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Thursday, January 12, 2012

You get what you pay for - The difference between cheap and frugal

Usually when you hear the term "you get what you pay for" it's because somebody is rationalizing spending more money on something than they probably should. But there is another side to that equation too, where people buy the cheapest possible version of everything they can. This isn't always the best way to go about buying things, and sometimes the idiom holds true, and you really do get what you pay for.

Remember, our goal is to spend less TOTAL. Not necessarily to spend less on any particular thing. Sometimes spending more upfront can actually result in less total expenditures.

The cheap person just hates spending money, and only buys the cheapest possible version of anything. They just can't stomach the idea of paying more than they 'have to' for any given thing. To them, there is absolutely no difference between brands, and quality is usually of little concern. They are more concerned with paying the least amount NOW. Individual purchases are evaluated individually, and many extremely 'cheap' people still spend lots of money.

The frugal person, on the other hand, doesn't have an inherent problem with spending money, they are just trying to get the most bang per buck. They focus on lowering their spending in general, not necessarily always buying the cheapest option. They want to save money, even if that means paying more to buy quality up front. Many frugal people seem to have lots of nice things, and live far better on much less money.

So how do they do it?

They focus on VALUE, not cost. In other words, they buy quality. You could go find a 'running' vehicle for $1000 probably, but you will likely spend more on tows, repairs, etc over the next 5 years than if you buy a sound, used $4500 car that can go another 100k miles without major repair. At the end of those 5 years you will likely have spent less total than the guy who bought the $1000 car. Not to mention avoided a lot of suffering and inconvenience.

For some things you really can just buy the cheapest version, as there is not as big a difference in quality as the prices suggest. In other areas, quality really matters, and you will suffer if you buy cheap up front.

Another often overlooked advantage to buying quality is resale value. If you buy quality items they will hold their value much more than the cheap stuff. You can actually recoup some (sometimes ALL) of your investment when you sell at the end, especially if you bought used to begin with. 

The following items are some things where quality matters:

- Hair Clippers

Cutting your own hair is an easy way to save $20 to $40 a month, so you will need to buy a pair of clippers, and maybe scissors. If you buy the 10 dollar buzzers you might as well use a fire to get ride of your hair, because it will be just as painful and just as terrible looking. They will rip out your hair, stop up, and be slow. And break after 6 months. To save $20 to $40 a month it is perfectly fine to spend $50 to $100 on a collection of quality clippers and scissors that will work well for several years.

- Tools 

Tools are one of those things where they have to actually, you know, WORK. So quality matters. They are put under stress/tension and have to perform to certain standards to be actually worthwhile.  Many cheap tools will simply break after only a few uses. Resale value for cheap tools is basically zero, while quality tools hold their value very well. If you buy them used you may be able to sell them after a couple years for as much as you paid for them. Make sure you don't OVERpay though, just look for value.

- Certain Electronics

If you try to go too cheap on computers and some other electronics, you will have to put up with a lot of heartache. I am not telling you to pay for more capability or features, but sometimes brand matters. Do your research.

- Work clothes (boots, gloves, )

This doesn't apply to all clothes, but sturdy work clothes like gloves, boots, and jackets has to be able to last. A cheap pair of work gloves or boots can be blown out in a week or even a single day of hard work, so you won't be saving much if you go cheap here. Only you know if you really need to buy the tough version though; you don't need a Carthart jacket and expensive boots to weed your garden.  You don't want to be like one of those people who drives around a huge pickup and never even uses the bed, but if you ARE going to be working hard you need quality work clothes or they will fall apart on you.

- Furniture

It seems like pretty much all furniture these days is made of composite or particle board material and not real wood. This is because it is cheaper. A LOT cheaper. If you think the prices of shitty Wal-mart and Target furniture is high, go price some real wood furniture.

The problem is that particle board is total crap. It is easily damaged, absorbs water, bends under the weight of books, and just plain sucks in general. It is much better to find (or make!) a piece of real-wood furniture that will last 50 years. Real wood can also be sanded and refinished, while composite just has to be trashed.

If you can find particle board stuff free, then use it until its dead (which won't be that long). But if you are going to have to buy something, get a quality used piece. Especially for tables, desks, and bookshelves. These items have to be sturdy, and the tables may have liquids spilled on them, and have to deal with other such things that would wreck particle board and flimsy laminate.

Find old ugly scratched up tables, and as long as they are real wood you can sand them down and make them look good as new.

These next few categories are items that you can usually buy as cheap as possible and quality is not an issue and won't end up costing you more money:

- Casual Clothes

While work clothes has to last through significant abuse, casual clothes doesn't, and there is usually very little difference in quality between different brands of stuff like T-shirts, socks, baseball caps, cargo pants. etc.  In these categories you are mostly paying for brand recognition.

- Food

The issue with buying cheap up-front is usually that you want quality that will last. But that doesn't really apply to perishable things that aren't going to last past a certain point anyway. Brand shouldn't even cross your minds when looking at things like canned vegetables. Get what is cheapest.

So remember: Be frugal, not cheap. And buy on VALUE not price. Stretch those dollars.

-The Money Monk

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