It can’t probably be repeated often enough so let me say it just once more: Being in control of your income and expenses is a crucial discipline that needs to be mastered in order to reach financial independence. Today, I would like to give some advice on the expenses side.
Let me start by saying that personally, I truly hate shopping. I like small grocery shops, fresh markets. I hate shopping malls. Not for their value and convenience of having everything you might need in life in one, central location. Yes, I admit I also spend time in shopping malls occasionally. What I hate is the fact that the constant competition that drives markets is intentionally pushing us into very unhealthy spending habits and encourages us to be constantly spending money.
I am amazed and terrified every single time when I enter a shopping mall, to see how many hundreds, thousands of people daily stroll from shop to shop and swipe one credit card after another to carry home as many bags as possible with them. The consequence of this is an empty account at best and credit card debt at worst.
Sales bargains and saving money
There is really only one definition of saving money: Not spending it. The one most intentionally false statement that you can see everywhere is the sales pitch of “saving on sales”. Buy 1 get 2, save 30%, and all other kinds of promotions have nothing to do with saving money. It is such a tricky way of manipulating our brains that I am really appalled by it. It addresses our desire to spend not more than necessary by stimulating one of the humans most primal and dominant instincts: Greed.
If you see a 2 for 1 promotion on toothpaste, chances are high that you will jump on it. The promoted retail price seems to indicate of really doing nothing wrong on this bargain and we immediately recognize that for paying what we normally pay for 1 pack, we receive the double value. Sounds great, right? Well, not in my opinion.
Toothpaste is a product that we use every single day and a pack might be finished within a month or 2, depending on size and frequency of use. Buying the promotion will reduce the time required to repeat the purchase within the regular usage-timeframe and also half the cost of it. There is nothing wrong with that, in fact, for a super-frugal living, it might be even recommended. However, it might quickly lead you to copy this into all other products purchases which may result in an overall negative effect on your spending and consumer habits. You see, when we have more of something, we also tend to use more of it simply because we lose the feeling for the value of the product.
For the case of the toothpaste, I remember as a student there was a time when I was really short of cash and needed to save on every single penny. When my toothpaste was about to run out, I would squeeze the tube until getting the last drop of it and even when I could not squeeze out anything anymore, I would cut it open and scratch out the last tiny rests to ensure I fully utilized the product. Chances are high that I wouldn’t do it if there was a second pack of toothpaste in my bathroom. I would most probably not go through the effort and just open the new pack.
Quality over quantity
In my opinion, simple living means to buy things that we need and to enjoy and fully utilize the things that we have. We don’t need to compromise on quality and purpose, but we should be conscious about why we buy something and for what reason as well as how we use what we have once we have it.
If you need a shirt, buy a shirt. You don’t need two of them. You don’t need to spend hours looking for the best promotion in the entire shopping mall. Just establish a budget and buy the shirt within this frame, that you like and that gives you the feeling of having bought what you wanted and what you came to the shop for. Buy it, wear it, keep it in good condition and enjoy it for as long as possible.
The more expensive the product or purchase, the tighter should be your criteria and the less should be your willingness to compromise on quality. Value is obviously always a factor, but the value is a tricky metric because especially for expensive products like laptops or cars it stretches over a long period of use. It may involve some points which you are not aware off, which may turn out after months or years and therefore you could or would not consider at the time of purchase.
To give an example: You might get a great deal on a diesel car right now, but a hybrid or an electric car might turn out to be the better deal, even at 50% higher cost, considering how technology and markets might develop within the next 5-10 years.
For a laptop, you might wonder why anyone would spend the double price on a MacBook compared to regular Laptops or Tablets, but you might change your opinion once you require a laptop for work and consider your requirements on a robust and reliable supportive equipment for your profession.
Have a budget in place
What I would like to make clear is that the combination of a minimalistic living approach with consciousness on quality and purpose can give us not only great satisfaction, but it will have a positive effect on our spending habits. You will quickly realize that the idea is not about reducing all your spendings but that it’s more important to enjoy and appreciate every single purchase that you do.
One important step that I did not write about yet is to have a plan in place. A budget. I will follow up on this with more detail soon but in the meantime, this is too important not to emphasize it: No matter how good the bargain is, if you don’t have the money, don’t spend it.
I want to be perfectly clear on this. If your account balance does not allow a purchase of a product, then you should not buy it. There may be certain very specific situations in which you may have an advantage by buying something through borrowing money or utilizing your credit card, but this should be a seriously special occasion and request a very realistic evaluation whether there is no other way around it or whether it can be postponed. Borrowing money, credit card debts, these are serious matters that push you in the wrong direction. No matter how good a deal may sound, if you can’t afford it, then don’t buy it.
Shopping is a formula to keep your account empty
At the end of the day, what is important is that you keep your main target on the horizon. To reach financial independence we need to focus on purchasing products that keep generating additional value. As explained in my previous article, The Investor Mindset, most of our daily purchases lose value the moment we take them in our hands.
Therefore, normal regular shopping should not be a daily activity and not a habit. It’s a sure formula to keep your account empty.