The Simple Dollar has a little piece of advice for having more money… don’t spend money today. I had check to do a double take to make sure that FreeMoneyFinance hadn’t written it as a guest article. It’s quality advice, especially when paired with make more money today. A lot of people make the same amount of today as they did yesterday. If you can do something extra to make more money you’ll be a bit ahead.
Not spending money is a good plan, but it may be too restrictive. It could lead to expensive splurges in the future. Dieters experience this same feeling when they restrict their calories or favorite foods completely. I find it’s a lot easier to ask, “Do I really NEED [item X]?” each time I look to make a purchase. Most of the time I realize that I don’t. Some of the time, like with gas to get to work, I obviously do. The other question I ask is, “Will buying [item X] save me more money in the future?”. For instance, going grocery shopping is spending money, but it saves me from expensive restaurant splurges. Buying a can of peas that are on sale today is often better than paying full price tomorrow. Changing the oil in my car is cheaper than paying a mechanic for engine repair. If this seems obvious to you, excellent, you are ahead of the game. If not, hopefully you find some help in this advice.
You’re effectively making an argument for buying in bulk (lower unit cost but more of it). The problem is if you buy more than you’ll use in a reasonable time frame.
Lazy Man says
Buying in bulk is one interpetation, but it’s not the only one. Taking preventative measures or spending money to save time counts as well. Joining a gym (and using it) could greatly decrease your hospital bills in the future as a small example of a preventative measure. If someone in the neighborhood wanted to mow my lawn for a dollar – a ridiculous example since I don’t have a lawn and they wouldn’t offer that price. I would be happy to pay that since spending that dollar saves me time to do other things that make me money – like write this blog for example.
Buying in bulk is definitely something that I do. However, I realize that product X usually goes on sale once a month, so I only buy enough bulk to get me through to the next sale. And I only do it if it’s not a perishable item. Also if the discount is very small, I attempt to do quick estimate on whether it’s worth my while to buy in bulk. I’m not going to buy three years worth of paper-towels just to save 3%. I’d be better off buying a small amount and taking the money and investing it. However, if it’s something that I normally use and it’s half off, I’m going to try to take advantage of that.
No arguments here.
I had been pondering on how the time value of money would interact but couldn’t get a coherent thought out. I’ll just throw out this link and move along: http://www.investopedia.com/articles/03/082703.asp
Adventures In Money Making says
I have tagged your blog. See the URL for more details.
Remember that you’re actually saving more than 3% on those paper towels if you buy three years worth, since inflation is going to mean that those paper towels will actually be much more expensive 3 years from now. Buying them in bulk on sale today might actually mean saving more like 10-12%.