If you want a Black Friday bargain, you have to be ready to be pepper sprayed, horse collar tackled, and perhaps trampled a few times. There are easier ways to get bargains.
Business Laptops. If you're in the market for a laptop, look at less expensive business models. Unlike laptops specifically aimed at consumers, business laptops are designed for heavy duty use, careless handling (it's the company's property, after all), and enough longevity that sales reps can convince corporate buyers the equipment is cost effective. Many business laptops are shock and spill resistant. They are often preloaded with good quality software. This, all for a price in the $500 to $700 range. Business laptops don't come in pastel colors, and are heavier than personal laptops (the additional ruggedness adds weight). But a well-made one delivers good value for the dollar.
Prepaid Cell Phone Plans. Prepaid plans give you direct feedback about your usage, by forcing you to buy more time when you're running low. These periodic demands for money teach you how much your yacking actually costs. You learn to reduce this negative feedback by controlling phone usage. You save by not paying for time you don't use.
Balanced Investing. A portfolio that's about 50% stocks and 50% bonds offers comparative stability in returns (see http://www.cnbc.com/id/45454073). Investors who enjoy stable returns are less tempted to trade, incur lower transactions costs, and face less of the volatility that tempts one to buy high and sell low. By reducing these negative factors, balanced portfolios can deliver good long term returns.
Renovated Homes. It's axiomatic among real estate professionals that home renovations, with rare exceptions, boost the value of a house less than 100 cents on the dollar cost of the renovations. This necessarily means a recently renovated home is a comparative bargain for the buyer who carefully researches prices and figures out where the actual market price is. A home that was renovated in the past year or two has a good chance of being a bargain. One that was renovated five or ten years ago may have appreciated enough that buyers don't really get a discount from the renovations (depending on the market). A beat up, water damaged foreclosure sale may a good deal. But so may be a sparkling recently renovated home. Do your research.
Year Old New Cars. Cars on a dealer's lot that are brand new, but one model year old can be an excellent bargain. The dealer will seriously discount them (sometimes with a quiet subsidy from the manufacturer) in order to make room for current year models. Year old new cars can be a better bargain than year old used cars, because they have no mileage but sometimes sell for not much more than a used car with 10,000 miles. Buying what the seller doesn't want is a good way to get a bargain.
Showing posts with label smart shopping. Show all posts
Showing posts with label smart shopping. Show all posts
Sunday, November 27, 2011
Wednesday, August 17, 2011
Steady is the Way to Save
Financial returns have gone to hell. Bond yields are evaporating, money market returns are zero, and stocks have gone negative more than most politicians. We're in an investment desert, with the prospect of retirement a cruel mirage. If you manage to retire, you fear that you'll run out of money before you run out of time on this planet. That would leave you with only Social Security. But the political right will ambush Social Security and if you plant a garden to survive, the white tail deer swarming America's suburbs will eat your food supply before you can harvest it. You're screwed. Unless you find a way to boost your net worth.
The most reliable way to build up your net worth is to save steadily, week after week, month after month, year after year. Then, if you compound your earnings (assuming there are earnings to compound), you leverage your returns (see http://blogger.uncleleosden.com/2009/09/if-you-love-compounding-compounding.html). How can you achieve a steady flow of cash into your saving and investment accounts? Here are a few ideas.
Pay yourself first. Participate in any 401(k) or other employer-sponsored retirement program available to you. A portion of your paycheck will be automatically credited to your retirement account before you can spend it. You can also arrange with your bank to automatically transfer each month a fixed amount from your checking account to a saving account, IRA account, or mutual fund account. The key to saving is to live below your means. Paying yourself first is a great way of doing that.
Shop for Loss Leaders. Many stores offer extra low prices on select items to get you in the door, in the hope that you'll pay full freight for other items. Grocery stores are notorious for advertising loss leaders, and nailing you with high prices on staples. A way around this pricing scheme is to identify a cluster of grocery stores that are within a few miles of each other, so that travel costs aren't a big factor, and buy the loss leaders at each. You'll probably find that different stores often have different items on sale each week. It's hard for stores to win the loss leader game if they mark down the same items. So they frequently mark down different items to avoid competing directly against each other. If the stores are close to each other, you can drive to all of them easily and buy the bargains. When you frequently shop the same cluster of stores, you'll also learn how their regular prices differ. One store will usually have cheaper meat, another cheaper bread, a third cheaper milk. With this knowledge, you can save even more. While this strategy may not work well in rural areas and urban areas poorly served by the big supermarket chains, it does work for the majority of Americans who live in the suburbs.
Cheap gas. There are websites that report on gas prices in your neighborhood. None have complete information. But take advantage of the bargains you find. Since gas is an important monthly expense for most Americans, the savings add up.
Drive like a millionaire. Studies of the well-to-do report that the typical millionaire drives, not a luxury or sports car, but a standard sedan or mid-range SUV. Most millionaires became well-off because, among other things, they didn't burn up their income on big depreciating assets like expensive cars. Buy as much car as you need. A family of five or six obviously needs more vehicle than a single person. But don't confuse looking prosperous with being prosperous. Choose a Honda over an Acura, or a Ford over a Lincoln, and you'll look more like a typical millionaire.
Eavesdrop on your fellow passengers. We all know that mass transportation will usually be cheaper than driving, and it's kinder to the environment. Okay, strap hanging with a lot of other people trying not to look like sardines may seem like eating bologna with processed American cheese food on white. But view the glass as half full. Almost every day in public transportation, you can hear other people over-sharing too loudly on their cell phones. You learn what idiotic, messed up, contorted, perverse, and incredibly lunatic lives they have, and you will be amused, entertained, appalled, disgusted, and grateful. Grateful because however boring, unrewarding, difficult, and warped your life may seem, someone else has traveled farther down the road toward disaster than you. Don't worry about being an eavesdropper; they voluntarily, if perhaps unwittingly, made spectacles of themselves. Laugh while you bank your savings in commuting costs.
Veg out for free. If you're going to rot your brain sitting in front of a television, consider what you like to watch and find the cheapest way to get it. Check out resources on the Internet. A lot of cable shows can be accessed through your PC for free or a lot less than monthly cable charges. If you are a public television fan, many PBS stations post copies of shows on their websites that you can access later without charge if you miss the broadcast. Broadcast TV still does exist, and there are more channels now than ever. Of course, if you need to slobber on the sofa with shopping shows playing nonstop, cable may be your best option. But you'd be spending money in order to spend money. That isn't the way to get rich.
A pox on credit card interest. You won't enrich yourself by enriching banks. As interest rates for savers have fallen, interest charges for credit card customers have risen. Do you think someone might be getting shafted? If you carry over a monthly balance on your credit card, that someone can be found in the mirror.
Make Your Life Fit Your Closet Space. If you look at the typical American home (be it a single family house, a condo or an apartment), you'll notice that the closet space seems rather limited. Think about your friends and family--most or all of them have filled their closets and other storage space to 150% of capacity, and then stacked stuff up against walls and in other stray spaces. Most of America's housing stock was built in the 1940s, 1950s, 1960s and 1970s, with enough closet space for the needs of the times. It's only been in the last few decades that the warehouse-size walk-in closets found in newer suburbs have felt barely adequate. During the halcyon years of the 1950s and 1960s, when Americans thought of themselves as glowingly prosperous, people lived with a lot less than they have today and felt damn good about it. You can save a lot of money by making your life fit your closet space. Buy what you need. Buy what you want. But don't make a landfill of your closet space.
The most reliable way to build up your net worth is to save steadily, week after week, month after month, year after year. Then, if you compound your earnings (assuming there are earnings to compound), you leverage your returns (see http://blogger.uncleleosden.com/2009/09/if-you-love-compounding-compounding.html). How can you achieve a steady flow of cash into your saving and investment accounts? Here are a few ideas.
Pay yourself first. Participate in any 401(k) or other employer-sponsored retirement program available to you. A portion of your paycheck will be automatically credited to your retirement account before you can spend it. You can also arrange with your bank to automatically transfer each month a fixed amount from your checking account to a saving account, IRA account, or mutual fund account. The key to saving is to live below your means. Paying yourself first is a great way of doing that.
Shop for Loss Leaders. Many stores offer extra low prices on select items to get you in the door, in the hope that you'll pay full freight for other items. Grocery stores are notorious for advertising loss leaders, and nailing you with high prices on staples. A way around this pricing scheme is to identify a cluster of grocery stores that are within a few miles of each other, so that travel costs aren't a big factor, and buy the loss leaders at each. You'll probably find that different stores often have different items on sale each week. It's hard for stores to win the loss leader game if they mark down the same items. So they frequently mark down different items to avoid competing directly against each other. If the stores are close to each other, you can drive to all of them easily and buy the bargains. When you frequently shop the same cluster of stores, you'll also learn how their regular prices differ. One store will usually have cheaper meat, another cheaper bread, a third cheaper milk. With this knowledge, you can save even more. While this strategy may not work well in rural areas and urban areas poorly served by the big supermarket chains, it does work for the majority of Americans who live in the suburbs.
Cheap gas. There are websites that report on gas prices in your neighborhood. None have complete information. But take advantage of the bargains you find. Since gas is an important monthly expense for most Americans, the savings add up.
Drive like a millionaire. Studies of the well-to-do report that the typical millionaire drives, not a luxury or sports car, but a standard sedan or mid-range SUV. Most millionaires became well-off because, among other things, they didn't burn up their income on big depreciating assets like expensive cars. Buy as much car as you need. A family of five or six obviously needs more vehicle than a single person. But don't confuse looking prosperous with being prosperous. Choose a Honda over an Acura, or a Ford over a Lincoln, and you'll look more like a typical millionaire.
Eavesdrop on your fellow passengers. We all know that mass transportation will usually be cheaper than driving, and it's kinder to the environment. Okay, strap hanging with a lot of other people trying not to look like sardines may seem like eating bologna with processed American cheese food on white. But view the glass as half full. Almost every day in public transportation, you can hear other people over-sharing too loudly on their cell phones. You learn what idiotic, messed up, contorted, perverse, and incredibly lunatic lives they have, and you will be amused, entertained, appalled, disgusted, and grateful. Grateful because however boring, unrewarding, difficult, and warped your life may seem, someone else has traveled farther down the road toward disaster than you. Don't worry about being an eavesdropper; they voluntarily, if perhaps unwittingly, made spectacles of themselves. Laugh while you bank your savings in commuting costs.
Veg out for free. If you're going to rot your brain sitting in front of a television, consider what you like to watch and find the cheapest way to get it. Check out resources on the Internet. A lot of cable shows can be accessed through your PC for free or a lot less than monthly cable charges. If you are a public television fan, many PBS stations post copies of shows on their websites that you can access later without charge if you miss the broadcast. Broadcast TV still does exist, and there are more channels now than ever. Of course, if you need to slobber on the sofa with shopping shows playing nonstop, cable may be your best option. But you'd be spending money in order to spend money. That isn't the way to get rich.
A pox on credit card interest. You won't enrich yourself by enriching banks. As interest rates for savers have fallen, interest charges for credit card customers have risen. Do you think someone might be getting shafted? If you carry over a monthly balance on your credit card, that someone can be found in the mirror.
Make Your Life Fit Your Closet Space. If you look at the typical American home (be it a single family house, a condo or an apartment), you'll notice that the closet space seems rather limited. Think about your friends and family--most or all of them have filled their closets and other storage space to 150% of capacity, and then stacked stuff up against walls and in other stray spaces. Most of America's housing stock was built in the 1940s, 1950s, 1960s and 1970s, with enough closet space for the needs of the times. It's only been in the last few decades that the warehouse-size walk-in closets found in newer suburbs have felt barely adequate. During the halcyon years of the 1950s and 1960s, when Americans thought of themselves as glowingly prosperous, people lived with a lot less than they have today and felt damn good about it. You can save a lot of money by making your life fit your closet space. Buy what you need. Buy what you want. But don't make a landfill of your closet space.
Sunday, June 10, 2007
Smart Spending Builds Wealth
Spending money can help to build wealth--if you spend the right way. Buy things when they are inexpensive. If you like tuna, wait until it goes on sale and buy a dozen cans for 1/3 or ½ off. As for meat or poultry, buy several pounds on sale and freeze what you don’t eat right away. If you like whole wheat bread, buy the brand that’s on sale. At most grocery stores, there will a dozen brands of whole wheat bread and one or another will usually be on sale every week. Also, read the nutritional labels. Sometimes, the supermarket’s generic brand has more nutritional content than more expensive and heavily advertised brands (no, not a joke). If you can get over the image problem, buying generic may be cheaper and better for you.
The next time you’re near a cheap gas station, fill your tank up completely. Then, top off at less expensive stations, even if you still have a half a tank. That way, you’ll always buy less expensive gas. Don’t wait until your tank is almost empty and you have to buy at whatever station is nearby regardless of cost.
On a larger scale, don’t buy expensive clothes until they go on sale. All stores have sales. Be patient and get suits, shirts and ties for 30%, 40% or even more off. If you want a large, flat screen TV, wait until a major holiday with a three-day weekend. The big box stores often drop prices to draw customers. Or find a discount outlet, either at a strip mall or online, and buy below the nationally advertised price. On an even larger scale, pay cash for your cars if you can. You may be able to get a very good price on a new car by asking for quotes from the dealer’s Internet departments. See our blog about buying a new car this way: http://blogger.uncleleosden.com/2007/05/buy-new-car-without-haggling-and-save.html.
When it comes to your credit card, don’t carry a balance over from month-to-month. Once you start rolling over a balance, the interest and other charges become a part of your financial life. If you pay off each month’s balance, you are effectively getting a loan at zero percent interest. That’s bargain basement credit. (Don’t feel sorry for the credit card companies—they ding the merchant a percentage of each charge, so they make money anyway.)
Think of smart spending as an investment. When you buy tuna at 50% off, you effectively make a 100% profit, because you save as much as you spend. When you buy a suit at 35% off, you effectively make about a 50% profit. The amount of money you “make” on a dozen cans of tuna this way is a few dollars. But if you approach all your spending this way, you could save hundreds and even thousands of dollars a year. Assuming you have a 50 to 60 year adulthood, your lifetime savings can amount to tens of thousands, and maybe more than a hundred thousand, dollars. Invest the savings, and you’ll notice an improvement in your retirement. To learn more about the power of compounding, go to our earlier blog at http://blogger.uncleleosden.com/2007/04/love-in-time-of-financial-planning-part.html.
This technique is most effective if you don’t buy when prices are high, and then buy in quantity when prices are low. Also, don’t buy things on sale simply because they are on sale. Use sale prices to your advantage, and purchase what you would buy anyway—when prices are low.
In order to buy things when they are inexpensive, you have to have some extra money around. An $800 charge for suits, shirts and ties at a sale may cause an unexpected jump in your credit card balance. It takes money to make money, even when we're talking about smart spending. So keep some cash on hand to cover these uneven expenses. How much you keep depends on your spending needs. A couple thousand dollars may be all you need for most household expenses. Obviously, more would be needed for something like a large high definition flat screen TV or a car. Set aside some money for spending capital. “Buy low, sell high” is an old adage in the investment business. Buying low is also a good way to spend.
Crime News: Here’s a criminal twist on a shopping list. http://www.wtop.com/?nid=456&sid=1162977.
The next time you’re near a cheap gas station, fill your tank up completely. Then, top off at less expensive stations, even if you still have a half a tank. That way, you’ll always buy less expensive gas. Don’t wait until your tank is almost empty and you have to buy at whatever station is nearby regardless of cost.
On a larger scale, don’t buy expensive clothes until they go on sale. All stores have sales. Be patient and get suits, shirts and ties for 30%, 40% or even more off. If you want a large, flat screen TV, wait until a major holiday with a three-day weekend. The big box stores often drop prices to draw customers. Or find a discount outlet, either at a strip mall or online, and buy below the nationally advertised price. On an even larger scale, pay cash for your cars if you can. You may be able to get a very good price on a new car by asking for quotes from the dealer’s Internet departments. See our blog about buying a new car this way: http://blogger.uncleleosden.com/2007/05/buy-new-car-without-haggling-and-save.html.
When it comes to your credit card, don’t carry a balance over from month-to-month. Once you start rolling over a balance, the interest and other charges become a part of your financial life. If you pay off each month’s balance, you are effectively getting a loan at zero percent interest. That’s bargain basement credit. (Don’t feel sorry for the credit card companies—they ding the merchant a percentage of each charge, so they make money anyway.)
Think of smart spending as an investment. When you buy tuna at 50% off, you effectively make a 100% profit, because you save as much as you spend. When you buy a suit at 35% off, you effectively make about a 50% profit. The amount of money you “make” on a dozen cans of tuna this way is a few dollars. But if you approach all your spending this way, you could save hundreds and even thousands of dollars a year. Assuming you have a 50 to 60 year adulthood, your lifetime savings can amount to tens of thousands, and maybe more than a hundred thousand, dollars. Invest the savings, and you’ll notice an improvement in your retirement. To learn more about the power of compounding, go to our earlier blog at http://blogger.uncleleosden.com/2007/04/love-in-time-of-financial-planning-part.html.
This technique is most effective if you don’t buy when prices are high, and then buy in quantity when prices are low. Also, don’t buy things on sale simply because they are on sale. Use sale prices to your advantage, and purchase what you would buy anyway—when prices are low.
In order to buy things when they are inexpensive, you have to have some extra money around. An $800 charge for suits, shirts and ties at a sale may cause an unexpected jump in your credit card balance. It takes money to make money, even when we're talking about smart spending. So keep some cash on hand to cover these uneven expenses. How much you keep depends on your spending needs. A couple thousand dollars may be all you need for most household expenses. Obviously, more would be needed for something like a large high definition flat screen TV or a car. Set aside some money for spending capital. “Buy low, sell high” is an old adage in the investment business. Buying low is also a good way to spend.
Crime News: Here’s a criminal twist on a shopping list. http://www.wtop.com/?nid=456&sid=1162977.
Tuesday, April 24, 2007
Spend Smart and Avoid that Sinking Feeling
One way to increase the amounts you save for retirement is to buy high quality goods and make them last by taking care of them. That way, you'll devote less money to buying things and save more. A look at cars illustrates the point.
A new car loses value the minute you drive it off the dealer's lot. In the first three years of their lives, many cars lose half their value. After five years, the total loss might be 70%. If you buy a new car every five years, you will lose up to 70% of the value of the car every five years.
But if you buy a new car and keep it for ten years, you'll lose around 70% of the value in the first five years, but only about 20% in the next five years. That beats having to make payments on a new car. Sure, you'd have to drive an older car. But, if you save the money you didn't spend on a new car, you'd have a larger net worth. Considering the price of a new car today (on average, something like $28,000), we aren't talking about pocket change. There's nothing wrong with driving an eight-year old car, especially if you have a better retirement as a result.
Smart spending means buying high quality, long lasting goods, and maintaining them carefully. Do this as a way of life and the money you save can go a long way to building wealth.
Consumer goods depreciate in value. They do not build wealth. Cars, furniture, TVs, entertainment equipment, computers, sports equipment, home furnishings, clothes, shoes, appliances, backyard grills, and lawn tractors all lose value over time. It's fair to say that the average American household contains a great big mass of depreciating goods that detract from one's ability to build wealth. And consumption items like cable TV, restaurant meals, pet grooming services, and $200 haircuts have no monetary value after you buy them. Of course, you have to buy some consumer goods and services to live in today's world. Heaven forbid that you should be unable to watch the shows that everyone else is talking about. Maybe you work hard and feel you deserve nice things. Okay. How about a nice big retirement portfolio?
Limiting the amounts you spend on depreciating goods allows you to invest more money in appreciating assets. You'll have less of a sinking feeling about your finances if you spend smart and invest more.
June 24, 2007 Answer to Comment Below: your debt-to-income ratio should not, if you are prudent, exceed approximately 35% of pre-tax income. This ratio is commonly recognized in the United States, and the figure for residents of other nations may be different because of differing tax and social welfare systems.
A new car loses value the minute you drive it off the dealer's lot. In the first three years of their lives, many cars lose half their value. After five years, the total loss might be 70%. If you buy a new car every five years, you will lose up to 70% of the value of the car every five years.
But if you buy a new car and keep it for ten years, you'll lose around 70% of the value in the first five years, but only about 20% in the next five years. That beats having to make payments on a new car. Sure, you'd have to drive an older car. But, if you save the money you didn't spend on a new car, you'd have a larger net worth. Considering the price of a new car today (on average, something like $28,000), we aren't talking about pocket change. There's nothing wrong with driving an eight-year old car, especially if you have a better retirement as a result.
Smart spending means buying high quality, long lasting goods, and maintaining them carefully. Do this as a way of life and the money you save can go a long way to building wealth.
Consumer goods depreciate in value. They do not build wealth. Cars, furniture, TVs, entertainment equipment, computers, sports equipment, home furnishings, clothes, shoes, appliances, backyard grills, and lawn tractors all lose value over time. It's fair to say that the average American household contains a great big mass of depreciating goods that detract from one's ability to build wealth. And consumption items like cable TV, restaurant meals, pet grooming services, and $200 haircuts have no monetary value after you buy them. Of course, you have to buy some consumer goods and services to live in today's world. Heaven forbid that you should be unable to watch the shows that everyone else is talking about. Maybe you work hard and feel you deserve nice things. Okay. How about a nice big retirement portfolio?
Limiting the amounts you spend on depreciating goods allows you to invest more money in appreciating assets. You'll have less of a sinking feeling about your finances if you spend smart and invest more.
June 24, 2007 Answer to Comment Below: your debt-to-income ratio should not, if you are prudent, exceed approximately 35% of pre-tax income. This ratio is commonly recognized in the United States, and the figure for residents of other nations may be different because of differing tax and social welfare systems.
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