I'm not naturally frugal.
I love spending money and buying stuff.
I’ve never gone overboard with spending. Initially, that was because it wasn’t really an option.
However, as time has gone on, I’ve found myself at the dangerous intersection of ability and desire.
Some aspects of my strategy are below.
1. S-l-o-w down.
There are some areas of life where it pays to s-l-o-w down.
The most important area is sex. But here are others.
One of the reasons I have a long-winded process before making a purchasing decision this is that it slows the decision down.
In situations like this, making a slow decision is a feature, not a flaw. As well as making a better decision, if I give it some time, the best decision might be not to buy the thing in question.
2. Do I really need it?
- Do I already own something that does the same thing, that I can use – at least while I work out whether this new thing will be worth it?
- Do I know someone who might own the same thing or similar, and can I borrow it for a while?
- Can I rent it? An example: for a long while, my wife really wanted to buy a Mini S Cooper. At one point, our car needed repairs, and we paid an extra couple of hundred dollars to rent out a Mini S Cooper as a replacement car rather than the standard car offered by our insurance policy. By having the car for a few days we realised that for our circumstances, the idea of owning a Mini S Cooper was much better than the reality of owning it.
- What are the trade-offs? If I spend money on this, what aren’t I buying? If I’m going to spend $500 on something, what else could I spend $500 on? If I put that money in, say, KiwiSaver, how much would it accumulate until I can access it?
Education is time-consuming, if not expensive. Ignorance is even more expensive.
It’s a pain to buy something expensive only to realise that it is missing some key functionality or that is harder to use than you thought.
I do lots of research on the basis that it’s better to suffer pregret than regret.
For lots or products, I check out Wirecutter. Sometimes I use Consumer. I use Google to look for independent reviews – including, in some cases, paid reviews (eg The Dog & Lemon Guide for cars). I watch Youtube. I ask people I know who might have an idea. I look at Amazon reviews.
When considering reviews, I try to apply some savvy – for example, looking at more nuanced consumer reviews, including 2-, 3-, and 4-star reviews rather than the 1- and 5-star reviews; and understanding that many reviewers have incentives to be overly positive about products, especially if they get affiliate fees or want to stay on the good side of a company that provides them with sample products.
One other benefit of doing product research: it makes you more interesting. You start to understand more about things, and it gives you more to chat about with other people. If I’m researching something, I’ll ask people about it, and often reach out to people I know who might be able to give some perspective. It can be surprising how much knowledge some people have, and most people are very willing to share their expertise.
Another benefit: if you research and choose the thing you really want, you’re more likely to love it. It's nice to own things that bring you joy.
Some specific things I consider when researching:
a. What type of accessories are necessary?
When making a buying decision, it’s easy to think of the cost of whatever the basic unit is. I’ve done this many times, rationalising a purchase by focusing on just the one item rather than the full cost.
However, in most cases, it’s necessary to extra items. It’s better to know what these are ahead of time, and work out what you need.
Another aspect is the ecosystem of accessories and support. Some products have more accessories than others. For example, I like the accessories that work with iPhones.
I also recently bought a fancy camera. After deciding to go with a mirrorless camera, I had to work out which ecosystem I was going to dive into, since lenses and accessories were likely to be specific to the one brand. (I went with a second-hand Sony A6000 with 35mm F1.8 prime lens and 18-135 F3.5-5.6 lens. I also purchased some additional accessories to get the most out of it, such as a horseshoe microphone designed for the A6x range.)
b. What is the long-term cost?
When making a big purchasing decision, it’s worth seeing how the capital cost translates into ongoing costs.
It can often be cheaper over the long-run to spend more upfront – for example, if what you’re buying will last longer, or you won’t feel a need to replace it more often.
c. What is the resale market and price?
It’s worth consider the resale price of something you buy, by looking for the product or similar on Trademe. For one thing, a better resale price mitigates risk because it means you can sell the product for a better price if you find you don’t need/want it any more. Higher resale prices can also be a good proxy for quality.
d. What is the time and hassle commitment?
Some things don’t require a lot of ongoing maintenance. Others do. It’s best to go into a purchase with eyes wide open.
Personally, I don’t like items that impose “time debt”. I will often pay more for something that requires less time and energy to operate and maintain.
e. What are the risks?
This is a big one. Take cars, for example: an older, mid-engined, German performance car (eg a Porsche Cayman) is more likely to have things that go wrong than a later-model Toyota or Lexus. If and when things go wrong, the costs are likely to be much higher.
For a less costly purchase, I’m more prepared to be roll the dice. The more I spend, however, the more conservative I am. It’s better to be speculative on a $200 decision than a $50,000 decision.
4. Ask again: do I really need or want this item? Am I rationalising?
Often, we’re not rational creatures. We’re rationalising creatures.
It’s easy to come up with lots of reasons for doing something.
Do I really want this item? Is there something bigger that I need to deal with? For example, do I really want a two-seater car, or does that represent the autonomy I wish I had in my life? Am I trying to get something else out of it that I can get more directly?
I often ask people to be a devil’s advocate and challenge me on my thinking. In fact, there are probably cases where I would pay someone to talk about a prospective purchase: to talk me off the ledge, or to help me make a better decision. That person wouldn't need special knowledge or expertise – apart from the knowledge and skill to ask tactful questions for me to answer.
5. If I’m likely to buy it:
a. Is it possible to buy second hand?
An added advantage of this is that you can get a sense of the resale market, if you find you don’t eventually need it. Over time, this has influenced me to buy more mainstream, and sometimes higher-tier items, on the basis that there is more likely to be a secondary market.
Trademe is an obvious example. But sometimes I will go to pawnshops, Cash Converters and the like.
You can also look for refurbished items.
b. Where should I buy it: at a physical store or online?
You can often buy via Amazon, even if it’s not technically available for the New Zealand market you can use NZ Post’s Youshop to have it redirected via a different country. However, especially for gadgets you need to be careful about power adaptors etc.
You might also want support and convenience in case something doesn’t go as planned. Usually I buy local, even if the cost is slightly higher.
5. Make the most of the purchase (which can involve time and money)
If I just dropped over $1,000 on a mirrorless camera (which I did), then it behooves me to get to know it. That involves a time commitment. I am reading books, watching Youtube clibs, and courses (eg Annie Leibowitz’s Masterclass). Plus spending time playing around with it.
Let’s put it another way. There’s a saying when it comes to cars: the best way to upgrade the car is to upgrade the monkey behind the steering wheel. Rather than upgrade the car, upgrade the driver!
If you've spent all this time agonising over whether-to-buy-it and what-to-buy and where-from and how and how-can-I-best-use-it, then make sure you enjoy it!!!
What do you do?
If you have any other suggestions, let me know!