This post is probably not for everyone. But if you are interested in reducing your expenditure, you may wish to read how I treat expenditures. Generally, the basic principle is that I will spend $2 on a $1 thing that I need but will not spend $1 on a $2 thing that I don't need. Despite having to "overspend" on things, there are actually a lot less $1 things that I need compared to $2 things that I don't need. Below, I describe some of the gimmicks that companies use to entice people to open up their wallets.
Coupons can provide great savings, but they are also advertising gimmicks for the $2 things that we do not need. Generally, we need to differentiate coupons that you actively seek out and coupons that are given to you on the street or when you participate in an event. In the former case, since the coupons are something that you seek out, they are really the things that you need and can provide great savings. In the latter case, they are just advertising gimmicks. While they can also provide great savings, you can probably save more without them. As an illustration, the coupon might have saved me $10 when I spend $50 at the shop, but without shopping using the coupon, I would have saved $40 more. How I treat coupons is to give them away to colleagues who might need them more.
For many things, the more you buy, the lower is the per-unit rate, thus given you a higher value for money or a bigger bang for the buck. As an example, broadband services could be priced as follows:
The higher the bandwidth, the lower is the per-unit rate. Such pricings might tempt people to pay a little more to get the higher quantity. But do you really need the higher quantity? If you don't, you are just paying more than is necessary.
Low Upfront Costs
If you have shopped for a printer before, you would notice that prices of printers are quite cheap. However, the price of an ink cartridge can easily cost up to 30% of the price of a printer. With printers using 2 or more ink cartridges, you could almost pay for a new printer every 2-3 years. For goods and services that have upfront costs and recurrent expenditure, it is best to compute costs on a Total Cost of Ownership basis and use that to compare between the various goods and services.
On a similar note, there are services that may appear attractive based on the promotional rates during an initial period of usage. But when the initial period expires, the rates will revert to higher levels. As an example, I was recently offered to upgrade my broadband services from 2Mbps to 25Mbps when my contract expired. The promotional rate for the higher 25Mbps service was $24.90, which was slightly higher than the $23.10 for the 2Mbps service. On top of that, the promotion came with 3 months of free subscription and some free TV channels. It looked really attractive, especially when compared to the approximately $35 non-promotional rate for the 2Mbps service which was no longer available for re-contracting. But when the contract expires after 2 years, the non-promotional rate for the 25Mbps service would be $45. Whatever savings I would have from the promotional rates would be wiped out by the higher non-promotional rates after another 2.6 years of usage. Hence, it is best to see beyond the promotional rates and calculate the total cost that you would have to pay for a service. (For your info, I eventually decided to upgrade as the telemarketer convinced me that broadband prices would continue to drop, so I might not have to pay the non-promotional rate at $45.)
In the final analysis, you need to know what your needs are and spend only on those needs. Salesmen will always try to convince you that you need certain things. If it is something that you really need, you probably do not need anybody to tell you that. If somebody has to tell you that you need something, it is probably a want that you can live without.
Also, do not try to suppress your needs so that you can save a little money here and there. It is a long journey and you must be at ease with your needs. What's the value of life if you can't satisfy your needs? As mentioned in a related post, managing expenditure is not about being a miser; it is about knowing when to spend.
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I'm the webmaster of Cheaponana.com, and am interested to perform a link exchange with your site. Let me know if you are interested. Thank you
Hi, Thanks for your invitation. I don't think I'll have many posts on how to save money. This is more of an investment blog. Thanks, anyway ;)Delete