The Latest Trend in Lousy Personal Finance Advice
/I don’t often write about basic personal finance principles on this blog, but I will jump in on a recent trend I’m noticing on YouTube. I'm seeing various bloggers/vloggers repeating the following advice, especially when it comes to what I would consider luxury or "treat yourself" type of items:
“Don’t buy something on sale if you wouldn’t buy it at regular price.”
On the surface, it might seem like great advice. What the message is intended to do is address the impulse to buy something we would never have even considered just because it’s on sale.
But the hidden message within the statement is that it’s somehow normal or expected to be paying regular price and/or not to negotiate (on purchases where this is culturally an appropriate practice...I would not say that everything is fair game in North America).
It made me think “Do people really buy stuff full price?!”
Serious question! That feels so foreign to my very everyday, opportunistic self.
The statement quoted above might be better communicated this way to capture the true underlying intention:
“If you wouldn’t have noticed this product at regular price, don’t even think of buying it.”
The second statement is fundamentally different. There’s a difference between being interested in a product at regular price and actually buying it at regular price. This different thinking can hint at a change in behaviour.
I can think of plenty of products that are regular price that interest me but I can tell you there’s no way in you-know-what that I would be shelling out the cash to get my hands on them!
What I want to focus on here is an underlying assumption about habits and pricing. The first piece of advice suggests that buying at regular price is “the norm” in our day-to-day activities.
I want to challenge this norm because saving on products and services we consume regularly is about the best way to reduce household expenses and it can have a greater impact on our household’s financial fitness than getting a raise or promotion at work—as long as the savings don't end up being spent on yet more products and services.
It can even have a greater impact on a household’s wellness than a given year’s investment returns. Where else can you make an automatic 30%+ by purchasing a consumable need on sale? (The assumption here is that we bank the difference or, if money's very tight, that we are are avoiding debt by spending the difference on other basic needs.)
For our household, buying products and services at regular price is the exception, especially when it comes to consumable products we purchased often.
Okay, I have to admit that we’re not huge consumers of household items. The grocery store is where most of our consumer purchases take place. We don’t really purchase anything for our home, car, etc., other than the regular maintenance our belongings require to remain in good working order.
We also don’t tend to replace items until they’ve either gone to consumer goods heaven or don't fit our needs anymore. We do spend money on our home-based business (materials, computers, services...on sale wherever possible), but we consider that a reasonable cost of doing business and these purchases happen maybe twice a year.
When it comes to restocking on staple items (Superstore, Shoppers Drug Mart, Sephora and Canadian Tire, and Princess Auto*), here’s how we shop:
- We pay attention to flyers & product pricing
- We know when the stores we regularly frequent have sales (seasonal, clearance)
- We keep a list (mental and/or written) of things we want to purchase eventually but that are not an emergency purchase
- When there’s a sale on a product in a given category and it’s the same or a better sale price than what we regularly would buy, we try it to see if it could be a good substitute
- We buy clearance perishable items if it’s something we can use immediately
- We buy value-sized products
Here’s a bit more detail on each of these behaviours:
1. Paying Attention to Flyers & Product Pricing
This is a big one, though the process only takes about 10 mins per week. We focus on stocking up (doing a big $250 grocery shopping trip) when the store we shop at (Superstore) is offering $25 off a $250 purchase—which is announced in their weekly flyer and app.
Anything less than that type of offer makes it a week where I only purchase the sales items we need to make it to the next $25 offer (that’s where a freezer comes in handy—we shop our stash). And it’s not a hard thing to do because we stock up when items are on sale and tend to look out for those items when we know we’ll need to restock. I guess you could say that the sales items make up the daily food menus for the week.
Also, knowing whether something is really on sale is key. Getting something for 30% off when the regular price has been hiked up by 20-30% means it's not really on sale. That means it's useful to know what a "good price" base price is for items anyone tends to buy often (knowing these values means we create an "anchor" for ourselves, a trigger that tells us something is a good value for money). Items where I've noticed this happening (other than fresh fruits and vegetables): nut butters, nuts, cheese, chocolate, coffee, detergent, cosmetics and paper products.
2. Knowing When Stores Have Sales
Most of our purchasing as consumers is not done in a state of emergency. When it comes to consumption, we tend to plan ahead and be patient. We know sales happen, and we know when they happen at the stores we frequent most. I really don’t understand why we wouldn’t wait for a sale on virtually everything we consume. And I have to assert that, to me at least, less than 20% off an item does not constitute a sale. Sales start getting my attention when I’m saving 30% or more on an item I’ve had my eye on for a while or something I regularly consume.
The key here is that we’re strategically shopping sales. We’re not using sales as an excuse. We wait for them and we know what category of product(s) we’re going to buy when it comes. Our patience is usually greatly rewarded. Plus, there’s the added bonus of being grateful for the products because the extra effort in delaying our gratification makes them a bit more special.
One key to the sales focus is to keep our eye on our preferences for a given category of products. Focusing on wanting a given model in a given colour can drive anyone crazy. What we focus on instead is what we want to get that fits in “that general product category” when replacing highly used items (this also goes for fashion and beauty & wellness products). I guess you could say I have blinders on in that I don't even consider full priced items as being "eligible" to make it in my cart.
What about FOMO? If I don’t know all that was available beforehand, I won’t be disappointed when I shop what is still in stock. This is a big one when shopping the after Christmas sales. What I don’t know can’t hurt me and the 50%+ off the original price tag makes that an even easier pill to swallow.
3. Keeping a List
The best savings advice I can possibly offer is: "If at all possible, wait.”
When it comes to things I covet, I’ve found that keeping a list is best. I keep a mental list of things we’re running low on in the pantry or the fridge/freezer but, when it comes to things I would “like to have,” I write it down instead of hopping online to add it to my shopping cart.
Writing it down makes me feel better, like I’m taking a step toward acquiring it, without having to cough up any money just yet. Here are a few other benefits to keeping a list:
- All the desired items are listed together, leading me to weigh them against each other (value, desirability, relevance)
- It gives me tangible evidence that desires are fleeting and that I often change my mind, crossing items off the list as I realize I’ve moved on (waiting does wonders for our bank account)
4. Purchasing Substitutes
While I shop, I focus on purchasing what is the best value in the foods we usually like to consume (sometimes what looks like a sale really isn’t).
Our diet is based on what is seasonal (seasonal fresh food is cheaper because it’s available in large quantities), on sale and that carries the least amount of sales tax (we pay tax on processed foods, not on unprocessed/unprepared fresh consumables).
Examples:
- If there’s a brand of coffee that’s cheaper than the one I usually buy and it’s of a similar type to what I like, I’ll most definitely try it.
- If there’s a different brand of spaghetti sauce that’s cheaper than what I usually buy and the ingredients are just as good or better, bring it on.
- If there’s nothing on special in a given food category, I might just skip on it during that shopping trip, choosing to substitude for something else that will do the trick.
- We’ll buy our fruits and vegetables unprepared, because the prepared deli foods are taxable, and they’re more expensive, even if they’re on sale or on clearance.
5. Buying on Clearance
We often buy meats, cheeses and eggs on clearance. The stores we frequent always have meats and cheeses that were the special for the previous week on clearance the following week. When we buy these items, we either freeze them or prepare them within the day. The food has always been fine, especially when it comes to red meat because it’s had a chance to age a bit more (steaks are perfect when they’re on clearance).
I sometimes also purchase fruits and vegetables from the clearance bin, as mentioned in this article, as long as I know I can take the time to prepare them that day.
So many people cringe at the above, but chances are that we all have clearance items in our refrigerators if we only shop weekly. What’s the difference if the item has been sitting in your fridge or in the grocery store? It’s a week older either way!
6. Buying Value Sizes
As long as what we're buying is something we know we'll use completely and/or it's a non-perishable item, we buy in bulk (laundry detergent, potatoes, olives, dog food, coffee, nuts).
The difference in cost per serving between value size and convenience size is astronomical! I often remark that convenience size pricing is an unstated tax on poor and/or single individuals.
What a rip off! And don't even get me started on the waste of packaging involved. If you don't think it's a big deal, do the math on the difference in cost per serving/ounce/pound/gram/litre. Depending on the product, it's mind blowing!
The only exception here is if we're getting ourselves a treat. I'd rather pay the premium for a single small serving of a naughty food than have a vat of it in the house calling my name very half hour! I'll take the $8 piece of extra gourmet bakery German chocolate cheese cake over the $40 full size cake any day. The full size cake does NOT fall under the category of a good purchase, unless I have 9 other people to split it with!
Full Price Is Only OK for Emergencies
Somehow, the list above can make it sound like we spend a lot of time thinking about pricing/shopping. The truth is that we really don’t.
Consumption can be very time consuming if we let it but, when it comes to saving, we’re pretty much on automatic pilot, having learned to focus on the big hitters:
- Never pay full price unless it’s an emergency
- Delay purchases & plan for sales
- Primarily focus on big discount opportunities
- Substitute & be flexible
And this plan works. Most years, we save 50%+ of our after tax income annually, as previously reported on our Millionaire To Do List.
So, to wrap this up, let's all make the following statement obsolete by making it irrelevant to our behaviour as conscious consumers.
“Don’t buy something on sale if you wouldn’t buy it at regular price.”
What's your take? Are you in?
*We also shop at amazon.ca and a few other online retailers (for beauty products and clothing). Indeed, the last two purchases we made were online.
Image courtesy of hyena reality at FreeDigitalPhotos.net
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