Penny-wise, Pound FoolishSubmitted by Compass Wealth Management LLC on September 9th, 2015
The use of the British term "penny wise, pound foolish" dates back to at least 1607, and refers to actions that might save a little in the short term, but in the long term wind up costing you much more than you saved. As a planner, I see this type of behavior time after time, especially in younger clients: short term strategies used to save on expenditures are viewed as financially savvy, but often wind up costing much more than expected.
A similar saying is "you get what you pay for". In this age of instant information and instant gratification, deals, offers and price "guarantees" are everywhere. But the cheapest deal is not always the "best deal", and we know from experience.
One of our employees works part-time at a large stadium ticket office. He spends most of his time there dealing with event attendees who unknowingly purchase fake tickets from scalpers or from sites such as Craigslist and Stubhub. The ingenuity of scammers is boundless – in a recent example, a large number of concert goers purchased tickets off Stubhub at what seemed to be a great price. The tickets were for a floor section, very close to the stage, but at a discount to what similar tickets were selling for.
When they got to the concert, they were allowed in (the tickets themselves weren't "fake"). However, confusion erupted when their floor seats were occupied by others. Upon further investigation, it turns out their tickets, while legitimate, were actually for a section furthest from the stage. The seller had purchased a bulk group of cheap tickets, altered the section and row numbers, and passed them off as much better tickets, selling them at a substantial premium to what the seats were actually worth.
Because the tickets had been purchased from a legitimate ticket site (StubHub), the purchasers might have some recourse for at least a refund in the price difference. But in the immediate moment (at the concert), there was nothing that could be done for them. The choice was to sit in the upper level seats to which the tickets really belonged, or go home.
Our employee mentioned that most concert goers he deals with are not so "lucky" – ticket purchases from places like Craigslist or other general listing services often involve outright fraud, with no event entrance permitted. The purchaser not only loses the price of the ticket, but the cost of travel (many people travel for miles to attend concerts), the time involved in attending, and the headache (and for some heartache) of not being able to attend a special event.
While ticket scalping is an obvious example we often discuss in the office, the fact is this type of "penny wise pound foolish" behavior is a common occurrence. What can you do to make sure you're not a victim? Do your homework before purchasing, and use the following tips:
- Use your credit card wherever possible for purchases. Contact your credit card company if goods/services are not as advertised;
- On the web, stick with larger, well-known names or providers. Try a new service out with smaller purchases first, using familiar payment systems such as PayPal;
- Don't "friend" strangers! Social media sites are a favorite of scammers;
- Do your research. Use the internet to find reviews of both potential purchase items and sellers before you take the plunge.