Frugal vs. Cheap

Posted by Matt

My friend sent me a link to an article about the difference between frugal and cheap. It's a great topic, but I totally disagree with the author's stance. For them, the only distinction is the intended recipient of the object being considered for purchase.

The secret is simple. If you try and save money and cut corners when spending on yourself, you are being frugal. If you try and save money and cut corners when spending on others, you are being cheap.

I think the author arrived at this conclusion based on the positive and negative connotations applied respectively to the words frugal and cheap. In this definition, cheap is just a type of selfishness peculiar to spending. I think there is more to it than that and that people can be cheap even when shopping for themselves. For example, assuming you have some discretionary income to spend on replacement shoes for yourself, is it frugal to save money by buying cheap shoes that hurt your feet and/or wear out quickly? Not if you don't wear them often enough to get any value from them and end up replacing them quickly with another pair.

The friend who sent the article to me argued that people can be both frugal AND cheap in different situations. I think that what this really means is that it is not the people who are frugal or cheap at all, but the decisions that they make and the actions they take. I evaluate each situation separately with a simple test:

Trying to avoid wasting money is frugal.
Trying to avoid spending money is cheap.

Another example: say my friend wants a new computer monitor for her birthday. If I go to the store and just look for a monitor at the low end of the price range, I'm being cheap. If, on the other hand, I elect not to buy her one of the higher-priced monitors because I know she doesn't need extra USB ports or the fast pixel response time required by gamers, I can call myself frugal.

Note that this rule becomes less appropriate as less money is available. Truly poor people don't have much opportunity to waste money and must be frugal to survive. Also, my definition for frugality is admittedly up for interpretation based on what a person would define as wasteful. This is why there is so much variety in the marketplace; different people place different values on the various attributes (features, reliability, appearance, practicality, price, etc.) of each product.

Regardless of what you define as valuable, we do need to purchase things (even if only food and shelter) occasionally, and it just makes sense to put in a little more thought than is required by simply making price the top priority.

Consider a humorous example from my experience.

My friend's father went shopping for new tires for his son. He's notoriously thrifty, but I think he was also worried about how guilty he would feel if a cheap tire blew out on the freeway and his son crashed his car. His solution? He walked in to the local tire store and said "Give me the second least expensive set of tires you've got!" Kudos to him for at least going one level up; but given that price was still the primary consideration, I'd call this decision more cheap than frugal.

In his place, I might have asked the tire salesman to recommend a reliable, long-lasting tire that offered good value for the price. Maybe the shop could have saved me even more money by offering a set of retreads. Maybe my favorite local tire chain would have been willing to match a competitor's lower price. Who knows? After all was said and done, I might have ended up with the same set of tires that my friend did. But I would sleep better knowing that I purchased a quality set of tires without wasting money.

Maybe that means that frugal people are just cheapskates who make a little extra effort. :)

More storage and more money!

Posted By Paul

I recently discovered a cool and frugal event that I thought was cool enough that it justified a posting.

I have several hobbies and my hobbies have a tendency to cause an accumulation of hobby related stuff (a fact that several of my friends can relate to).

Well I recently discovered an event that helped me to get rid of some of my unwanted hobby related stuff, and also helped me to save money. This event was specific to a particular hobby, but I thought that I should try to keep my eyes open for events like it.

Enough beating around the bush. The hobby I'm talking about is board games. I really enjoy playing them with friends and family. So of course the result of this is that you end up with a pretty decent closet full of board games that for whatever reason you don't want anymore.

Well a local game store hosted a game auction where you can bring in your old board games and they will sell them at an auction for you. I brought in 10 games that I didn't want. The way this auction worked was that you brought them in on Wednesday (where you were given a 'seller' number and you filled out the minimum bids for all of your items), and then the actual auction was on Sunday.

I went to the event on Sunday. My plan was to not only sell my unwanted games (the cash paid for the games goes to the store and you get that amount in store credit), but pick up a few games at a bargain price.

Well I didn't end up buying any games (my wife was shocked, but the other games I was interested in were all bid up too high for me), but I sold all of my games except 1. The store handled the whole process and all I had to do was pick up my one unsold game and my gift card loaded with my $130 in store credit!

The game store (if you live in the Portland, OR area I recommend checking it out, the people there are really nice) does these auctions twice a year and it was a great way to clean out some of my old stuff and turn it into new stuff.

I do a similar thing with books (I found a bookstore that takes used books and gives you store credit) and it not only helps you save money on your hobbies, it also keeps you from accumulating too much stuff that you just end up storing and never using.

Have people out there had similar experiences with other types of hobbies?

A path to instant gratification

Posted by Matt

Some of our more dedicated frugalizers are probably sticklers for buying on sale. But it's painful, isn't it? You do the research and then watch the ads every week. Wait......wait......waaaaaait.......

Frustrating, huh? Well, thanks to a website called Price Protectr, you may no longer need to torture yourself.

If you buy something and then it goes on sale, some stores will refund the difference for up to 30 days. You can register purchases with Price Protectr and the site will monitor price drops (free of charge) for items from Target, Costco, Amazon, and other selected stores. You'll receive emails each time the price goes down.

I should point out that you don't necessarily have to use this site to find sales AFTER the fact. The simple interface only asks for the product URL and your email address, so I punched in the URL for a book on my Amazon wish list. PriceProtectr correctly found today's price and sent me a confirmation email to let me know that they would let me know if the price went down anytime in the next 30 days.

As soon as I can think of something I want to buy, I'll try it out.

Know Their Agenda: Some great advice I got.

Posted By Paul

This is just a little word of wisdom that I man I used to work with gave me that I thought was very useful.

In today's world you have to be careful about what you do with your money, but you don't want to spend all of your life being paranoid about being swindled.

Here is what my colleague told me:

"In every business transaction where money changes hands. Remember that SOME of that money is going into that person's pocket, if you can't see how that money is going into their pocket, then be very concerned because you're probably missing something."

That probably seems like an obvious statement, but I have actually found it to be a pretty useful. It's amazing to realize how often people try to do something where you give them your money and they try to hide the fact that some of that money is going to them. Just taking a moment to think about how THAT person is getting paid (thus understanding their motivation) can keep you cautious about a deal without being overly paranoid.

Buying a Mattress

Posted By Paul

Not too long ago my wife and I went shopping for a new mattress. Our current bed had been given to us and even though the frame and box spring were great, we decided we preferred a firmer mattress.

So off we went to go mattress shopping, and wow, what a terrible industry that is. I know car salesmen get a bad reputation but they've got nothing on mattress salesmen. I had heard that one of the big reasons why mattress salesmen are such vultures is that no one goes shopping for a mattress unless they plan to buy one (which makes sense). You may just be looking around for fun when you walk around a jewelry store or a sporting goods store, but who thinks it's fun to browse around mattress stores? The sales people know that anyone in a mattress store is probably planning on buying a mattress in the very near future and they take full advantage of that.

After going to a couple of mattress stores and getting the same high pressure sales tactics my wife and I decided to try comparison shopping. We had made note of each mattress that we had found comfortable at the different stores. I think one was called the Royal Rest (or something like that) so I decided to go online and search for other prices. I was amazed that I couldn't find a link to that mattress anywhere that listed a price, and I couldn't even find the mattress listed on the website of the manufacturer. That struck me as odd. I tried calling 1-800-mattress for pricing, and the phone conversation went more or less like this:

Me: I'm interested in hearing a price on the Royal Rest.
Operator: Oh, sure, that's brand X, you must have seen it at Beds-R-Us.
Me: Yes, that's right, how did you know that?
Operator: They change the name of the mattress for each retailer.

So from the call I discovered that 1-800-mattress didn't service my state (I hear they're very popular on the east coast, and would be VERY interested to hear comments from people who have used them). I also discovered that mattress companies actually rename their mattresses for different retailers. So the Royal Rest at one store, will be called the Slumber King at another store. Why is this done? The main reasons are:

1) It keeps me from being able to easily comparison shop.
-and-
2) It makes it almost impossible for anyone to actually take advantage of the "If you find a comparable mattress at another store, then we'll give you the difference plus $100."

If anyone out there has ever taken advantage of such an offer, please post a comment or email us, so far I have yet to find anyone.

The mattress industry is perfectly designed to make it almost impossible for a consumer to make an informed decision. The mattresses are named different things at different stores, and on the surface all mattresses more or less look the same.

I've also heard that mattress stores that "save you money" on a mismatched set are often just giving you the illusion of savings. They'll offer a mismatch set discount which is really just a fictional discount that makes you think you're getting a deal. I've even heard (though I've only just heard) that mattress stores will often specifically mix up sets in their inventory so they can have these mismatch sets sales.

Considering my experiences with mattress stores, I would believe just about anything. The pressure tactics we received were so non-subtle that is was practically insulting. Everything from stories of "one day sales" to scare tactics of horrendous back problems from buying poor quality at another store.

One of my favorite techniques that you see at a mattress store is the "one or the other" tactic. Which is a pretty simple sales technique where they get you to try two mattresses and then ask which you like better. Then they bring in another one to compare to your current favorite and so on. The key is that you always have your favorite mattress in mind so the hope is that eventually that's the one you'll buy.

Oh, one technique if you ever decide to brave a mattress store that worked well for me was to go in and say that you were looking for a mattress and planned to buy one as soon as some windfall arrived. In our case the story was that we were getting a tax refund and planned to use the money for a new mattress. It provided us with a simple "no we won't buy today" story that kept the salesman from bothering us too much, plus in our case the story happened to be true.

So what did we end up doing? Well we ended up going to a CostCo where they not only had mattresses, they also had samples set up that you could lay down on just like at the mattress store (only without the vulture salespeople). Sure we felt a little silly laying down on mattresses in the middle of a crowded CostCo, but the mattress was so much cheaper that we didn't care.

In fact, the mattress was so much cheaper that we figured that even if we decided after a few months that our mattress was terrible and that we should have purchased a more expensive mattress from a mattress store, that it was worth the risk to try it.

The result? We love our mattress. We've had our mattress for almost two years and it's great. With part of the money we saved we bought a couple of fancy foam pillows and a foam pillow top for the bed. Not only is it super comfortable but it was SOOOO much cheaper than the mattresses we were considering at the mattress stores, plus we didn't have to joust all day with a salesperson to haggle down to a fair price.

I should say at this point that neither my wife nor I have any back problems so we're pretty easy to please as far as mattresses go.

I'd like to hear stories from other people out there, as far as what worked for them, or if they had more pleasant experiences at mattress stores.

I found this one web page that seemed to have some good info on buying a mattress:

http://www.slate.com/id/93956/

Also if you go to:

http://www.mattressscam.com/

This web page lists various sales tactics common to mattress stores. If the sales people at mattress stores use even half the tactics described in this web page, I don't know how they can sleep at night.

;-)

Is Leasing Really Fleecing?

Posted By Paul

Let me start of by saying I'm biased against leasing cars for two reasons:

1) As I mention in my article "Know Your Indulgence" I'm not a "car person" I don't really like driving so I don't really care all that much about cars, for me it's really just a way to get from point A to point B.
2) My first exposure to leasing was right after college when I was shopping for my first new car. I was in this one dealership and the salesman told me about how if I leased a car I could "drive a car that would normally be beyond my means". That statement struck me as so odd that I remember it to this day.

So in my view, leasing a car is essentially like renting an apartment. When you lease a car you:

1) Don't generally have to come up with a down payment (the same way you don't have to come up with a down payment for an apartment, but you generally do for a house).
2) Pay a smaller monthly amount compared to your payment if you bought the car (which is like how renting an apartment is generally cheaper per month than buying a home).
3) You don't really have to worry about the long term care of the car (just like with an apartment you don't have to worry about upgrading the water heater, or putting a new roof on it).
4) When you are done with the lease, you have no ownership of the car (just like when you move out of an apartment you don't "own" any part of it).

It seems like leasing is essentially a life style choice. Some arguments for and against leasing are:

Arguments For Leasing:

-After the lease is up, you can just turn in the car and get a new one, you never have to drive a car that is more than a few years old.
-Because your car is always fairly new, it's unlikely that it will break down unexpectedly.
-Also because your car is fairly new, any major problems are probably covered by the warranty. -You can often lease a car for a smaller monthly payment than you would have if you were to purchase and finance it.

Arguments Against Leasing:

-Yes, your monthly payment is smaller, but it NEVER ends.
-If you plan to keep the car for more than four years or so, then buying it is considerably cheaper in the long run.
-Many leases have mileage limits. If you accidentally drive too many miles during the lease period, you get penalized.

I know quite a few people who lease cars. A very small few of them really do like having fancy cars and are willing to live with the monthly payment for the sake of driving a cool car that they could not afford otherwise. A more common reason is that the person doesn't like taking care of cars. To them a car is something they want to pay for and never have to worry about. The lease option in that case works for them.

For me, my car is 13 years old, and still runs great. I haven't had a car payment for a LOOONG time and I don't miss it. I doubt I'll ever choose to lease a vehicle.

Buying to Cheer Yourself Up

Posted by Paul
A common problem I've seen with various people I've known who are in financial dire straits is the fact that they seem to buy things as a way to cheer themselves up.

Now, I also see people who I consider financially resposible also treating themselves to something when they've had an especially long day, or perhaps as a reward for completing a project around the house.

The difference that I've noticed is that the people who are in financial jeopardy often buy themselves big dollar items while the financial responsible people buy more simple treats.

For example, I know one person who is working their way out of several thousands of dollars in credit card debt. After a rough week as a way to cheer themselves up they bought a $300 stereo.

On the other hand, I have a friend who is pretty together as far as his finances. They spent the whole day working to complete a major project on their house so at the end of the day they treated themselves to a DVD movie they wanted (I think it cost them $12).

I don't see any harm in treating yourself to something every now and then, but I've noticed that often a simple treat (a new CD, eating dinner out, a trip to the ice cream parlor) can be just as satisfying of a pick me up as a big ticket item.

I also noticed that the people who had a tendency to buy big dollar items as a way to treat themselves were often in a dangerous spiral. They'd be in a troubled financial situation, so they would be more prone to stress and depression, they'd go out and buy some big item to cheer themselves up, plunging them further into a bad financial situation, making them more prone to stress and depression, and so on.

I think people should train themselves to take pleasure in the little things. Not only will it help your financial situation, but I think it will probably make you a happier person in general.

Long-term purchasing.

Posted by Matt
I've found a helpful tip for making purchasing decisions, though I'm sure it is probably starting to bother my wife. Whenever I'm faced with a purchase (and I'm talking more like long-term items like housewares than groceries here), I try to remember to ask myself "Is this the last [blank] I'll ever buy?"

First off, it means I shop with durability and quality in mind, and am willing to pay a little more for those attributes if it means I won't have to re-purchase the item when it wears out or breaks.

Next, I try to think about how well the item covers all of our requirements and whether I think I might get sick of the style eventually.

Now, admittedly, long-term purchasing is easier when you can actually afford to buy quality and when you are in a stage of your life where it makes sense. For example: when I was young and single, trying to find the perfect dinnerware was very low on my priority list and I probably couldn't have afforded it anyway. When my future wife and I first moved in together, we bought an inexpensive set of plates that we later grew tired of. We next received a very nice set of dishes as wedding gifts, but later discovered that they were very difficult to fit into our dishwasher racks and they also chipped frequently. That's when I thought, "okay, let's just find what we need already." Someone recommended Corelleto us and I'm SO glad they did.

1. The stuff is practically unbreakable.
2. The design is plain, simple and classic (all white).
3. They fit well in the dishwasher and our cabinets.
4. The set was relatively inexpensive.

I NEVER want to replace this stuff. I will concede that all the other dishes I've owned or used in my life helped me define exactly what types of dishes I was looking for and there is definitely value in that. I'm just saying that I try to think ahead.

So far, I've got a fairly short list of things that I think I'll never buy again (my cast iron skillet, wedding ring, some furniture and some tools to name a few items), so I hope that other people will post suggestions in the comments.

Credit Cards Aren't All Bad

Posted by Paul
You often hear about credit cards and how they are the terrible, dangerous and potentially the quickest path to putting your financial life into a shambles.

Though it's true that credit cards can easily be misused, and that this misuse can easily put a person into dire straits, if used properly they can actually be a good thing.

For example I use a credit card quite a bit, since it's convenient to not have to carry around a lot of cash. I have a card that has no annual fee (you should never have an annual fee credit card, how absurd to actually pay a company to use their card), and I NEVER carry a balance on the card. Seriously, always pay off your credit card. As long as you pay off your card every month then you don't have to pay the crazy interest. If you ever find yourself with a balance on the card that you can't afford to pay off, STOP using your credit card immediately, pay it off as soon as possible and look closely at your life because you are almost certainly overspending somewhere.

So in addition to the convenience of using a credit card, I also have a card that gives me incentive points. For example one of my cards gives me 1% of my purchases in free Amazon merchandise. Books, DVD's, and CD's are items that I like to buy but that I really don't need, so I like to use my Amazon incentive points to buy fun stuff. It's a great way to use the "free money" from the credit card to buy fun stuff.

So as long as you can use a card and pay it off every month, I think it's a great idea to get one that has some sort of incentive that appeals to you and make use of the free stuff.

I like the idea that not only is the credit card company not making money off of me, but I'm getting free stuff by using the card responsibly.