The Financial Suite

Spending Money To Make (Or Save) Money

Finding a great deal is always exciting. However, excitement over getting more for less shouldn’t cloud your judgment when it comes to the long-term effects of your purchases, which often don’t enter into our minds. There are plenty of examples of instances when apparent savings can actually lose you money in the long run: buying a massive loaf of discounted bread that will mold before you can finish it, or buying an expensive plasma screen and rationalizing the decision because you bought it with a rewards credit card.

Retailers, restaurateurs and Groupon employees alike know that the appearance of a great deal can switch off our rational decision-making capabilities, making us believe we need it now, whatever “it” happens to be. But if you’re a thoughtful spender, shelling out now can actually save you money later. Don’t just be a cheapskate; be a strategic cheapskate.

Small scrimping, big savings: Consumers often agonize over finding the best bargains on big-ticket items like washing machines and home entertainment centers, but don’t keep track of their smaller, more mundane purchases. If you really love your gadgets but couldn’t care less about your food, you may find it worthwhile to splurge on the flatscreen while buying Safeway cola instead of Coke. On the other hand, you may eat organic but never watch TV, in which case your spending habits will be vastly different. Know what you like, and decide what’s worth spending money on and what isn’t.

Fight Temptation: You should only purchase items that are actually useful to you, regardless of how deeply they’re discounted. Let’s be honest. How many times have you thought to yourself, “I know it’s not in my style…but it’s just so darn cheap!” If you buy something you’re not going to use, no matter how awesome a deal you’re getting on it, you’re throwing money down the drain. Many stores will have discounted items by the cash register to take advantage of just these impulse purchases.

Buy for the long term: Even though the mantra of the times is to save, save, save, you can actually do better over the long run by making an investment in your purchases today. Your instincts tell you to buy a nice suit off the discount rack, despite the fact that it’s of a lower quality and may need alterations or frequent replacement. It would actually be more cost-effective to spend on a classic piece that will withstand the test of time.

An ounce of prevention: An annual checkup, even if you have good health insurance, isn’t cheap. But that cost is nothing compared to the health problems that can arise if you’re not getting checked out with a decent frequency. Putting off a doctor’s visit until you’re actually in some dire medical straits will probably end up costing you more than a frequent exam. Prevention isn’t free, but it’s certainly cheaper than a surprise trip to the ER for something you could have prevented with regular self-maintenance.

The value of time: As the saying goes, time is money. Consider the opportunity cost of what you’re doing – that is, the value you could be getting by doing something else. An anesthesiologist could be making $10 an hour at In-n-Out, and getting value in absolute terms, but he’d be in the red by hundreds of thousands of dollars if he considered the money he could be making at the hospital. Make sure you take full advantage of your time and focus on ventures that will have the maximum payout.