Wisdom from The Action Wisdom In Action

Prey By Price Alone

Real wood or particle board? Real marble or faux? Fiesta Ware or colorful knockoffs? Mercedes or Buick?

How do you know when something’s a frugal buy and when it’s just being cheap?

Frugal is buying something that will last, along with your need to own it and use it. Cheap is buying something for the least amount of money, need, and use. Cheap is a band-aid fix for the un-addressed problem of unwise spending decisions.

I’m not suggesting you should go out and buy REAL things at every turn, but rather that you THINK before going out in the first place. Assess your true needs, length of need, and plans for use—then think of alternatives to buying new.

Now that you’ve gotten through all that, you need to think about how you’re going to acquire the item in question—first hand, second hand, or make it yourself.

Quite often, buying second hand is more expensive than buying new, but the difference in quality will more than make up for it. Take furniture as a case in point. Antiques and reproductions cost more than new furniture, but the wood is real, and the construction is much more sturdy—otherwise, they wouldn’t still be around today! An idea: do you think the plastic-and-particle board furniture of today will be around in 100 years, and how do you think it will be regarded in the future?

There are cases where new buys will always cost more than used buys—take cars and houses, for example. Future buys will always cost more because of demand and market value, but depreciation will always come to take a bite—sometimes a HUGE one—out of the value, making it worth less and you feeling like an idiot for throwing good money away on misperception instead of carefully spending on true needs.

Once upon a time, frugality used to be the dominant societal norm in this country…I think right up until after WWII. When the factories got to cranking and spewing out stuff after the war, and our need for conserving scarce resources went away, the floodgates opened—prosperity abounded, along with the borrowing capacity to go along with it. Inventions flourished, and so did demand for more. Convenience was the driving factor, and novelty was the fashion it wore. Those who wanted it, and could afford it (both in the head and wallet), usually got it and flaunted it. Rather than be left behind, the rest of us scrambled to catch up. Technology and marketing did the rest.

We are now a more affluent society than we will ever come to realize. Thanks to industry and production methods, things cost much less today than they did 100 years ago. Constant demand drives the prices lower still, yet we only seem to focus on the price tag in front of us.

If it would help to think of things in terms of work-hours needed to pay for it, then by all means shift focus. A TV today would take maybe a week’s earnings after taxes—100 years ago, a TV (even though it probably didn’t exist) would’ve cost YEARS of income minus taxes. How did we get here? Technological and production improvements. What did we get for our money? Certainly not a better TV—just one with more bells and whistles than a train of yesteryear.

We need to stop and smell the roses—cherish what we already have, and be more discriminating about what we add to it.

It's unwise to pay too much. But it's worse to pay too little.
When you pay too much, you lose a little money. That is all.
When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

The common law of business balance prohibits paying a little and getting a lot. It can't be done.
If you deal with the lowest bidder, it is well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.

There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and people who consider price alone are this man's lawful prey.
John Ruskin (1819-1900)

Posted by Cute at 9:24 PM

Labels: financial (non-tax)