Yahoo Finance I’m a Financial Expert: 5 Times I’ll Always Pick the Most Expensive Option
When you’re deciding where to spend your money, your first instinct is probably to choose the cheapest option. After all, you want to save money and stick to your budget. But sometimes, choosing the most budget-friendly choice can actually end up costing you more in the long run.
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“Strange as it might seem, there are times when it makes financial sense to choose the most expensive option,” said Scott Lieberman, founder of Touchdown Money. “They don’t come around very often, but in these situations, it’s wise to bite the bullet and spend on the expensive choice.”
So when do experts recommend paying up for the premium choice rather than pinching pennies?
Attorney’s Fees
When it comes to messy divorces, criminal charges, business disputes, malpractice suits and inheritance fights, you’ll want a top-notch lawyer. That means shelling out some cash.
“Hiring an attorney before signing any legal agreement and protecting you while making a move to new pastures is an integral part of the career transition for highly skilled professionals,” said Lauren Williams, co-founder of ProsperPlan. “Don’t ever skip this step. If you’re in this position, view it as a privilege rather than an emotional, financial journey.”
Don’t settle for a bargain attorney. Your finances and freedoms are on the line. Highly accomplished, elite lawyers charge premium fees, but their expertise and track records are what really matter when the consequences are dire.
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Platinum Level Health Insurance
If you have kids, or you’re planning to have kids, consider ponying up for a platinum health insurance plan. These top-tier plans charge the highest monthly premiums, but they also have the lowest out-of-pocket costs in the form of rock-bottom deductibles, copays and coinsurance.
“Those with young children know that you spend more time at the doctor’s office the nine months before a baby is born to the two years following birth than you will at most other points in your life,” Williams said. “While high-deductible health savings plans may look like a cost-effective option, this is one time you should skip the $7,000 to $9,000 surprise at the doctor’s office. Instead, opt for the more expensive option with less out-of-pocket payments in your early child-rearing years.”
With platinum coverage, you won’t have to worry about being hit by an enormous medical bill since your maximum annual spending is capped at an affordable level.
Pet Insurance
Many people with pets don’t even consider insurance. But insurance is important for pets, too, not just people. And a higher-tier plan can save you from bankrupting yourself with vet expenses.
“I carry catastrophic pet insurance at this point in life,” Williams said. “Meaning I have a low monthly payment with a higher deductible plan for my dogs. I’ve been fortunate when it comes to building wealth; but, when I was younger, I had a surprise $6,000 vet bill that left me deciding between paying the bill or giving my dog up for adoption.
“It wasn’t an easy decision, but I ended up taking out debt to pay for the exploratory surgery. More time with my dog was worth every penny! However, I learned that pet insurance is just as important as health insurance when it comes to protecting wealth.”
Every pet owner hopes their furry friend stays healthy forever, but emergencies are impossible to predict. A higher tier of coverage means you’ll be responsible only for a small deductible and copays, rather than thousands for a major surgery or treatment.
Investment Contributions
One of the smartest places to put your money is maxing out your contributions to retirement accounts. The tax-deferred growth and compounding interest is what makes these better than any other kind of account.
Williams specifically recommends funding what she calls a “gap account.”
“The ‘gap account’ is a trust, individual or joint brokerage account with no premature penalties for taking money out before age 59 1/2,” she said. “This account type is the primary account I help my clients fund when they want to retire well before 60.”
Whether you choose to use a gap account, a 401(k) or an IRA, be sure to max it out every year. This way you’re taking full advantage of the tax benefits, and your money will grow as much as possible.
“I view the gap account as my saving grace,” Williams said. “If you don’t end up needing the money early, having it invested and growing on your behalf over the long term will still be a worthwhile financial endeavor.”
Anytime Comfort and Enjoyment Matters
While sticking to a budget is important, it’s also important to treat yourself occasionally by spending more on the things that can enhance your quality of life. Maybe that means going with first-class flights and luxury hotels for big vacations, hiring a monthly house cleaner to alleviate the stress of chores or getting the high-end massage chair you’ve had your eye on.
“When your comfort is at stake, choosing the less expensive option isn’t helpful,” Lieberman said. “You’ll find reasons not to use something that isn’t comfortable, making the purchase a waste. For example, if you’re debating between two robes and one costs twice as much but feels incredibly comfortable, you’ll get far more use out of the more expensive robe.”
Making room in your budget for comforts you’ll truly enjoy and appreciate provides an immense benefit to your mental and physical well-being.
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: 5 Times I’ll Always Pick the Most Expensive Option
