Extended warranties are a booming business for one reason: They make money for the companies that sell them. That’s why it’s so important to crunch the numbers before purchasing any type of extended warranty. In many cases, you’ll be better off just putting that money in a savings account.

The Economics of Extended Warranties

Companies that sell extended warranties are in the business of making money. Some estimates put the yearly revenues of the extended warranty industry at over $25 billion. Since those revenues are built on the backs of warranties and service contracts that failed to pay out as much as consumers put into them, it’s pretty clear that buying an extended warranty is a losing proposition. There are some circumstances where it makes some sense to buy one, but you’re usually better off skipping the extended warranty and saving the money.

Examine the Warranty

Some big ticket purchases are incredibly expensive to repair, which can make an extended warranty seem like an attractive option. However, it’s vital to look at the factory warranty before pulling the trigger. A lot of consumer electronics and appliances have generous factory warranties that cover any problems that an item might develop early on. Statistics show that if an item is going to need repairs, it will typically fail within the time period allotted by the factory warranty.

It’s also vital to determine whether or not an extended warranty actually provides coverage that the factory warranty doesn’t already offer. This is especially important if you’re in the market for a new car because OEM factory warranties are usually quite comprehensive. Some automakers offer up to 10 years of coverage on vital powertrain components, and others provide free service for a specific amount of time.

Look at the Failure Rates

Different items have varying failure rates, so it’s a good idea to look at some hard numbers before paying for an extended warranty. Some major appliances and consumer electronics have remarkably low failure rates, but extended warranty companies are more than happy to sell you coverage that you’ll probably never need. According to Consumer Reports, only 10 percent of all dishwashers ever require service, and digital cameras are similarly unlikely to fail. The failure rates of most other consumer electronics are even lower.

Computers are more likely to break down at some point, but about 70 percent of them survive without ever requiring significant repairs. You’ll typically be better off saving the money you would have paid for the extended warranty because it will probably be time for an upgrade by the time your computer fails. At that point, you’ll be able to dip into your savings account and apply that money toward your next purchase.

The Cost of Self-insuring

The basic concept of extended warranty coverage is sound. Repairs are often costly, and it can be tough to fit an expensive repair bill into an already strapped budget. However, you’re typically better off skipping the extended warranty and self-insuring. If you take the money you would have paid for the warranty and put it in a savings account, you’ll enjoy multiple benefits. The money will earn interest, and it will be available if you ever need to pay for repairs. It will also be available if the item you purchase never needs repairs, which isn’t the case with extended warranty coverage. If you pay for a warranty and never need it, that money is gone forever.

Extended warranty companies operate just like insurance companies. Some of the warranties they sell actually pay off for consumers, but the majority don’t. As a single consumer, you don’t enjoy that protection. However, there is a way you can turn the odds in your favor. Every time you have the option to purchase an extended warranty, you can put the money into a dedicated savings account. Since it’s highly unlikely more than a few of the items will actually break, you should always have more than enough to cover repair costs.

Recently, I’ve been tempted by several of their deals. First, there was a complete collection of The Little Rascals. Then there was a 32GB memory card at a deep discount. I noticed it was becoming more and more difficult to resist the temptation to click “Add to Cart” and part ways with my money, so I unsubscribed.

In fact, over the last several weeks I have unsubscribed from a number of similar “Daily Deal” websites, paper catalogs, etc. When I receive a paper catalog in the mail, I call up the customer service number and ask that they remove me from their mailing list.

Yes, I may miss out on an occasional deal, but I’m OK with that. I am trying to be more intentional with my spending. When I need something, I will seek out coupons and deals, but I prefer not to receive a constant reminder to spend money in my inbox at 5:15am every day. It starts my day off on the wrong foot – especially when it is a no spend day!

To expand this exercise a bit, consider all the forms of advertisements we are faced with in a day. From billboards on the morning commute to internet ads to radio and television commercials to junk mail; the list could go on and on. It is becoming more and more difficult to insulate ourselves from the barrage of ads, but there are a few steps you can take.

Skip the Commercials

Our family doesn’t watch much television, but the programs we do watch are recorded on a DVR and played back minus commercials. I enjoy listening to talk radio during the day, but when commercials come on I find myself reaching for the mute button. I recognize people need to make a living selling ads, but I also recognize there are plenty of other willing participants.

Ad Filtering

A number of plug-ins exist for the most popular internet browsers available that work to suppress a variety of internet ads encountered on major websites.Simply Google “ad filtering” for a list of sites where you may download an add-on or plug-in compatible with your browser of choice.

Do Not Call Registration

I’ve noticed a big jump in the number of telemarketers contacting me via cell phone. Just a few years ago, this practice was unheard of, but with so many people now using their cell phone as their primary contact number, it seems the amount of cell numbers floating around marketing lists has increased significantly.

Register up to three phone numbers per email address at the national Do Not Call Registry.

Naturally, the best resistance to over spending is a strong frugal willpower. However, if you are like me, that willpower occasionally needs reinforcements. For that reason, I try to intentionally make it hard to overspend by removing temptation.

During the past few months we have been reviewing our monthly budget and looking for areas to shave. Some categories can be reduced drastically with a radical change (such as canceling your home phone or cable service). Others choices are not quite as painful.

Reduce cable service to basic channel offerings. Monthly savings: $30.  The idea of canceling cable altogether strikes fear in most couch potatoes. A good compromise is to cut back to basic cable service. You’ll still receive your local cable channels and will be able to use a TiVo or DVR to record network television shows.

Many cable providers offer this bare-bones package at $10-15 a month – compare that to what you are currently paying for 150 channels of things you barely watch.

I also see the use of internet television programming continuing to rise, and with a device such as a Roku player, or internet-enabled television, you can find plenty of offerings (some free, some not) for viewing pleasure.

I keep hoping this will one day satisfy my wish for a la carte programming where I only pay for the few shows that I watch, rather than a huge cable bill every month to receive the 145 channels I don’t watch. 

Skip the bookstores and hit the library. Monthly savings: $30.  Before I started making an attempt to live more frugally, I frequently picked up a book or two at the local bookstore to the tune of $25-30 a month (this is a conservative estimate as newly released hardcovers typically cost much more).

To satisfy my reading habit in a more frugal fashion I decided to visit a local library. I found the sections on personal finances, career development and personal productivity clustered in one area. I was in heaven!

These days, many libraries support various ereaders such as the Amazon Kindle which allow you to download the content electronically, furthering your savings and convenience factor.

Cancel your home phone service. Monthly savings: $40.  I was late to the party on this front as several of our friends cut home phone service almost immediately when cell phones (and unlimited in-network and long distance packages) became so prevelant.

I was always a bit leery of doing away with my home phone, largely because I was concerned we would go over our out-of-network minutes making local calls, etc. However, these days so much correspondence takes place over email, Facebook, Twitter and text messages that there isn’t much need to make local phone calls. The few local calls we make generally fall well short of our out-of-network minute plan.

So you see, with a little creativity and some sacrifice, it is relatively easy to save $100 a month. What will you do with that $100? If you are in debt, I suggest putting the savings towards debt repayment. If you are out of debt, I suggest increasing your emergency fund to a full year’s worth of expenses.

I was right. Some of the tactics used to save money were quite extreme (in my opinion), such as a mother of six banning toilet paper from her home and instead using cloth scraps. The used scraps were tossed in a hamper and washed every couple days. Yuck.

Another show participant went around to fellow diners at restaurants with a to-go box in hand asking if they planned to finish the food on their plates. If they said no, he asked if he could take it.

I suppose he should be commended for attempting to reduce food waste, but I’m not sure how sanitary it is to share the meals of 20 strangers. At one point the show mentioned this family rescued dogs and provided them temporary shelter. Perhaps the scraps were for the dogs. I’ll give him the benefit of the doubt here.

Naturally, the show also featured a dumpster diver who thought it was classy to dig through the trash to look for his wife’s anniversary present. I say you don’t have to spend a lot of money to give or make a thoughtful gift, but digging something out of the garbage to give to someone you love says more about how little you think of this person than your frugal prowess.

The show did have some redeeming moments, such as Jeff Yeager’s feature (he’s a fellow frugal writer, in case you have never had the pleasure of reading his material such as his book, The Ultimate Cheapskate’s Road Map to True Riches). Jeff has some excellent ideas for saving money such as bicycling to town for short errands to minimize the expense of operating a car (particularly relevant given the recent run up in gas prices).

Jeff also mentioned something I whole-heartedly agree with, and something I have heard him mention in the past: avoid lifestyle creep.

Lifestyle creep is the phenomenon that occurs when people, over time, allow their lifestyle to “creep” higher and higher, costing them more and more money each month to maintain.

This “creep” is often motivated by a “must keep up with the Joneses” mentality. After all, when we see people driving nice cars, we want one. When our friends and family upgrade houses, we want to do it, too.

The problem is that all this “upgrading” causes our monthly expenses to creep ever higher, reducing the amount of free cash flow to divert towards savings (and often leads to the accumulation of debt).

It also means we have to work much longer than those who decide to draw a line in the sand and keep expenses in check as much as possible. Jeff and his wife were able to “retire” early by keeping their expenses flat and avoiding the accumulation of new debt.

So while I won’t be rinsing and reusing any Ziploc bags, or forgoing toilet paper, in the near future, I do plan to continue watching the series and learning small ways to apply new frugal tips.

To me, living frugal is all about avoiding extremes. Frugal people often do spend more money than extreme cheapskates, because we value the quality of items enough to spend a little more up front to get more use and enjoyment of things over the long run.

My fear with this new show is that it will portray “frugal” folks as extreme, in general, when in fact the large majority of truly frugal people I know are quite moderate and simply make small decisions throughout their day towards reducing their bottom line.

So, in no particular order, I present my 35 favorite personal finance/frugal living sites of this year. If you haven’t already, I highly recommend that you add them to your “to read” list. And because I know all of you are busy, I’ve included an interesting post from each site. I hope that you not only find new gems, but rediscover old favorites.

Feel free to share this list with your family and friends or put the Frugal Dad badge up on your site for your readers to know about the recognition – and of course, let me know what you think in the comments!

1. Dumb Little Man offers a wide array of tips that will help readers save money, become more productive, and enjoy life a little more each day.
Favorite Post: 7 Warning Signs That You’ve Given Up on Your Dreams

2. Get Rich Slowly does what its title implies: it offers personal finance advice and contextualizes the larger financial landscape for those who are unfamiliar with this realm. The site features home and mortgage advice, as well as debt relief info.
Favorite Post: The Road to Wealth is Paved with Goals

3. Zen Habits offers advice on simplicity, health, and inspiration all while promoting frugality and developing a path towards a more zen future.
Favorite Post: 6 Money lessons for My College-Aged Daughter

4. Debt-Proof Living offers its readers a custom-made plan for getting out of debt, alongside a substantial archive of blog posts that lend prime financial insights. You can utilize tools and calculators on-site in order to get started.
Favorite Post: When Wants Become Needs

5. Surviving and Thriving demonstrates, through smart writing and relevant backstories, how frugality is less about denial and more about mindfulness. The site encourages its readers to make the most of what they have, however much that is.
Favorite Post: Think You’re Broke? You Probably Aren’t.

6. The Art of Manliness aims to rediscover the quintessential elements of a healthy and virtuous man. The blog encourages men to reclaim the positive traits that make them a functioning, responsible and proud member of society.
Favorite Post: A Young Man’s Guide to Understanding Retirement Accounts: IRAs

7. Consumerism Commentary is a sobering but informative and encouraging personal finance blog. Many of the posts tap into current events, and reflect an ever-changing financial landscape.
Favorite Post: Is Following Your Passion a Luxury?

8. Generation X Finance caters its financial advice to those born between 1965-1980. The news and suggestions aren’t exclusive, however, and other generations can still learn how to control debt and establish a successful career.
Favorite Post: Top 5 Ways to Become a Millionaire

9. My Dollar Plan explores the difficult-to-navigate world of college savings, retirement planning and tax strategies. On top of finance tips, readers can receive deals and discounts to help them save more money.
Favorite Post: 5 Alternative & Creative Gift Giving Ideas

10. StopBuyingCrap.com isn’t your run-of-the-mill personal finance site. Not only does it offer advice, but its tone is exceptional–the whole site is devoted to making saving fun and excited, instead of tedious and humdrum.
Favorite Post: 10 Simple Ways to Feel Rich Without Materialistic Means

11. The Digerati Life keeps its readers up-to-date on the latest investment studies and financial forecasts. The site is especially tech-savvy.
Favorite Post: 14 Staycation Ideas & Ways to Save Money with Local Travel

12. Afford Anything suggests that time is more important than money. The blog encourages readers to invest wisely, live your wildest dreams, and maximize each moment on their way to a life that is richer in every way.
Favorite Post: Stop Crying That There Are No Jobs. Create One.

13. Enemy of Debt takes an aggressive stance against debt and helps its readers find and then maintain a debt-free lifestyle. Self-reliance is the name of the game – the ultimate goal – on this site.
Favorite Post: Stop Spending Money – It All Depends on Your Definition of STOP!

14. I Will Teach You to Be Rich takes a hard-nosed approach to ensuring that its readers’ financial lives are advanced and enriched. Strategies are shared through books and other media, and the exploration of psychology is a huge component to the site’s success.
Favorite Post: 7 Lies We Tell Ourselves About Money

15. The Diary of a Frugal Family is devoted to sharing recipes, thoughts, and tips on parenting. The tone is friendly and conversational – a perfect site to ease your way into the world that is frugal literature.
Favorite Post: Homemade Nutella Cookies

16. Bad Money Advice is home to the often bitter but entertaining and informative rants of a Boston resident. Frank shares his financial thoughts with readers “because mainstream personal advice is not what it should be.”
Favorite Post: A Tax on People Who Can’t Do Math

17. Pick The Brain is a web site that aims to motivate readers on toward a more productive, healthy and better-educated lifestyle. Self-improvement is the name of the game here, meaning psychology and philosophy are prominent features.
Favorite Post: Time is All We Have: 3 Ways to Increase ROI

18. Clever Dude is a smart blog that offers advice on family, marriage and finances. Any and all advice stems from the very mistakes “Clever Dude” has made himself – his family has reduced their debt by at least $200k over a 4-year period; it’s this first-hand experience with debt that makes this site such a great resource.
Favorite Post: Frugal Lunch by Clever Dudette