year. According to KBB online, the estimated trade-in value is only $1400 less than what we paid for it, and the estimated private party resale is about $400 MORE than what we paid for it.

      • Unfortunately, dealerships don’t base the value of a vehicle off of Kelly Blue Book values. They have some proprietary “black book” subscription service that only dealerships are privy to.

        That being said, something is really only ever worth what someone else is willing to pay for it. If you found someone to buy that focus for only $1400 less than what you paid for it, then that’s what it’s worth. Conversely, if you found someone to buy for $1400 more than what you bought it for, then that’s also what it’s worth.

        • Rebekah K says:

          Hey Ross,

          My name is Rebekah and I work at Kelley Blue Book. We have a rather large network of dealers (and banks) who reference Blue Book values, it’s up to the dealer to reference whomever they choose. Ultimately, you are correct, values are just a marker from which the negotiating process begins. That’s why our team works to provide so many reviews and other reference materials to support negotiating.

          Rebekah K
          Kelley Blue Book

          • Thanks for correcting me Rebekah, that’s interesting to learn. The last two dealerships I dealt with told me dealers don’t use Kelly Blue Book, but maybe they just meant THEY don’t use Kelly Blue Book… or they were trying to pull a fast one on my or something. Good info!

      • Rebekah K says:

        Hey Courtney,
        My name is Rebekah and I work at Kelley Blue Book. We’ve just released a report on used car values, as they are the highest most of us have seen in years. (reference this article:
        Rebekah K
        Kelley Blue Book

        • Strebkr says:

          Are used car values going up as less people are buying new and more people buy used. Wonder what this will do in 3-4 years when there are less used cars on the market as a result of the lack of new car sales today.

        • Courtney says:

          Hi Rebekah – thanks for the article. That is pretty interesting to see that big of a difference in used car values in just a few years! I obviously don’t plan on getting rid of my car for a long, long time but it’s nice to know they’re maybe not depreciating as fast as they used to.

        • skylog says:

          thank you for the article! i would like to see how this trends out into the future.

    • aj says:

      my mother in law purchased a brand new rx-8 in 2003, paid it off completely, and could never bear to part with it again. she cares for it compassionately and it has a total of 20000 miles on it in the 8 years it has been driven. plus, since it is a sports car in very good condition with very low miles, she can expect it to have a higher resale value.

      she gets to enjoy the car for more than a decade, then sell it for a comparatively small loss if she wishes. she can be very floozy about getting new things too (new laptop and iphone every year), but with the right commitment, it /can/ happen!

  2. No Debt MBA says:

    In addition to ethnic stores, you can also find cheap basic spices at CVS. Shakers are all reasonably sized and priced at $.99.

    • skylog says:

      i have been doing this for a couple of years. as you stated, they mainly carry the basics, but it is a great way to save.

  3. zapeta says:

    Number one is huge. You can save a ton of money with a programmable thermostat if you use it right.

    • Strebkr says:

      I love my programmable thermostat. Then we had a baby and the night time temp is no longer allowed to go down as low as it used to. I guess its a small price to pay for the family.

  4. Wilma says:

    Gearing up my herb and vegie garden as we speak. Love those fresh herbs. This winter was tough on my herb patch so I have to replace my chamomile tea and oregano plants.

    Finally getting central air put in this very moment. Hoping it’s more efficient than window units with fans to push the air around.

    My 08 Scion is equipped to run 87. For the most part I run that but I’ve noticed some gas is better then others.

    I pay some one else to do my taxes cause I hate paperwork and I’m not the best at doing it. Maybe I’ll try that Turbo thing next year.

  5. Stefanie says:

    Also shop the bulk aisle for spices – they are probably replenished fairly often and they cost very little compared with bottles spices/ herbs.

    • Shirley says:

      Very good point since a fair amount of the cost of packaged spices/herbs is the cost of the container.

      • Martha says:

        And never buy sesame seeds from the regular grocery store! They cost $4.99 or $3.99 for a tiny jar when you can buy a bag for the same price at our local Korean grocery store!!

  6. Shirley says:

    We live in an area of CA where summers often have temps above 100 degrees. We find that opening windows at night when it cools down, and closing them soon after daybreak, keeps the house cooler and makes less work for the AC. Big bonus is the fresh air in and the lived-in air out.

  7. Danielle says:

    “Oh, and while you’re at it, go to “ethnic” grocery stores (any store that isn’t your neighborhood grocery store) for spices because they’re a lot cheaper.”

    Um, what if the “ethnic” grocery store *is* my neighborhood grocery store?

  8. Charlie says:

    One myth I would like to add is ‘There is no reason to pay a bill before it is late.’ Probably true for utilities, taxes, and credit cards paid off monthly, but it is certainly not true for debt. Pretty much all forms of debt collects interest daily, so someone that consistently pays after the payment is due, but before it is late, won’t have to pay any late fees, but will have to pay a bit more interest than one that pays their bills on time or even early.

    • Strebkr says:

      Charlie – Depending on interest rates and amount of principle, this is a small savings, but has the potential to really add up over time. Good point.

    • Courtney says:

      This is true, and hence why paying bimonthly (if your debt servicer will let you) saves you some interest in the long run.

  9. Katie says:

    There is one reason to use high octane gas. High octane gas typically has no ethanol. Talk to a boater or a small engine mechanic. They will tell you how it eats through fiberglass gas tank resin or expands/breaks down rubber and plastic parts in small engine carburetors(resulting in one that can’t be rebuilt). However, there is a right & a wrong way to do it. Most people don’t realise they need to run out 1.5-2 gallons of gas into your car tank otherwise you are getting whatever the last person @ the pump bought! Then you run the premium gas into your gas can.

  10. Hate stupid science says:

    The only reason to use higher octane fuel is because your car’s or motorcycle owner’s manual says the engine needs it. Otherwise everything else written about alcohol content, energy content, water content, engine cleaning additives and other advertisement laced rhetoric are myths. Please study chemistry. Learning science is good.

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