Thursday, August 13, 2009

Understated Economizing

It's become chique to be cheap. But conspicuous penny pinching can have the same declasse overtones as buying expensive things. If you're doing it to impress people, you've only proven yourself a nouveau-pauvre. Understated economizing, just like understated elegance, connotes good taste. How, then, to maintain grace under financial pressure and not appear like a parvenu?

1. Buy brand names on sale. Just about all brand name goods go on sale eventually, especially now that the economy is slow. Or else, they are sold by high end retailers to discount outlets that sell them for a fraction of the full retail price. Think of yourself as a bargain hunter, not a penny pincher. Every time you get a good deal, consider it a success, not parsimony.

2. Don't buy services you don't need. Maintain cars in accordance with the manufacturer's recommendations. But don't buy the additional services recommended by dealers. They can double the cost of routine maintenance while adding little value. For example, many car dealers will recommend changing the oil every 3,000 miles or 3 months, whichever comes sooner. If you're an ordinary suburban driver, that kind of maintenance hasn't been necessary since leisure suits were the rage. In addition, don't buy service contracts or extended warranties for quality equipment (computers, household appliances, etc.), unless you're going to use them a lot. A small business may wisely buy an extended warranty for a computer, but the ordinary home Internet surfer is probably wasting money. Consider whether the $120 haircut is essential to your image; maybe a less expensive hair stylist would offer new, refreshing ideas.

3. Save where spending more wouldn't matter. Buy the cheapest gas you can find. There's no real difference between gasoline brands. Use the cheapest vino in a box for cooking wine. The cooking process ruins a wine's bouquet, so there's no point putting Chateau Arriviste in a frying pan. Re-use bags from grocery stores. Kitty litter doesn't mind if it's disposed of in a grocery bag used a second time.

4. Spend more when it gets you more. Buy nonperishable goods in bulk when the bulk sizes go on sale. For example, toilet paper is inevitably on our shopping lists, so buy it when the family-size packages go on sale.

5. Spend less when it gets you more. Invest in low cost mutual funds. Index funds, and other low cost investments like exchange traded funds, are often a better bet than managed funds. Many and perhaps most managed funds don't meet, let alone beat, the performance of index funds or ETFs. Spending less on management fees and the like means more investment gains for you in the long run. In this case, less really is more.

6. Eat where the Chinese eat. If you want to find the best Chinese food, ask the local Chinese people where they eat. You'll probably end up at a cubbyhole of a restaurant in a strip mall with an aura of vinyl and formica. But the food will be great and modestly priced. The Chinese are genetically wired to be gourmands and they'll sniff out a good meal wherever it can be had. Since it's no longer fashionable to be seen in the restaurants where people go to be seen, you might as well go the ones with the best food.

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