Inertia versus transaction costs

allen36_0

One of the mantras of this and other money-saving sites is the savings generated by challenging inertia - reviewing and changing utility, credit card, bank etc providers. Probably true enough on paper

However, as some of the threads on the forum illustrate there are also hidden costs by being too being a `rate tart' or moving too readily to new offers. You may need to cost in the time, effort, transaction costs of moving (eg phone bills) overcoming teething problems etc, getting used to new arrangements.

With finances there is also a risk that being too adaptable may make some of your affairs less manageable. For instance shifting savings or credit cards too readily, cancelling subscriptions etc. Through fragmentation, it may encourage to lose track of their affairs

Instead of glib statements from moneysavers on how much could be saved, some concept of cost-benefit needs to be addressed. That would then come closer to the reality

jo_b_2

In Martin's first book, the Money Diet - he spends some time discussing the pros and cons of spending time to save money, versus spending money to save time.

Essentially, the value of undertaking any money-saving exercise is going to vary from individual to individual and that is why Martin suggests that not everybody is going to benefit from fixed-term 0% credit card offers, for example. The trick is to accept your own strengths and limitations. If you are super-organised and committed then credit-card tarting can be highly lucrative. If you're a bit more forgetful, then you might end up with your fingers burnt! There is no 'formula', though, as most will depend on human error and personal values.

If you haven't already read the Money Diet, I would highly recommend it!