Posted on July 15, 2009 - by Sgbluechip

When ignorance is costly and not bliss

Photo by Wetsun

More often than not, we hear that ignorance is bliss. However, this is not the case when it comes to finance, choosing life partners and even simple recurring purchases. Let me illustrate this with car servicing.

All drivers know that we have to send our car for regular servicing every 6 months or 10,000km, whichever comes first. It is recommended in car manuals and forums.

Ignorance 1: Servicing at authorized distributors

If you only send your car to the authorized agent, eg C&C, Borneo Motors, Kah Motors, PML, because you feel they are the best person for the job, well, you are paying a minimum of 50% premium compared to other external workshops.

You are paying at least $100 more each time.

Similarly, if you are buying shares, unit trusts, foreign currencies and insurance from banks directly, you know it is more expensive compared to online portals.

Ignorance 2: Servicing too soon

Many drivers do not hit 10,000km in 6 months. However, most still send their car for servicing as it is “recommended” and some jokers in car forums will always claim that the engine oil will “turn bad” after 6 months even if the 10,000km mark is not reached. Well, the truth is, engine oil typically will be left on the shelf for at least 1-2 years after leaving their factory. They do not turn bad in plastic containers, let alone your car engine bay. If you feel insecure not to service your car after 6 months, you can stretch it to 9 months instead. This is provided you can only hit 10,000km after 9 months. Hence you will do 2 servicing in 18 months instead of 3 servicing.

You are effectively saving $150 more each time.

I am sure you do not “rebalance” your financial portfolio all the time and incur expensive transaction charges.

Ignorance 3: Changing unnecessary items
Read more…

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