Costco Gas

Looking for the cheapest gas seems to make people do crazy things. The other day I found myself driving out of my way to fill up my car at Costco. I didn’t need a pallet of toilet paper or 50 gallons of milk, just gas.

While I was driving I started thinking about the natural tendency we have to focus on certain areas of savings while ignoring others. This old idea of being penny wise and pound foolish is really true. If I “saved” $0.10/gallon on a 20 gallon tank of gas that is a whopping $2 savings. It’s hardly worth the extra gas it took me to get there let alone the time and the hassle of dealing with traffic.

This is just one example of a common “savings” mistake we make. Here are a few more:

[1] Saving the $500 a CPA might charge to do your taxes while missing out on potentially greater tax savings.

[2] Paying over $30,000 more for a Lexus Hybrid versus the conventional model to for the purpose of saving on gas. The Hybrid model gets an extra 4-5 mile a gallon, and at that rate, it will take more years than you will be alive to make up the difference [thanks to Barry Ritholtz for the example].

[3] Making investment decision based on the tax implications. I remember a friend of mine that worked for Oracle during the tech run-up in late 1999, early 2000. He would not sell his concentrated position of the stock because he didn’t want to pay the 20% capital gain taxes…the 50% drop in market value took care of that problem for him.

[4] Here is a rather humorous example of the IRS sending two agents out to collect 4 cents of back taxes (it’s the principle that matters, right?).

I know that these examples just focus on one narrow part of the equation. Sure, it makes sense to get gas at Costco if I am already there for the pallet of toilet paper. In some cases it makes sense to do your own taxes, and you might be buying the Lexus Hybrid for other reasons, but my point is that it never hurts to think about these things before you do them.

This sketch and post appeared originally in the Behavior Gap Newsletter. Sign up for your FREE subscription.