There was a fascinating article yesterday in the New York Times entitled Recession Diet Just One Way to Tighten Belt, which looked directly at the real-world ways consumers alter their spending at the retail level. In other words, the authors, Michael Barbaro and Eric Dash, actually went to a supermarket to watch and learn how spending was changing because of recession fears. A few elements really stood out to me.

Buying the Cheap Stuff

At Save-A-Lot, a discount grocery store in Cleveland, Teresa Rutherford, 51, chided her sister-in-law, Donna Dunaway, 44, for picking up a package of Sara Lee honey ham (eight ounces for $2.49).

“We can’t afford that!” she said. “Get the cheap stuff.” They settled on a 16-ounce package of Deli Pleasures ham for $3.29, or 34 percent less an ounce.

Here, Teresa is clearly advocating buying a cheaper type of cold cut ham, presumably for sandwiches. Yet I’m left with a biting question here: what’s really behind this switch from the high-end ham to the middle-of-the-road ham?

Clearly, the belief here is that price is directly related to quality, and because of that, many people when in corner-cutting mode will simply settle on a cheaper version of the product they’re already buying when they see it on store shelves rather than asking more fundamental questions. To me, this is the equivalent of buying a new GM car instead of a new Lexus without even looking at the late model used options - it’s settling on a mediocre option because you’ve already self-limited your options.

Cutting corners by just buying the slightly less expensive version of the same item isn’t really cutting corners at all. In the book Predictably Irrational (which I enjoyed and reviewed a while back), Dan Ariely (the Sloan Professor of Behavioral Economics at MIT) dug into this phenomenon repeatedly from different angles.

Relativity Ariely argues on page 4 of his book that when people make buying decisions, they are looking for information, and in most buying situations, the easiest available information is the sticker price. They want guidance, so they use the highest price and the lowest price as “runway lights,” guiding them into a safe place in the middle where they feel like they’re not spending too much, but not buying something cheap, either. Teresa in the ham-buying example is using these runway lights - the high-end ham is too expensive, but she doesn’t go for the low-end Carl Buddig ham for less than $2 a pound, either.

Obviously, marketers are aware of this and thus price accordingly. They want to ensure not that those middle prices are a good deal, but that the fattest profit margins are connected to the item that sells the most. Thus, quite often the items in the middle tiers at a grocery store are the worst bang for the buck you can buy - they’ve got the highest profit margin for the store.

Anchoring Similarly, people often judge what a “fair” price is based on the first price that they ever associate to a given product - that becomes the anchor price for all future buying decisions and an anchor price is very difficult to do away with, as Ariely describes on page 30.

In this ham-buying example, Teresa and Donna likely have different anchor prices for ham in general, but they also might not be anchoring on the same item, either, and this is probably likely given how different they thought the acceptable price for ham was at the beginning. One person’s definition of acceptable ham is different from another’s, so Teresa might go home and find the cheap ham to be completely unacceptable. The best solution would have been to buy a small amount of the cheaper ham and a regular amount of the usual ham and actually find out whether the cheaper one is acceptable.

My question is why is $3.29 a pound ham a necessary purchase at all? If you’re truly being frugal with your money and didn’t necessarily put a premium on the quality of your ham (which, if you’re willing to compromise while standing at the store shelf, is likely a given), why not try the lowest-end ham and work up from there? Or, even better, drop the ham entirely and eat leftovers for lunch?

Another quote from the story really shook me:

Ms. Dunaway, a homemaker, used to splurge on the ingredients for homemade lasagna, her husband’s favorite, before food prices began to surge this year.

“Now he’s lucky to get a 99-cent lasagna TV dinner, or maybe some Manwich out of a can,” she said. “I just can’t afford to be buying all that good meat and cheese like I used to.”

Ms. Dunaway was willing to make homemade lasagna, which means that food preparation time isn’t that big of a deal - she has ample time to prepare meals. Yet she’s replaced this with a 99 cent lasagna TV dinner or some Manwich out of a can? That’s cutting corners in the short run, but adding a lot of cost over the long run due to the consequences of an unhealthy diet.

The problem is clear - when the economy is bad, people cut corners, but cutting corners on food not only often undermines what you’re trying to accomplish, but can have bad long-term consequences for your health.

The Solution: A Cheap and Healthy Diet
If you want to “cut corners” when buying food, don’t turn to the junk food aisle and don’t “settle” for middle-of-the-road inferior versions of other foods, either. Instead, make a sensible plan and stick to it. Here’s what you do.

Use your grocery flyer. Each week, grab a flyer for the upcoming week at the grocery store. Look at what fresh produce, fresh meats, and healthy staple foods are on sale in the upcoming week.

Make a meal plan. Using those items, figure out what meals you’re going to eat over the next week. Focus on simple stuff that you know how to make and tasty stuff that you know you’ll be interested in eating.

Focus on inexpensive staple foods. If you’re looking for foods to supplement what you have, look at inexpensive staple foods, especially anything that can be bought in large quantities and stored. Beans come to mind - a pound of dried beans can be purchased very cheaply, provide a lot of nutrition and protein, and can go a very long way.

If you make frugal choices to begin with, you can choose the high-quality version of that item. For example, once you’ve made the decision to give beans a serious try in your diet, you can choose organic beans or fresh herbs and spices to give them a rich flavor. Choices like these are quite frugal - you’ve already made a great cost-saving choice by going with beans and flavoring them up the way you like them best is a great way to keep yourself eating them.

Avoid the junk temptation - it’s cheap and tasty now, but has long term consequences. For most people, it’s a lot easier for the moment to just say, “Why bother?” and head down the junk and prepackaged food aisle for some easily prepared and rather tasty meals. Resist that temptation at all costs. Stick with staple foods and fresh foods - you’ll be much better off over the long haul.

Use a grocery list. Once you know what you’re eating, make out a grocery list containing exactly what you need for the coming week - and only what you need. When you get to the store, only put stuff in your cart that appears on the list. Do that and you’ll be in great shape at the checkout aisle.

Use what you learn - and don’t lie to yourself. Many people give this a sincere try and wind up preparing foods that they frankly don’t like too much. If you don’t like a dish, don’t blame the process - blame the dish. Just simply note that you didn’t like it and try something different. Many people give up on an ingredient or a process simply because they didn’t like the first permutation. You know what? It’s the anchoring problem from earlier in the article all over again.

Make meals in advance. If you find something really tasty on sale, make a bunch of meals with that food, freeze them, and enjoy them later. That way, you don’t just get to enjoy the benefits of the sale now, but for as long as the meals last in your freezer.

Afraid to cook? Many people are trying to cut back right now, but don’t have the basic kitchen skills needed to make things work. My suggestion is to head down to your local library and pick up Mark Bittman’s How to Cook Everything. Make some very simple recipes using some very simple ingredients. Learn a little bit at a time. Pay attention to what you like that also happens to be healthy (for me, tomatoes and onions and garlic are right up on that list, for instance). Use those in abundance, especially when they’re on sale.

Recently, I made an offhand mention that I’m a user of Amazon Grocery and this intrigued several commenters, so I thought I’d walk through the shopping process that leads me to using Amazon Grocery for some items.

What’s Amazon Grocery?
For those unaware, Amazon Grocery is a section of Amazon.com where one can buy most dry grocery goods and have them shipped directly to your home. This ranges from things like baking mixes to things like diapers and baby formula. Rather than transporting them yourself, Amazon ships the items right to your front door.

As a rule of thumb, the prices at Amazon Grocery are usually a bit higher than the prices in the grocery store, but using it effectively offers several advantages that cause it to be much cheaper for us on many items.

First Thing: Know the Prices
Before you even consider shopping at Amazon Grocery, know how much you’re spending on items at the grocery store. Take out your last few grocery receipts - including both food items and household stuff like laundry detergent, dishwashing detergent, etc. - and go through and mark everything that’s dry on that list. This gives you a baseline: you know exactly how much you’re paying for the item at your local store.

Once you have that in hand, fire up Amazon Grocery and start comparing prices. Almost always, the Amazon price will be somewhat higher than the price on your receipt - don’t sweat it quite yet.

How I Save Money Using Amazon Grocery
Of course, that baseline price for those items is just a starting point. Amazon offers a ton of ways for me to trim down that price and often get it to a level that’s lower than what the grocery store is offering. Here are the tactics I use.

First, I signed up for an Amazon.com Visa for my purchases there. You already need a credit card for your purchases there anyway and the bonus program is stellar if you use it exclusively for Amazon purchases (I use a Citi Driver’s Edge card for most of my purchases). When you sign up for that card when you’re processing an order there, you immediately get $30 off of your order. So, even on a one-time use situation, you can get $30 worth of free groceries shipped to your house.

Second, I use that card for all purchases from Amazon. The card gives you 3% back in Amazon credit for all purchases done with the card on Amazon.com. In other words, when you rack up $833 in purchases on the card, you’ll get a certificate in the mail with a $25 off coupon code on it.

Third, I take advantage of “Subscribe and Save”. Let’s say you run through dishwashing detergent and laundry soap and diapers like clockwork. I know we do - I can practically set the clock by how often we need to refill stuff. If you sign up at Amazon for their “subscribe and save” program on these products, they let you schedule automatic purchases and shipments of these items to your home - and shave another 15%-20% off of the purchase price.

Fourth, I keep an eye out for Amazon Grocery coupons. Once every few months or so, they’ll offer a coupon giving $10 off any Amazon Grocery purchase of $49 or more, which when compounded with the other stuff can really trim your costs.

An Example
Let’s say, hypothetically, that I only wanted to use Amazon Grocery to buy diapers. I log into Amazon and set up a plan to ship me a box of 126 Stage 4 Huggies every month for a year. The default price is high for that box ($34.99 for a box of 126), but not outrageous.

First, I sign up for the “subscribe and save” option. That takes the price down from $34.99 for the box to $27.99 a box. Then, when I check out, I sign up for that Amazon card - giving me the first box for free and $2.01 off the second box. This means that my cost for a year’s worth of these diapers shipped to my door is now $305.88 - a cost of $25.49 on average for each box, which is at or below what you’d pay at the store for the same box. Furthermore, I use the Amazon card for all of the purchases, getting myself about 40% of the way to a $25 gift certificate there. Even better, these diapers just magically arrive on my doorstep without having to worry about it.

Amazon Grocery Doesn’t Always Work, Though
There are a lot of items where “subscribe and save” isn’t available or doesn’t make sense for you, and there are some items where the local store simply offers significantly better prices. It really pays to do the footwork and look beyond the initial price that you see - look at all of the savings available to you and see what is really your best deal.

I don’t use Amazon Grocery for all of the stuff that I could potentially get, but I do use it quite often - and if the price on Amazon ends up being virtually the same as the store cost, I use Amazon because it’s more cost-effective for me to have an item delivered to my front stoop than to grab it at the store, put it in the car, haul it home, and bring it inside. The scheduling is particularly convenient, too, if you can get the price point to the right level - the convenience of just having dishwashing detergent or laundry soap delivered to your door right on time, like clockwork, is quite helpful.

As I embark on a career as a full-time writer, I’ve come to discover that I truly need some sort of workstation on which to do my writing. My laptop (upon which every single post ever posted to The Simple Dollar was composed) works great for a couple one-to-two hour sessions a day, but for a full day of writing, it doesn’t cut the mustard for several reasons. It’s giving me minor ergonomic pain already and the screen size gets in the way of some of the editing that I want to do, for starters. Plus, given that I am now completely reliant on this laptop for all of my writing with no redundancy at all gives me some pause. Even more so, I want to start recording some audio and video for various purposes (podcasts? videos? what do I have in store?).

This leaves me with a handful of choices.

Option one includes hooking up an external monitor, keyboard, and mouse to my laptop. I have a dusty old 17″ monitor in the closet, so I attempted this solution. It worked to a degree, but the video card in my laptop has serious compatibility issues with the monitor. In a nutshell, this solution partially resolves one of the four issues I’m concerned with, but leaves me out to dry on the video and audio recording, the single unit reliance, and the screen size, as the monitor isn’t much bigger than the laptop.

Option two is to go all out and just get the exact system I want. This is expensive and specs out at around $4,000 - a staggering sum of money. Basically, this system is an iMac with a 24″ screen and maxed out memory, a new printer/scanner/copier, a backup system, and all of the software I might potentially need for any of my plans. This is expensive, but it solves all of my problems.

Option three is compromising between the two. This basically means a desktop PC of some sort with a large monitor. It’s not the exact system I dream about, but it does afford me the solutions that I need.

Right now, I’m using the first option. It partially solves the biggest issue (ergonomics), but it doesn’t really resolve any of the other concerns I have. In short, this is a stop-gap solution.

This leaves me with one monster question: how do I distinguish between option two and option three over the long haul? Here’s my gameplan.

Step 1: Specify exactly what I actually need.
This is the real challenge, actually. What components of a system do I actually need? I plan on using this machine for work day in and day out for the next several years, so actually getting a grip on my honest needs over that timeframe is vital. The problem, though, is that it’s very easy for wants to slip into the needs section.

Here’s an example. In my previous life, I got very used to a 20″ monitor, and now using my laptop’s 15″ screen (or even my old 17″ monitor) feels small. I feel like I’m chasing windows around much of the time and that’s a time waster. Coupled with that, recent research seems to indicate that six more inches in monitor space can save two and a half hours of time per day. If that larger monitor actually led to a 20% bump in personal productivity for me, it would be well worth it. But is that larger screen a necessity?

Similarly, whenever I spec out a system, I tend to want to add as much memory as possible to the thing, because I’ve witnessed time and time again how much difference plenty of memory can make for a workstation. My wife and I have very similar laptops, but mine has 2 GB memory while hers has 1 GB - and mine is light years faster while doing the same tasks. But is that speed difference necessary?

What I’ll effectively be paying for with both of these options is a bump in system speed over the next several years. That bump might translate itself into enough productivity to allow me to write an extra article or two a day - or it might be negated by other factors.

In the end, it comes down to me. The system will increase the speed with which I’m able to write and create, but will that extra time go to productive use? If the answer is a clear and confident “yes,” then I should go for the upgrades as they’ll pay for themselves. If the answer is “I’m not sure” or “no,” then I should hold off.

My genuine belief, based on my level of productivity recently, is that the answer is yes and I should go for the extras. Is that a justifiable choice? I’m sure it will be debated in the comments for this post.

Step 2: Look at my various options for a system that achieves those needs.
So, I know what I’m getting: a reasonably fast desktop system with a large screen (22-24″) and plenty of memory. I can then hop along to Dell and Apple and spec out these machines … and I quickly see that the Dell version is cheaper.

This brings up another question: what are my concrete and compelling reasons to go for an Apple instead of the Dell? This is a brand choice - it could extrapolate to any major purchase, like choosing a more expensive Honda Odyssey over a Ford Windstar. I can name several concrete benefits for the Apple (built in PDF creation, the relative portability of the iMac, the high quality and inexpensive price of the basic productivity software I’ll need (iWork and Final Cut), and more sensible user interface with less security and driver compatibility concerns, for starters).

Are those extra benefits of the Apple over the roughly equivalent Dell enough to pay a premium price for? I’m not sure, so I hold onto those two specs and move on to the next step.

Step 3: Work on minimizing the price on these options.
For the PC, I might be able to find a similar build from another manufacturer - or perhaps even build the system myself. Pricing the parts out online results in a couple hundred dollars’ worth of savings, but also a long day or two of configuring and setting up the system, which I doubt is particularly cost effective at the moment.

This means I move on to finding opportunities for discounts with Dell or Apple. Do I know anyone who can help me with a discount or a coupon of some sort, like the rumored 15% discount for friends of people who work for Apple? This basically comes down to social networking - who do I know that can help me out with a deal for either brand that might help me make my final decision - and research. What can I find that reduces my bill?

Step 4: Execute sooner rather than later.
At some point, I collect my best deals and move ahead with the purchase. There is some danger here of “analysis paralysis,” where I keep analyzing the situation and seeking better deals, but eventually there’s a point where that’s not cost-effective and I need to move ahead with my purchase.

What’s the point?
For many of you, this might have seemed like a great deal of navel gazing. Why fret so much over the purchase - just get what you need and get on with it! In this process, though, there are some valuable lessons that can be applied to any purchasing decision.

Figure out what you actually need before you start looking at products. It’s easy for me to go to Apple’s website, spec out a system, and go “Wow, that’s impressive!” and then talk myself into it. Even more dangerous is actually visiting an Apple Store, where the systems are out on display. I see them - and I want one. The best way to combat this is to know what you want before you even start looking at real systems. Figure out the specifications you actually desire, do research on the item itself in a general fashion, and then start matching this information with real-world items that match up.

Distinguish the needs from the wants. Obviously, it’s sometimes fun to buy stuff you simply want rather than need, but it’s very easy to go too far down that road and wind up with something overly expensive that goes far beyond what you need and goes into budget-busting excess. As you analyze features (and that should be done before you start actually shopping), focus on defining the things you actually need versus the things you want - and be honest about it. Recognize when you’re buying to fulfill a want rather than a need, and try to keep the wants under control - that will help keep your bill under control.

Tug on your social networks for discounts. Major purchases are a great time to ask around to see if any of your friends - or their friends - have opportunities that would allow you to make your purchase at a discounted price. Coupling this with effective research can often result in a nicely diminished bill at the end of the day. Even better, if someone asks you for help and you have the means to make it happen, make it so - it’s all about paying it forward.

Don’t add “impulse” add-ons. Most major purchases come with pitches for “extras” that you almost assuredly don’t need. Just say no to all of them and figure out any accessories that you might really need later on, and buy those separately with an independent purchase. Electronics stores and car dealerships are both notorious for this, as much of their profit is tied up in slipping little extras in with your big purchase.

I’ll let you know in a few weeks how this all turns out.

One of my readers recently alerted me to an interesting article at CNN.com entitled Why Sadness Can Blow Your Budget. The article discusses the “misery is not miserly” phenomenon, where people who are experiencing sadness tend to be much less in control of their personal spending, prone to splurges and poor consumer choices. Even more interesting: most people aren’t even aware of it, as they believe that their emotional state doesn’t affect their buying decisions.

Intrigued by the idea, I kept digging and came across the scientific literature that this article is based on, Misery is not Miserly: Sad and Self-Focused Individuals Spend More by Cynthia Cryder, Jennifer Lerner, James Gross, and Ronald Dahl.

Their study involved having people watch various movie clips with different emotional content - some watched neutral clips and others watched sad clips. Afterwards, they were given money and allowed to buy products with it. The people who viewed sad clips were willing to spend significantly more money (as much as 300% more) to buy the same items as the people who watched a neutral clip. In effect, the study demonstrated that sad people spend money frivolously.

For a lot of us, the idea that sadness leads directly to spending isn’t a surprising conclusion. I can say that I’ve certainly experienced this phenomenon - I used to regularly go on a buying binge whenever I felt sad about something, and quite often that would lead to initial elation and a sense that things were better. Over time, though, the bills would come in, triggering the same issues all over again. That’s a very vicious cycle, indeed.

It’s easy to offer the usual advice on how to break it - substitute other mood enhancers for shopping, avoid opportunities to shop, reduce the influence of marketing in our lives, and so on. These are tips I talk about all the time on The Simple Dollar - they’re powerful techniques that can really make a difference.

Unfortunately, those solutions are just the steps to follow once the problem is recognized. As the study shows, most people don’t even realize they’re buying because they’re sad. Is there any wonder why advertisers want to link their ads to strong emotions? Strong emotions drive us to irrational behaviors, and one of the biggest ones in modern life is spending more than we should.

The real challenge for solving this problem is simple awareness. When that moment of sadness comes and you are suddenly urged to buy something, what will help you remember that maybe you’re not making the best choices - that maybe right now isn’t the best time to buy?

Remind yourself. Do something very basic and silly, even something like placing a smiley face sticker on the front of your credit card. Try to remind yourself of this regularly, particularly when you are about to shop - ask yourself if you’re in a good mood before you bust out the plastic just to protect yourself.

Have others remind you - and remind others yourself. Send that article around to your friends and talk about it with them. Get the idea flowing among all of you that it’s a really bad idea to shop when you’re sad, and then when you’re trying to cheer someone up, don’t suggest shopping - or point to that article as reason not to go.

It’s not a willpower issue or a common sense issue - it’s a psychological predisposition issue, something most of us are prone to. It might seem obvious now when you’re in a good mood, but think back - have you ever bought something when you were sad or upset and regretted it later?

The key thing is to realize that when you’re sad, you’re quite liable to make bad buying decisions even if you’re not realizing it at the moment. Emotional purchasing is simply dangerous to your pocketbook.

In the wake of yesterday’s discussion about ING Direct and customer service, a fair number of readers wondered whether I am overvaluing customer service. I personally believe that good customer service is worth a premium on most items, from a bank account to an electronic device, and here’s why.

In 2002, I purchased an iPod. Less than a week after owning it, it had some problems - the hard drive inside began to make some very ominous noises. Since it was under warranty, I called Apple’s customer support line, spoke to a clear-speaking person within five minutes, and was given very specific instructions on how to mail it to Apple. Less than two weeks later, I held a brand new replacement iPod in my hands.

In 2006, I bought a Dell laptop. About two months after owning it, the battery ceased to work. Since it was under warranty, I called Dell’s customer support line. I stayed in the hold queue for more than an hour before giving up. I tried again later and, after forty five minutes, was handled by an individual in India who spoke very hard-to-understand English. He basically refused to exchange my battery and would not allow me to speak to a supervisor. On a third call, I finally got ahold of a supervisor, who told me that my battery had been subjected to “abnormal usage” and that it wouldn’t be replaced.

Guess what? The next time I buy a laptop, I’m going to spend the premium and buy the Apple.

I’ve had similar experiences in various arenas, including online banking (one bank basically fought me over allowing me to withdraw my deposit, for starters). Considering the time and frustration invested in dealing with companies with poor customer service, I consider it well worth my time and money to spend a small premium to ensure good customer service from a product that I will rely on.

Whenever I consider buying a new item, I ask myself what would be the implications in my life if it ceases to function and there’s no customer service available? My primary bank, for instance, better have good customer service, as they hold the money I use every day. On the other hand, if I’m just using a bank to stockpile some savings, I can tolerate a little less in the customer service department in exchange for a bit better rate. Similar logic applies to my computer, many of my electronic devices, my automobile, and so on.

On the other hand, when I buy a package of light bulbs, I realize the customer service has very little value. Only rarely will I invest the time to call them up if a light bulb were to burn out early - the value of my time is higher than that. Plus, there’s almost no implication if that item ceases to function - I just go change the bulb.

In the end, good customer service is like an insurance policy. Some feel better having that insurance in case something goes wrong and are willing to pay a premium for it. Others are willing to eschew it and go straight for the cheapest item. For me personally, the more I rely on an item in my daily life - and the more disastrous it would be if that item simply ceased to exist - the higher the premium I’m willing to pay for stellar customer service.

I’ll start off this time by relating a few tales of recent shopping excursions where I talked myself out of making some seriously frivolous purchases.

A week before Christmas, I was at an electronics store searching for a shower radio for my sister-in-law. While wandering around, I went through the flat panel television section. As I’ve mentioned before, our current decade-old television has cloudy corners and my wife and I agree that sometime in the next few years the picture tube will fail. Anyway, I stood there admiring a 46″ LCD television, envisioning how we would rearrange our family room to accomodate it, including some wall-mounted shelves on either side of it to hold DVDs and other electronic equipment. Three years ago, I probably would have left the store with a big box. This year, I didn’t.

Two days before Christmas, I spent most of an afternoon playing Halo 3 and Bioshock online with my cousin. I was atrocious, but I had a lot of fun. Afterwards, he practically begged me to get an XBox 360 so we could play together online. I was tempted, but I won’t be buying one.

Yesterday, I was at a bookstore searching through the cookbook section for a book with a good description of how to make some particular variations of homemade pasta - I’ve been trying some things and it always winds up being of a texture that doesn’t cut very well (it seems to shred, actually). I found an amazing Italian cookbook that not only clued me into what I was doing wrong (insufficient kneading and not running the dough through the roller more than once), but provided a very elegant description of the whole process. I was sorely tempted to get it, but instead I just read aloud out of that section into my voice recorder, went home, promptly added the book to my Amazon wishlist, and sighed with relief that I didn’t spend unnecessarily.

Earlier today, I was at a coffeeshop for a brief meeting with a potential business associate. I was tempted to get a big ol’ $6 coffee, but instead I just requested water, which was comped to me, and sat down at the table.

In each case, I was tempted to spend on something I didn’t need, and I resisted the urge to do it. The items were at a variety of price levels, ranging from the $6 coffee to the $3,000 LCD television, but the principle remained the same: I didn’t need it, so I didn’t buy it.

Three years ago, I would have probably spent the money in each of those situations, at a point in my life where my income was substantially lower than it is now. What changed? The biggest change was that I realized I didn’t really need stuff to make me happy. An extension of that is that I learned how to talk myself out of frivolous purchases.

I hear from a lot of readers who realize that stuff doesn’t make them happy, but they’re still having a difficult time figuring out how to actually say “no” to their purchasing habit. For instance, a reader wrote to me recently describing all of the spending that they had cut out, but lamenting that they were still having difficulty making ends meet and paying for their “needs” like “kid’s sports fees and equipment, new clothes for work, painting the living room, and counseling.” In each of those cases, they made a choice to spend and even if you realize that you’re making a real choice in such decisions, it can still be hard to say “no,” especially if you’ve spent many years saying “YES YES YES!”

My approach to saying “no” is pretty simple. For each and every purchase I make, I try very hard to talk myself out of the purchase by asking myself a few questions about that purchase:

What’s the best thing that could happen to my life if I make this purchase?
This question usually nails unnecessary upgrades, like buying the flat panel television. Does my life improve if I buy it? If it’s just an upgrade, then the improvement is just incremental - and if it doesn’t add any major features, that incremental improvement is tiny. With the flat panel, the only thing it does is increase my floor space in the family room by a square foot or two - and that’s only if I wall-mount the thing and rearrange our other home entertainment equipment. Not much of an improvement at all, especially compared to the price.

What’s the worst thing that could happen to my life if I don’t make this purchase?
This one filters out frivolous new items, like an XBox 360. If I don’t buy the item, nothing changes in my life. There’s nothing bad that happens in my life if I don’t have an XBox 360 compared to not having one. Obviously, this is a compelling argument for some purchases, like a cell phone, but for many things, you realize that nothing bad really happens if you don’t have it.

Do I already have access to something that substitutes for the function of this item?
Here, we’re filtering out redundant purchasing, like the cookbook. I already have cookbooks that cover most of the material in that book, so even though I’d like to have it and read it, I do realize that it doesn’t bring any new value into my life. In other words, perfect gift material - I’d enjoy it (likely quite a bit), but it’s not something that serves a need for me.

Could I acquire this item cheaper elsewhere?
This one encourages comparison shopping, and often stops the urge when the other questions fail. I often know I could find the item cheaper online or at another retailer, so I think about the cash I could save with just a little patience and that’s enough to get me out the door. You might also be able to get that same item for free: counseling could come from a valued friend, or a book might be had for free from the library.

Am I buying this entirely for social reasons?
This final question battles peer pressure, like the urge to buy coffee when you go to a coffee shop with friends. Why not just buy water instead? When you go clothes shopping, don’t buy clothes you don’t need just to be social. The real question is whether you would buy this item without others around - if the answer is no, you should never buy it.

In a nutshell, these questions are merely there to get you out of the store and away from the immediate temptation to buy. With time and reflection, you may in fact decide to make that purchase, but such calculated and researched decisions aren’t the problem - impulsive buying is the real danger.

My family has only one television in the house, and it is primarily used for playing Wii games. It’s an enormous, extremely heavy old 32″ television, bought when I was in college and now approaching ten years old. In all four corners, the screen has begun to turn faintly blue, and it shows up particularly well on a white screen, as the cloudiness covers a good portion of the screen.

Not too long ago, I would have insisted on replacing this immediately, but in all honesty, it doesn’t interfere with any of our usage of the television. Thus, we’ll keep it until the issue becomes serious enough that it disallows our use of the television for any purpose.

Quite frankly, some of our friends and family think this is weird. “Why don’t you just replace it?” they ask. “You can afford it, you know,” they’ll say, as though they need to remind us that we can, in fact, spend money.

The real truth of the matter is that my wife and I have started to follow a set of unwritten rules about when and how to upgrade or replace the items that we have now. I thought it might be fun to actually write some of these down and share them.

Rule #1: If it isn’t broke, don’t replace it.
This means that if we have an item that is functional, we don’t replace it with something newer (there are a few little caveats to this that I’ll explain later). This rule is why we haven’t replaced our television yet and we probably won’t until the tube blows - it’s functional, so why replace it?

Rule #2: When we do replace something, we replace it with long term quality and reliability.
For example, our house came with a washer and dryer set that we plan on using until they’re on death’s door. At that point, we will pony up and buy quality replacements for them - ones that are energy efficient and designed to last for the long haul. This might cost us a lot out of pocket right then, but the efficiency and reliability of the items will pay dividends for many years afterwards.

Rule #3: Upgrading before the end of the lifespan is fine if there is a clear and compelling functional reason for the change.
Our kitchen knives are a great example of this. We have a functional set of kitchen knives that work well for most of our uses, but they’re not excellent and they are frustrating for some tasks (vegetable chopping, etc.). The knives simply aren’t designed well enough to execute repetitive chopping and so on. Thus, the knives are on our list of items to replace in the future. When we do replace them, we will replace them with stellar knives, ones intended to last a lifetime.

Rule #4: No item is upgraded unless we both agree on the need for the upgrade.
If this rule weren’t in place, I might have already replaced the knives. However, my wife is still riding the fence on them - we’ve slated a replacement for them in the long term, but not immediately. Why? Her argument is that they still do most tasks well, so we should buy single knife upgrades for specific tasks. My argument is that some single knives will just encourage us to upgrade all of them, so we might as well save the money and get the whole set. We will do a knife upgrade when we are in full agreement on what to do, but until then, we’ll wait until we agree on what to do.

Rule #5: Try to avoid things that have a steady “upgrade” cycle.
Video game consoles come to mind. We own a Wii, and we know from the past that video game consoles are “upgraded” every five years or so, with the console manufacturer reducing and then eliminating support for the old console as the new one begins to sell well. Does this mean we upgrade when the new console comes out? I don’t really plan to as long as I’m still enjoying games for my Wii - I actually have far more games right now than I have time to play, so why upgrade until I’ve gotten the enjoyment out of everything that I have?

The same logic goes for HD-DVD and BluRay. I see no reason to ever upgrade to them until it literally becomes impossible to get movies on regular DVD - and even then, I won’t upgrade for a while. Why? I have all of the movies I enjoy watching repeatedly on DVD already, so why upgrade to a new format? I’m very glad to see that some family members of mine feel the same way - one of them actually has a VCR in a box (just in case they completely go off the market) so that they can continue to watch their video tape collection and aren’t forced into an upgrade that doesn’t really add value.

In short, we don’t upgrade that often, but when we do, we do it with items of quality, not just a cheap replacement item.

In 1983, when my wife was just a little girl, she wanted a Cabbage Patch Kids doll for Christmas. Her parents were unable to find one, but her grandmother apparently bribed a shelf-stocker at a TG&Y in rural Iowa to grab a couple.

In 1988, I desperately wanted the video game Super Mario Bros. 2 for Christmas. My father sat out on a loading dock behind a store for almost six hours, then bribed the guy unloading boxes with a $20 bill and five pounds of catfish fillets (my father was - and is - a small-scale commercial fisherman) to just put the game in his hands so he could go buy it.

In 1996, my niece wanted a Tickle Me Elmo. I was able to get one by going to a Toys ‘R’ Us store in West Des Moines, Iowa, waiting in line for three hours, then dashing for a huge display of them. I grabbed one, turned around, and tried to get out of the crowd when an old lady tried to actually take the toy out of my arms.

Why do this? For many of us, seeing the joy of a child receiving that one toy that they most want for Christmas is an enormous motivator. I know, certainly, that my best Christmas memories are of receiving that one toy I most wanted for Christmas, but I realize now that on some level, I realized that it was more than just the mere gift. I knew that my parents had gone through a lot of effort to get the item and make sure that I had it that year for Christmas, and I knew it was because they loved me very much.

In the end, I don’t really mind putting in a lot of effort to get that one gift that a child wishes for the most - I’m much more bothered by a mountain of gifts, as I’m a big believer in the idea of diminishing returns if a child receives a lot of presents. Thus, my gift-giving strategy usually is two or three great presents, period.

There are a lot of ways to track down that “it” gift each year:

Go shopping early on a Sunday morning. This is the time when most major retailers put out the items listed in their flyer, so if you spot a highly desirable item in a store’s flyer, you should get there early on a Sunday to procure it. I know that I used this strategy to get my Wii earlier this year.

Talk to the people in the store where you might find the item. Just ask when they usually receive shipments and whether or not they’ll be receiving a particular item soon. Even better, if you have a friend who works there, work out an arrangement where they can directly help you pick up the item (hopefully, it won’t involve you sitting out on the dock).

Call around. If the item is not sizzling hot, but a bit hard to find nonetheless, make it a routine to call a lot of local stores asking for the item on a regular basis. If they say it won’t be in stock, ask when it will be. If they don’t know, ask to talk to a manager. Sometimes, the item will wind up being ordered by that store.

Hit up Craigslist. Explain that you are trying to find a particular item for your child for Christmas and are looking for any pointers or people that have one for sale. This isn’t a guarantee, but there’s a decent chance you’ll find the help you need - but often at a premium.

The lazy solution: use eBay. For high demand items, eBay (and/or other online auction houses) is the best place to find a high-demand item - but you will pay out the nose for it. Stick with highly trustworthy sellers, too - again, you’ll have to pay a premium. However, in the end, you will get your item this way. This is definitely the lazy way to the solution.

What if you can’t afford or can’t locate that one item that your child most wants for Christmas?

Don’t make a big deal out of it. Bringing it up yourself and being upset about it will just stir emotions in your child. If your child is disappointed at Christmas, be simple but firm about it and just move on with life. If the

Find other items that the child wants. Never get in a situation where a child’s Christmas wish list consists of one item. Make sure that there are lots of items to choose from, so that even if one is a clear favorite, you still have many options.

Spend time with the child. Time is the best gift you can give, not a Nintendo Wii. Play a board game with your child, or take the child to a park, or just watch a movie together. That will mean far more to the child in the long run than a snazzy gift.

Thoughts and good stories about getting an “it” toy for Christmas are welcome in the comments.