The Wrong Way You’re Doing Savings (A Lesson On Frugality)
We all know that you want to save, but are you doing it right?
Holly Johnson, founder of the Thrifty Club, has a nice little story to tell all of us. It’s all about the hard truths of being too frugal.
Johnson, being a self-proclaimed frugality expert, was not born with great savings skills. Before, her idea of frugality would have to be to get the cheapest buy in the market to “save.”
So, one day she bought a cheap coffee maker that ended up being broken after a few months. She bought another one, and lo and behold, it broke again. After her third failed try, she decided to go to a premium quality machine that costs $99—the coffee machine that stood the test of time.
Johnson learned the hard lesson about savings and frugality. Being frugal is not just about finding the cheapest version in the market, but finding the most valuable one.
Don’t get me wrong. There are outstanding but cheap products in the market, but not everything offers the same value. To make sure you get the best out of your buck, make sure you don’t skip on analyzing the value of a product.
For example, you can choose to buy a trench coat that you would need to use for a year or two. There’s a bargain in the market that costs $120. This may look attractive since the other, more premium version costs $699. The cheaper one was made in polyester and it has average sewing. Though the design looks the same, you already know that the $699 version would last longer.
So, if we’re calculating the value of the purchase, if the use of the coat will just be for occasional night outs, you can choose the $120. It will give you the coverage and style you need when you’re going out and it does its “job.”
On the other hand, if you need an office companion, the one you’d take on business trips and on plane flights, it is best to choose the other one for durability.
The other lesson Johnson wants to share is about sales and bargains.
We always see these 50% sale on supermarkets and malls (even during online shopping!). However, even though they look attractive, we have to remember that, “50 Percent Off Is Still 50 Percent On.”
These bargains and deals are always made to attract you into buying but that doesn’t mean you will get value out of it. Let’s do the math.
You’re in a mall and you see this All-In-One Kitchen Knife for only $99 (50 percent off). You think you need that knife ASAP since you cook at home. This purchase is supposed to be practical and of value. However, if you have a certain budget for that month, it simply means you are taking $99 out of that budget and allotting it for something you could buy later when you have a wider spending cap.
Yes, you could have saved $99 on that deal, but it might cost you that crucial $99 you would need for that month, for example, to set up your own Forex account.
“One of things we see often is people use [frugality] as an excuse to buy things they don’t need,” says Kyle Taylor, CEO of The Penny Hoarder. “Whether it’s on sale or you have a coupon, you end up spending money just because something appears to be a great deal.”
Johnson adds that when it comes to smart purchasing, “instead of buying the cheaper option, just find ways to save on the quality product you know and love.”
Technology and the Internet also help you make better choices. Since you have a plan with you, you can compare prices before heading to the store to see if there are “more valuable” options for you to choose from.
Saving is not just about being able to buy the cheapest lot out there, but finding the products that would give you compounded value over time.