I wanted to see if you could run the numbers on this. My family is considering signing up for a year of Amazon Prime for $80. I can see a lot of situations where it would save us a little bit of money, but I don’t know if it adds up to enough money to make it worthwhile.

The value of Amazon Prime really, really depends on your buying habits. For some people, I think it’s absolutely worth it. For others, it’s not worth it at all.

First of all, what is Amazon Prime? From the site’s blurb:

Amazon Prime offers multiple shipping benefits, including FREE Two-Day Shipping for eligible purchases. Members also get free access to Amazon Instant Video and the ability to borrow books from the Kindle Owners’ Lending Library.

It costs $80 per year for these services. I see a few primary ways in which Prime saves money for families.

First, it enables you to use Amazon to buy individual items for less than $25 without paying for shipping. Without Prime, you have to pay for shipping for items under $25, meaning that there’s often a temptation to add unnecessary items up to the $25 threshold or just walk away and pay more for the item elsewhere, like buying a book at a bookstore. If you have Prime, you’ll likely find yourself doing all of your gift shopping and small purchases at Amazon rather than buying them at stores.

In that situation, you have to start doing some serious price comparison among the items that you buy. The best way to do that is to grab some receipts from your last few weeks of purchases and start comparing them with prices at Amazon. With shipping as a non-factor, can you save money by buying the item at Amazon?

If you’re a warehouse club member, you should include those in the comparisons, too. You should also carefully examine Amazon’s “Subscribe and Save” program on household products, where you can shave 5% to 15% off of the cost of a household item to have it shipped to you on a regular schedule, such as having shampoo shipped to you every two months (for example). If you’re a Prime member, the shipping costs for those things just vanishes.

Another factor that helps Amazon’s case is the cost of going to the store for these items. If you’re sitting at home and you have two or three things you need to buy, Prime can often save you the cost (and the time) of having to go buy those items.

Is that worth it? It really depends on the things that you buy. I will say that the larger your family is, the more likely it is that you’ll find Prime to be worthwhile.

Another factor is the video streaming service. If you’re a Netflix subscriber, this might be a deal-breaker for you. Amazon Prime provides a video streaming service with content that largely (but not completely) overlaps Netflix. Most of the items that my family enjoys on Netflix streaming is also available on Amazon streaming. If you’re spending $9 a month on Netflix streaming, take a serious look at Amazon Prime, as it might actually save you money to switch (as the cost per month of Amazon Prime is about $7).

The Kindle lending library is pretty secondary. If you have a Kindle, it’s worth looking at simply because it gives you access to more “free” books, but I don’t think the value there is worth a significant amount.

I think the value of Prime really comes down to two questions.

One, would you actually save enough money over the course of a year by eliminating the shipping barrier at Amazon? This is a trick question, of course, as it will become easier for many people to shop more if they no longer have to worry about the shipping issue. If you can get anything you want at a pretty good price shipped to your house in two days without any shipping cost, it can be really tempting to buy more items. Self-control is really needed here. On the other hand, if you have that self-control, the small savings on entertainment items, gifts, household items, and other random things will likely add up fast, particularly if you can clearly identify the savings and switch to buying most of those items through Amazon.

Two, can the video streaming service adequately replace Netflix for you? If you don’t use a streaming video service, then this is a non-issue. You certainly have no reason to subscribe to such a service. On the other hand, if you do use Netflix, Amazon Prime provides a pretty strong subset of what’s available at Netflix plus some minor additional items. Is the mix of content on Amazon Prime’s service an adequate replacement for Netflix for you? (Overall, I do feel that Netflix offers better content overall with regards to streaming, but Amazon provides a lot of good stuff and, given the other benefits of Prime, this might be worthwhile for you to switch.)

Would that $80 per year actually add up to more than $80 per year in savings for you? I think that if you have some self-control, you’re willing to buy a lot of your household and other items from Amazon, and particularly if you’re a Netflix subscriber and would be willing to cancel it and jump ship, Prime can be worth it, particularly if you have a large family (and thus a larger household supply budget). You need to run the numbers for your own situation, and the best way to start is with your receipts for the past few weeks.

The post Does Amazon Prime Actually Save Money? appeared first on The Simple Dollar.

Usually, you’ve already decided whether or not to buy the item. Usually, you’re just trying to reinforce the decision you’ve already essentially made.

If you typically decide not to buy something in this situation, then you’re in good shape. You’re not spending money unnecessarily most of the time.

Of course, millions of Americans wouldn’t be in thousands of dollars of consumer debt if they were all adept at saying “no.” Instead, they say “yes” to the purchase and stand there reinforcing and justifying it.

That describes me to a tee in 2004 and 2005 – and even, sometimes, now. I’ll pick up an item and, on some level, decide almost instantly I’m going to buy it. My conscious mind then starts filling in reasons for that purchase, and before I know it, I’m in the parking lot holding a bag in my hand.

It’s that moment where you’re standing there giving yourself reasons to buy it that you really need to focus on, because that’s the moment where you can turn the tables on frivolous purchases.

My tactic? Whenever I pick up an item that I’m seriously thinking about buying, I actively find five reasons not to buy it. I stand there intentionally looking for flaws in the item and flaws in my decision-making process.

If I can come up with five reasons not to buy and still push through them with a straight face, then it’s a reasonable purches.

The essence of this is something I’ve referred to many times – the “ten second rule.” The entire purpose of the “ten second rule” is to just slow you down when you’re about to spend your money, but it doesn’t really address what exactly you need to do to put a leash on your spending.

So, what kinds of things do I look for to convince myself not to buy?

Can I find this exact item at a lower price elsewhere? Is it cheaper at other stores? Is it cheaper online? Can I wind up with this item at a later date while keeping more money in my pocket?

Do I have something similar to this that’s unused or underused at home? Why buy this book when I have unread books on my shelf?

Will I actually enjoy this? How do I know I’ll like this item at all?

What’s wrong with this item? Does it have ingredients I really have no interest in consuming? Do I agree with the ethics of the company that makes it?

The more you analyze your purchases along these lines, the easier it becomes to just default to saying “no” to unnecessary purchases. When you reach that point, you’ll find that it’s a lot easier to retain money in your pocket while feeling quite happy with your purchasing decisions.

The post Stop Justifying Your Spending Yes’s appeared first on The Simple Dollar.

Think about that for a second. Thirty seconds.

Amazon has a huge array of consumer goods available on their site. You can go there and type in just about anything, from Bob’s Red Mill oatmeal to baseball cards, from a new hard drive to a new shirt, from a magazine subscription to a new record for your record player.

In other words, Amazon is an impulse buyer’s dream world. If you have a sudden impulse to buy something, you can go to Amazon and quickly find it.

They know this, of course, and that’s why they’re trying to get the speed of a transaction down to about thirty seconds. In other words, in roughly the length of time it’s taken you to read this much of this article, you could have bought an item off of Amazon.

Here’s the painful truth, though. The longer you have to wait to fulfill your impulse, the less likely you are to just buy something to scratch that itch.

It’s the same philosophy as to why grocery stores stock the checkout aisle with impulse purchases. It only takes a second or two to grab something, toss it on the conveyor belt, and have the checker scan the item and put it in your bag.

With other items, you have a lot of time to rethink the impulsiveness of the purchase. When you’re out in the store, you have all the time you want to make up your mind about an item. Even after you put it in your cart, you can rethink the purchase – you have plenty of time. There’s even another window to re-think a purchase when you put the item up on the conveyor belt to have it scanned.

Amazon is trying very hard to move from the “shopping cart” model to the “impulse buy at the checkout” model. Why? It means that you spend less time thinking about and reconsidering your purchases.

(This does not make Amazon “evil” or a bad company in any way. It just makes them a smart retailer.)

So, what can you do as a consumer to fight back against this? Here are a few steps I’ve taken with my Amazon account.

First, I don’t store my credit card information on the site. I force myself to have to re-type in that info each time I make a purchase. Yes, it’s a hassle, but it makes me re-think that purchase with each of those digits that I type in. It adds another minute or so to the purchase cycle and brings the fact that I’m actually paying for this item to the front and center.

Second, I turned off my own address from the “one-click” settings. This means I can’t just order an item to my home address with one click. It’s easy to do – just head to their address page and change the settings for your home address.

Finally, I regularly clear out my browsing history. The items you look at help Amazon to suggest better and better item recommendations for you when you’re browsing through the site. If you delete your browsing history, the recommendations get much worse, cutting down on the impulsive temptation. All you have to do is head to Your Amazon Browsing History and start deleting items. I do this regularly.

Those three steps will go a long way toward making shopping at Amazon a less impulse-driven – and less expensive – experience.

The post Online Buying, Impulse Control, and Amazon.com appeared first on The Simple Dollar.

Thanks to Adria Richards for the picture

Over the years, Sarah and I have relied on Cascade Complete to get our dishes clean. We’d tried a lot of different dishwashing detergents, particularly when we were first living in apartments where a dishwasher was available, and we just found that Cascade Complete got our dishes cleaner. We didn’t have to re-run loads. We didn’t have to pre-wash dishes. We didn’t have to worry about overloading. It just got the job done consistently – something we couldn’t say about other dishwashing detergents.

Because of this, we just adopted a routine of buying Cascade Complete whenever we needed dishwashing detergent. We’d recognize the logo on the store shelf, find the best bargain on it we could, stack a coupon on top of that (usually), and head to the checkout.

Some time in 2010 – I think it may have been in the spring – I noticed that our dishes weren’t getting very clean. They looked sort of dingy and they often would still have caked-on food or smudges on the glasses (with little kids, smudged glasses are a very common phenomenon).

After doing a bit of studying, I learned that Cascade Complete had removed the phosphates from their dishwashing detergent, making it much less effective and putting it almost exactly on par with other phosphate-free dishwashing detergents that cost substantially less to buy.

Simply put, we haven’t used Cascade Complete in a year and a half. We either use a generic brand or a homemade mix. The brand on the bottle means little, after all – it’s what’s inside that washes your dishes.

* * *

Companies work very hard to associate brands with certain things in our minds. Apple. Nike. Sony. Olive Garden. Each of those things – and countless others – causes us to picture certain things in our minds and often causes us to have certain assumptions about the products that carry those brand names on them.

For us, Cascade Complete was synonymous with “clean dishes,” but that eventually proved not to be the case. Not because they changed the brand, but because they changed what was inside the box.

The label on the outside of the box doesn’t mean you’re going to always get the same thing inside the box.

What does that mean for us? Don’t become attached to brands. The particular item that is on top of the heap right now might not necessarily be on top of the heap next year if a particular item changes its contents or a competitor produces a better product.

The product you once started buying because it was the best bang for the buck quite likely isn’t the best bang for the buck any more.

I can easily recall a similar experience with a Sony Walkman during my childhood. When I was about eight, I had a secondhand one that was industrial strength. I used it for about six years until it was dropped into a lake. I wouldn’t be surprised if someone were to dive into that lake and find a fully-functioning Sony Walkman.

I bought a replacement, expecting a similar durable product. It worked for about three months, then it started eating and shredding tapes. I attempted to turn it in under the warranty and just wound up battling Sony’s customer service until it wasn’t worth it any more.

The Sony name and the Walkman name meant very little. The product inside is what mattered.

* * *

My solution to all of this is to just completely abandon any meaning when it comes to brand names. All they’re useful for is making it easy to identify a certain item on the store shelf.

What I do instead is constantly watch for product reviews. I read publications like Consumer Reports and The Consumerist pretty faithfully and I simply watch for what their comparative studies suggest is the current best “bang for the buck.” I stick with that for a while until an updated comparison comes out.

When I’m about to buy a more expensive product, I research it thoroughly, but the brand name doesn’t mean a whole lot. If it’s an electronic item, for instance, it’s likely that it was made out of many of the same components in the same Chinese factory no matter what name is on the box. If it’s a dishwashing detergent, the vast majority of the materials in the box are exactly the same. The small differences between the items have little to do with the name on the outside of the box.

All I care about are features and price. Those things matter far more than the name on the package.

I’m striving to apply the same philosophy to everything I see. Does it matter what car someone else bought? Not really. They just decided that it had the right set of features for them. I might not value those same features, but then again, I’m not the person spending the money. If I see someone driving a Jaguar, for example, all I can really conclude is that they have a different set of features that they care about in a car than I do.

I’m not defined by the brands that I buy, nor is anyone else. They’re just stickers on the outside of an item that will ideally make my life a bit easier or more enjoyable. Nothing more, nothing less.

The post Overcoming the Power of Branding and Brand Preferences appeared first on The Simple Dollar.

How do you find anything good at Goodwill? Whenever I go into one, all I find is a lot of junk. I can’t believe you find anything good there.

There are a few basic tactics that you should use if you’re shopping at Goodwill.

First, visit Goodwills that are located in upscale areas. Don’t visit the Goodwill in the poor part of town or even the medium income part of town. Look for the Goodwill stores and secondhand shops that are located as close as possible to the rich part of town.

What happens is that people in the rich part of town often have more money than sense, so they’ll often get rid of very nice clothes having only worn them a time or two – and they do the same thing with other items. I’ve been in Goodwill stores in the peripheries of rich neighborhoods that have had far higher quality stuff than almost anywhere I shop at. I’ve filled up my book collections, my video game libraries, and, yes, my wardrobe thanks to such visits.

I’ll give you an example. Once, I stopped into the Goodwill store at Washington and Racine in Chicago and walked out with about fifteen video games and about ten new shirts. The store was nicer than many Wal-Marts and Targets I’ve been in and the quality of the merchandise and prices were fantastic.

Second, be picky. If you go into a Goodwill that seems to mostly be full of junk, you don’t have to buy that junk. Walk out and put that one on your “avoid in the future” list.

However, having said that, there are a lot of gems to be found, particularly in areas of income disparity. A college town is a perfect example of this. A college town often has a wide variety of incomes and perceptions of money, which means that their Goodwill stores tend to include a lot of cheap stuff and a fair amount of good stuff.

You often have to dig for those gems, though. What I often do is look for examples of high-quality things, even if I’m not particularly interested in buying them. If I see some high-quality items, even if they’re not perfect for me, I know that there are some diamonds hidden in the piles here.

So, how does that really work? I’m often willing to try a Goodwill that’s in a decent neighborhood that I’ve never been to before.

The first thing I do when I go in the door is look for items that I know really well. I’ll look at their men’s shirts or their smaller youth clothes or their books.

I look for items that fit me or that will fit my children, of course, but I also simply look for quality items of any kind. If I can find good items with some consistency while looking around, then I know the store is worthwhile even if I don’t specifically find items that match my needs.

So, with men’s shirts, I’ll look for items that look like they’re reasonably close to new, not faded, and are well constructed. I don’t necessarily expect to find a treasure trove in my size (like I did at that Chicago Goodwill several years ago), but I’m much more likely to stick with it if I’m finding some indication of quality items.

If I don’t find anything that seems of reasonable quality, or if I only find maybe one item in forty or fifty that looks worthwhile, I leave the store and often don’t look back.

The trick is to investigate lots of Goodwill stores, consignment shops, and secondhand stores in your area with these tactics. You should fully expect that some of them are going to be of poor quality and not worth visiting again.

However, if you’re like me, you’ll eventually find a series of stores that you’re happy to visit time and time again because the prices are excellent and you often find incredible discounts on nearly-new stuff. Such discoveries are well worth the time invested in finding them.

The post How to Find Good Stuff at Goodwill (and Other Secondhand Stores) appeared first on The Simple Dollar.

I particularly struggle with three sites directly connected to three of my biggest hobbies: Amazon (for books), Cool Stuff Inc. (for board games), and Steam (for computer games – and, yes, Steam sales are particularly my weak spot).

Over the years, I’ve had to build up some defenses against these temptations. I’ve tried lots of different things, but I’ve found that only three of them really work and make a difference in my buying habits.

Delete Passwords and Credit Card Info
Whenever I place an order at one of these sites, one of the first things I do is make sure that my credit card information is not stored at that site. When my browser prompts me to save the password for the site, I always say “no.”

For some people, this might seem like an annoyance. It’s supposed to be. The reason for doing this is to force me to slow down when I’m tempted to make an unnecessary purchase.

Let’s say, for example, that I’ve been reading reviews of some board game and I’ve talked myself into spending some of my extra money on a copy of that game. If I left my password saved and my billing information stored in the online retailer’s site, then I can have that game shipped to my house after a simple search and about six clicks.

On the other hand, if I’ve deleted my password and my billing and shipping information, I have to spend the time to type in my username and password, type in my card number and other information, and type in my billing address and shipping address. This adds up to several minutes of additional typing.

During that time, my mind on some level is rethinking the purchase. “Is it really worth it?” I’ll ask myself. Quite often, I’ll wind up never placing the order at all. This keeps money in my pocket instead of watching it leave for something frivolous.

Keep a “Already Have This” List Nearby
On my computer screen, I have three Post-It notes.

One says “Books to Read:” and lists about five books that I already have on my shelves.

Another says “Games to Play:” and lists about five board games that I already have on my shelves.

The third says “Computer Games to Play:” and lists about five computer games that I’d love to dig into more.

Whenever I’m tempted to buy another one of these items, I just glance at these notes and I realize that I already have more than enough.

Use the Computer Less
My final tactic is to simply use the computer – particularly the internet – less and interact with the real world more. Instead of surfing the web during my idle time, why not read one of those books on my “Books to Read” list or play a board game with my wife? Instead of playing a computer game, why not just go for a nice walk?

The computer is a wonderful source for entertainment, information, and contact, but in the end, those things are just a stepping stone for interacting with the world around you.

Keep these tactics in mind if you find yourself regularly tempted by online shopping. They guide me to better results; hopefully, you’ll find the same.

The post My Top Tactics for Reducing Online Shopping appeared first on The Simple Dollar.

Pay for RAM, not speed. The speed of the computer chip does not matter; the attention-span or RAM memory does matter.
Pay for components, not cables. Buy the best components, and the cheapest cables.
Pay for speed, not channels. For cable internet, with enough speed you can watch TV channels on the internet for free.
Pay for sensor size, not pixel count. On today’s cameras you’ll have enough megapixels; better quality comes from larger sensors.
Pay for reliability, not mileage. On a car, you’ll spend more of repairs and maintaince over its lifetime than you will on a difference in gas.
Pay for comfort, not weight. A bicycle’s feather weight is moot once you add water bottle, a bag, any extra clothes you wear, while its comfort never disappears.
Pay for glass, not shutters. In professional cameras, great lenses endure, while the camera bodies change and go obsolete.

(I included the two photography ones because I’m related to multiple professional and semi-professional photographers, so I’m at least a bit knowledgeable in the field.)

These simple rules of thumb for purchases can be a great starting point for the research that you do when deciding what products to buy. They don’t point you straight to a product, per se, but they tell you which features are more likely to give you value for your dollar when you do make that purchase.

Over the past few weeks, I’ve been accumulating a number of these “rules of thumb” for more common household purchases. Here’s that list – hope it helps.

Pay for location, not square footage. A home in a good location will always retain its value. On the other hand, lots of square footage mostly means room to store stuff you don’t really need, you often have to be far from your job in order to have a huge house, and there are tons of empty McMansions sitting in the suburbs that are unable to be resold due to the housing glut.

Pay for utility, not quantity. If you’re buying kitchen implements, you’re better off buying basic tools that really work for a lot of things rather than tons of tools for specific things. You don’t need more than three knives (a paring knife, a chef’s knife, and a bread knife, along with a honing steel). You don’t need more than two pots, one saucepan, and one skillet – you can make about every dish imaginable in those four things because they’re so flexible.

Pay for hardware, not software. Most of the applications that people need for their home computer have quality free versions online. Need Office? Use OpenOffice or Google Docs. Image editing? FotoFlexer (and other such tools) do almost anything a home user would want to do.

Pay for the beans, not the coffeepot. My wife uses a cheap old coffee pot that she’s had since we were in college. The coffee you put into the pot makes all the difference, not the pot itself, according to her. A $200 coffee pot with bad coffee beans will still make you a poor drink.

Pay for speed, not size. If you’re buying a new computer and are comparing hard drives, get the faster one rather than the bigger one for home use, as it’ll speed up your computer substantially and you don’t really need another 80 GB. The fastest ones are the solid state drives, but if you’re buying a regular hard drive, get the one with the fastest RPMs. Get the smaller drive, too. You can always buy a far less expensive external USB drive for file storage if you manage to fill up your main drive.

Pay for reference, not entertainment. I only buy a book if I know I’m going to return to it again and again. For books that don’t fall into that category, I check them out at the library or swap them online.

Pay for energy efficiency, not features. When you’re buying a large appliance, the energy efficiency of the appliance outweighs virtually every feature because of the enormous amount of energy used by the appliance. For example, an older refrigerator can use as much as 1,400 kWh of energy per year, which adds up (at $0.12 per kWh) to $168 a year. A newer refrigerator may use as little as 200 kWh of energy per year, which adds up to $24 per year, a savings of $144 per year. Over a twenty year lifespan, that’s $2,880 in savings, far more than the cost of the fridge itself. Similar calculations are true for other large appliances, such as washers, dryers, furnaces, and A/C units.

Pay for freshness, not convenience. Paying for convenience with food is usually a very poor bargain and often results in either bland food or food loaded down with so many chemicals and artificial flavorings and preservatives that you don’t even want to imagine what it’s doing to you inside. Buy fresh foods, take them home, wash them, and prepare them simply. Knowing how to use a slow cooker in conjunction with fresh foods is a life changer, because you still have the convenience of coming home to a hot meal that’s ready to serve, only it’s made with fresh and naturally flavorful ingredients, without lots of preservatives and the like, and for a lower cost.

To close, here are two bonus tips that can be used to evaluate even broader choices in your life.

Pay for experiences, not things. A thing is something that takes up space in your house. An experience changes who you are as a person. One cannot be replaced, while the other can easily be replaced. Give me junky furniture and a lifetime of memories.

Pay for what you need, not what you want. This is the best tip of all. Figure out your actual needs before you ever go shopping for any item, then seek out the least expensive option that matches your needs. Your wants mostly just cost you money without giving you anything you need.

The post 15 Shopping Rules of Thumb appeared first on The Simple Dollar.

What do I mean by that? Characters are often very deliberate about using certain products, like the repeated iPod use throughout the film. The camera angles are chosen to show the logos on various products, like the Hewlett-Packard logos all over the place. Many scenes use giant corporate logos as backdrops, like key discussions that take place in front of a giant Burger King logo.

Quite often, these product placements occur in scenes that highlight a particular emotion.

An intense, exciting scene might highlight a particular product that the maker wants you to associate excitement with, like the individual getting revved up while listening to his iPod.

A sentimental scene might highlight another product that a marketer wants you to feel sentimental about, like the family using an HP computer (ridiculously marked with the HP logo on the monitor) to teleconference with a member that’s far away.

One scene might highlight attractive people (like Megan Fox) eating and include an enormous Burger King logo in the background. If we’re even slightly hungry, our hunger might be triggered and we also see someone being satisfied with food… and there’s a big logo there to remind us who made it happen!

Here’s the truth: it’s not the direct advertisements that infest television and movie watching. It’s the indirect stuff, like this, that is incorporated directly into the program I’m viewing. The emotional tint of a well-crafted movie scene ends with me staring directly at a corporate logo with an emotion created by that movie running through my head and coursing through my veins. Even if it’s not on a conscious level, I make some association of that emotion – excitement, sentiment, humor, joy – with the product or product logo I’m being shown.

That association pops up when I’m making a purchasing decision. Should I buy this item right now? If I’m hungry and I see the Burger King logo, did my hunger not take a little bit more of a bounce?

I don’t mind the use of real-world products in movies or television. The problem comes in when the movies and television programs hit certain emotional chords with the viewer, then proceed to match that emotion with logos and products. Remind me again – am I watching a television program or an advertisement? I’m also not stating that people should never watch television or movies, either.

Instead, I offer the following suggestions.

Be conscious of product placement. If you notice them doing this, then it becomes at least somewhat less effective. You’ll laugh at the product placement and they won’t get the effect that they want from it.

Don’t spend idle time watching television. If you’re sitting around with some time to burn, do something else. Read a book. Do a sudoku puzzle. Get a little bit of exercise. Practice a musical instrument. Meditate. Take a nap. Put on some music and dance. There’s nothing wrong with watching a movie or a television program if you’ve been planning on watching it, but if you’re just idly web surfing, you’re not really thinking about what you’re watching, and that’s a perfect time for product placement to strike.

Use conscious buying techniques. Before you buy anything, wait ten seconds and think about why you’re buying that item. If it’s an item that costs more than $20, give yourself thirty days to think it over (unless it’s an emergency).

Understand why you like a particular brand. “I just do” doesn’t cut it, nor does “All my friends do.” If you can’t articulate why you like a particular brand or product, then there’s likely no reason for it other than marketing.

In the end, the best solution for being successful in the modern world is to be thoughtful about what you’re doing. The more thought and consideration you put into your actions, the more likely you are to find success.

The post Some Thoughts on Product Placement appeared first on The Simple Dollar.

The top chef’s knife is a loose one that I picked up for $0.50 or so at a yard sale more than a decade ago – I’m unsure even what type it is. It’s serviceable, but it loses its edge fairly quickly.

The middle knife is from a Henckels kitchen knife set given to my wife and I as a wedding gift. It works extremely well for most cutting applications and holds its edge for quite a long time without honing. A similar knife retails on Amazon for $47.99.

The bottom knife is a Global chef’s knife, which I received as a Christmas present in 2008. It’s the sharpest knife (post-sharpening), holds an edge almost as long as the Henckels knife, and fits the best in my hand. It’s the best knife I own. It lists on Amazon for $115, currently.

If the Global knife is the best knife and I gave it a score of 100, what kind of score would I give the other ones? I’d give the Henckels a score somewhere around a 92 and I’d give the old knife a score of around 70, with 0 being the worst cutting experience I’ve ever had in the kitchen with a knife.

Now, here’s the big question: if I can get that 70 knife for $0.50, is that 100 knife really worth $115? In other words, if you have something perfectly serviceable for a very low price, is it ever worthwhile to spend significantly more to get a top quality, highly reliable version of the item?

Here are my thoughts on the subject.

Free (or nearly free) trumps everything. In the scenario above, I would go for the $0.50 knife every single time if I didn’t have a chef’s knife and needed one. That’s because the worst case scenario is that you’re out fifty cents. That’s the worst possible thing that can happen. On the flip side, the best case scenario is that you have a knife that meets your needs for many years to come. Given that the best case is very, very good and the worst case isn’t much of an issue, that would be the knife of my choosing. Free (or nearly free) means that the worst case scenario for an item you need is not bad at all.

If you can’t truly articulate the difference between a low cost item and a high cost one (and claims on the packaging or by the salesperson don’t count) then stick with the low cost version. Again, you have to take a look at the worst case scenario for each item. The worst case scenario for the high cost item is far worse than the worst case scenario for the low cost item, but they have similar best case scenarios. If you do not know specifics about the item, stick with the scenarios.

Have some domain knowledge. The more knowledge you have of the items at hand and their usage, the better buying decisions you can make. Don’t just buy a tire and forget about it. Note what tires you’ve purchased and compare how they grip and hold air compared to other tires. Know what suits your needs and understand fully the terminology used when describing a particular item.

Research, research, research. Whenever you spend money, you’re spending the fruits of your labor. The more you know about a purchase, the more effectively you can use your money. It’s always key to remember that the money you have is directly connected to the work you do. If you work at a minimum wage job, every $7 you spend (roughly) equates to an hour of your work. If you can save $50 by researching a purchase for 2 hours, that is very much worth your while. If that same research leads you to buying a much better item at a similar price or a vastly superior one by paying a bit more, then that research time was still well worth it.

Never go into debt for a consumer item. If you don’t have enough money to afford the high end version, then don’t buy the high end version. Buy the basic item that you actually need. Don’t use credit to facilitate purchases that you couldn’t simply make on your own. You’re simply adding a huge additional cost to that high end item, one that alters the best case and worst case scenarios for each purchase significantly. The only debts worth incurring are for your education and possibly for your home.

If you do truly understand the difference and you can afford to pay cash for the better item, then by all means do so. If you can afford the better item without negatively impacting other aspects of your life and you truly understand why the item is better (and, more importantly, why the item is better for you), then purchase the better item.

I think all of this can be tied together with a note about my own experiences with piano playing.

I practice a bit almost every day. I use an old electronic keyboard that sounds a little “off” to me – the reviews of it often chide the sound quality. However, the price – free – is something that I really can’t argue with.

I’ve often looked at electronic pianos, and some of them are quite good. However, the good ones often have prices well into the thousands of dollars.

I know why I would want such an item, and I know from experience and extensive research that such an item would be reliable and of a very high quality. I’ve even been to music shops and tried a few of them.

I haven’t bought one, though. The best case scenario still involves me plopping down a few thousand dollars, and that makes the best case scenario simply not add up to enough to really compare to just playing on that free one in the basement. It’s good enough for me.

The post Cost and Quality: Best and Worst Case Scenarios appeared first on The Simple Dollar.

One of the things she picked up for me was a quart of soy egg nog. On my first day there, I tried it… and I liked it! It was quite tasty and it was something I could essentially enjoy without violating my current doctor-ordered diet.

Every day, I’d consider having another glass of it. Every day, though, I’d think “well, if I drink it all now, I won’t have any later in the week, so I’ll wait to enjoy it later.”

Sure enough, the last day of our visit came. Sure enough, there were so many things going on that the egg nog didn’t even cross my mind.

Sure enough, the rest of that egg nog is now sitting in their refrigerator, several hours away, at a house where the occupants likely won’t drink it.

In other words, my desire to conserve that egg nogd meant that much of the egg nog simply went to waste.

This phenomenon pops up all the time with regards to shopping and personal finance. If you buy ten pounds of apples in bulk because the price is right, you need to use them quickly before they begin to rot. If you buy a large container of honey, you need to use it before it crystallizes.

On a straightforward level, good personal finance is about conserving things. You conserve your money. You conserve your splurges. You reuse and recycle things, finding second uses for them. You buy secondhand items, allowing these items to have a longer lifespan.

Yet, when you do this too diligently, you can often waste things – like the egg nog this past week.

After thinking about it a few times the past few days, I’ve come to a few conclusions about this.

First, if you have a desire to use something that can go bad, use it. If that egg nog is sitting in the fridge and you want a glass, have a glass of it. Don’t wait unless you’re waiting for a very specific event – for example, you might be waiting to specifically share a glass with someone who will be there later.

Second, the real decision with regards to being financially conservative with such disposable items happens at the store. Your choice with regards to the egg nog doesn’t happen at home. It happens in the store when you’re deciding whether to buy it. The same philosophy goes with regards to virtually any item you might pick up.

Once you have that item at home, use it. Use it when you want to use it. Use it until it’s gone, then make a decision about whether to replace it.

If you’re preparing a bowl of oatmeal and think to yourself, “I could put honey in this… but I should save that honey,” don’t. Use the honey. If you “save” the honey for some unspecified future event, you’re just increasing the likelihood of finding yourself with honey that’s crystallized into a giant brick in a month or two.

If you’re wanting a drink and think to yourself, “I could use some egg nog right now… but I should wait,” don’t. If you wait and then forget about it, you’ll find yourself with rancid egg nog – and wasted money.

Your decision to buy such treats should happen at the store – or, ideally, before you even go to the store, when you’re assembling your grocery list.

When you make the choice to write the words “egg nog” on your list, the decision of whether or not to have a cup of it in your kitchen a few days later should already be made for you. Otherwise, you’re spending money on items that will go to waste.

The post The Egg Nog Dilemma appeared first on The Simple Dollar.

For those not from the United States, Thanksgiving is a national holiday that occurs on the fourth Thursday in November, roughly one month before Christmas. “Black Friday” is the nickname given to the day after Thanksgiving, which many people take off of work in order to travel and enjoy time with family. Because so many people are off of work and the holiday season is approaching, that day is often seen as the “kickoff” for Christmas shopping and many retailers offer steep discounts to get their holiday season sales numbers off in the right direction.

Several times a day, I have an email from a PR firm telling me all about the latest Black Friday deals. As I browse across the web, I see countless articles telling me all about the things on sale on Black Friday.

And, frankly, I don’t care all that much.

Yes, I utilize Black Friday for part of my holiday shopping, but I do it in a way that’s essentially the “reverse” of all of this.

My first step in the process actually started long before now. I drew up my Christmas list several months ago and put some thought into what each person would like for a Christmas gift. What sorts of things would this person actually like? I actually wound up making a small item list for each person on my list.

At that point, I started watching for sales, making homemade gifts, and slowly eliminating (or partially eliminating) people from my list. If I had a complete gift for them, I crossed them off. If I had a partial gift for them, I eliminated some of the items on their list.

At this point in the year, I only have a handful of potential things that I might actually buy, which is where Black Friday comes in.

Starting with my list, I scan the Black Friday ads using online services like BlackFriday.com.

An example: someone on my Christmas list has a very high likelihood of receiving the Toy Story 3 DVD/Blu-ray combo as a gift this year. Knowing that, I start searching the Black Friday ads for Toy Story 3 until I find that some retailers are selling it for as low as $9 on that day.

Another example: I’m helping someone look for an Amazon Kindle as a Christmas gift, an item I might be contributing a small amount to. Thus, I can use Black Friday ads in advance to find which store is going to have the best bargain on a Kindle, saving $40 or maybe even more.

This doesn’t work for everything, of course, but it works for enough items that I’ll likely save a significant amount of money on Black Friday, either out in the stores or on the ‘net.

Why do it this way? There are several reasons.

First, by starting with the list, I’m thinking of the person first. If I look at a Black Friday ad without any goal in mind, I’m quite prone to convincing myself that someone on my list will want “sale item X,” which they may or may not want at all. By doing it the other way around, I’m ensuring my list contains items that will actually bring joy to the recipient, not just ways to make Black Friday fun for me.

Second, since I have a list of items already, using the Black Friday flyers in this way is basically the same thrifty technique I use for weekly grocery shopping. I have a list, I hit the flyers, I develop a plan, and then I shop – with a shopping list in hand, of course. This process works because it makes you do all of the decision making (or almost all of it) outside the store before you even go inside and be tempted by the sales and displays and marketing.

Here’s a tip for you all: make your Christmas list before you even look at a Black Friday ad. Come up with gift ideas you think people will really like – or even several ideas per person. Then, hit the ads and see if you can find any matches which will enable you to save some cash this holiday season.

The post My “Reverse” Black Friday appeared first on The Simple Dollar.

How I’ve Used My iPod Touch in the Past
As I mentioned, I originally received one as a gift in 2008. I used the item extensively (averaging multiple hours a day, I’d bet) over the past two years. Here’s a list of the nine significant uses I’ve found for the item (in no particular order).

1. I’ve used it as a pocket notebook.
2. I’ve used it as a podcast and music player during thrice-weekly exercise.
3. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
4. I’ve used it to check email and reply to it.
5. I’ve used it to entertain my children, particularly on car trips.
6. I’ve used it for music in the car on long car trips.
7. I’ve used it to quickly record lots of small pieces of data here and there.
8. I’ve used it to check some internet services (Facebook, Twitter).
9. I’ve used it to keep my listened and unlistened podcasts synchronised.

Are These Uses Now Met By Other Devices?
Now that I’m in a situation where I need to replace the item, I need to ask myself if each of these significant uses is met by another device at this point. So, let’s walk through each of them.

1. I’ve used it as a pocket notebook.
I often use the free program Evernote to jot down notes using the iPod Touch. However, I do find myself alternating between using Evernote and simply using a pocket notebook, mostly because the input on the pocket notebook is so much more efficient (though I do sometimes end up re-recording the note in Evernote when I’m at my computer, it is very easy to type it in). Moving just to a pocket notebook isn’t a major loss to me.

2. I’ve used it as a podcast and music player during thrice-weekly exercise.
This is an existing need that isn’t replaced by anything I have.

3. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
This is an existing need that isn’t replaced by anything I have.

4. I’ve used it to check email and reply to it.
I can now do this on my cell phone with similar efficiency to the iPod Touch.

5. I’ve used it to entertain my children, particularly on car trips.
The “entertainment” that it used to provide was the ability to watch a children’s movie on it, like WALL-E, on a long road trip. For Christmas this past year, we received an in-car DVD player as a gift, which pretty much eliminates the entertainment aspects of the iPod Touch.

6. I’ve used it for music and podcasts in the car on long car trips.
Other than the dodginess of radio, this is an existing need that isn’t replaced by anything I have.

7. I’ve used it to quickly record lots of small pieces of data here and there.
This is a similar situation to the pocket notebook. It’s far easier in the moment to just record the information on my pocket notebook, but I have the additional burden of often having to re-record it. I think moving fully back to a pocket notebook isn’t a major loss.

8. I’ve used it to check some internet services (Facebook, Twitter).
I can now do this on my cell phone with similar efficiency to the iPod Touch.

9. I’ve used it to keep my listened and unlistened podcasts synchronised.
This is an existing (minor) need that isn’t replaced by anything I have.

What Are My Usage Needs for an iPod Touch Replacement?
This leaves the following factors as features that I want a replacement for.

1. I’ve used it as a podcast and music player during thrice-weekly exercise.
2. I’ve used it as an exercise tracker as it records my distance and pace via Nike+.
3. I’ve used it for music and podcasts in the car on long car trips.
4. I’ve used it to keep my listened and unlistened podcasts synchronised.

In other words, I’m looking for a device (or devices) that can do the above things.

It’s easy to find a device that handles 1 and 3 – pretty much any mp3 player will do that. The trick comes in with the other options.

I could simply buy a good pedometer or exercise watch to take care of the second option to some extent.

The fourth choice is very tricky. From what I’ve seen, the only devices that manage to pull this off well are iPods and Microsoft’s Zune device.

So, to put it simply, I can buy a low-end device (like the Sansa) that will handle just needs 1 and 3, and I can pick up a good pedometer ($30) to somewhat handle need 2 or a good exercise watch ($100 or so) to really handle need 2. This leaves the fourth need in the realm of some sort of additional manual management, which can be a pain.

Also, I could buy a Zune for $95 that would handle all but the exercise uses. Or, I could buy an iPod Nano for $135 that would handle all four needs in one device.

Of course, I could spend $200 on the iPod Touch replacement, which would also nail everything but mostly give me redundant features compared to the Nano and the items I already have.

My Decision
I picked up a Nano – and it works like a charm. I saved $65 over just replacing my Touch and I’m not missing out on any important needs.

Why So Much Effort?
In truth, this thought process took much less time than it did for me to write it – and probably for you to read it. I spent, all told, about 45 minutes actively evaluating what my real needs and wants were and what the various options were.

The easy choice would have been to just directly replace the Touch. However, spending some time really looking at my needs added up to a $65 savings, money that can certainly be well-used elsewhere in my life.

Why write it out in such detail? It shows, quite clearly, the value of thinking about whether you actually have a real use for something, what those real uses are, and what you can buy that meets those real uses. I cut away the fat to show what I actually used the iPod Touch for, then I looked at what other things I have already take care of those needs, then I just looked at the factors that were left. Doing that helped me to buy a lower-cost player, a decision that saved me $65 over just buying without thinking.

That’s what I call a win.

The post Degrees of Want: Revisiting the iPod Touch Replacement appeared first on The Simple Dollar.

A few days ago, on a long walk across town, my long-used and long-abused iPod Touch finally bit the dust. I was holding it in my (slightly sweaty) hand and dropped it. When I picked it up, it wouldn’t boot. I took it home, called the Apple Store, and they offered to perform surgery on it. Before I took it in, I tried everything I could find online to fix it, to no avail. After examining it, the person at the Apple Store told me that the motherboard and the battery were both shot.

What’s next? Do I buy a replacement (getting 10% off by trading it in), do I find a very low-end mp3 player for something to listen to while I’m walking, or do I buy nothing at all?

Clearly, such an item is a “want” item. I will continue to survive just fine without such a device, as I had for many years before having it.

The real question is when does something you want elevate to the level of a worthwhile purchase?

I don’t think there’s an easy answer to that question, and I think different people are going to come to different conclusions. When I’m thinking about such a non-essential purchase, I ask myself the following questions.

What is my financial situation? Am I having difficulty making ends meet? Are there high-interest outstanding debts that I should be paying down?

Do I know I’ll actually use this item a great deal? Have I used a similar item a lot in the past? Is this item a direct upgrade or replacement for something that’s in heavy use?

Do I have that much money available in my “free spending” account? By this, I’m referring to the fact that my wife and I each have small amounts of money we’ve each agreed that we can spend freely each month. Can I simply buy this item out of that “free spending” money? Is the item that urgent that I can’t wait for a while to replace it (assuming I don’t have enough “free spending” money)?

Is there a lower cost alternative to a direct replacement? Do I really only use a subset of features on the item, in which case a lower-cost alternative will do the trick?

After evaluating all of these questions, I came to a few conclusions about this potential purchase.

First, the thing I’m really going to miss is the ability to easily manage podcasts and listen to them while I walk. I listen to a fist full of podcasts and the thing I value most about my iPod Touch is that it helps me to listen to my unlistened ones easily and works with iTunes to manage all of those subscriptions. Not only can I get lost in the podcast while walking (helping me get into shape), but I learn a great deal from all of the podcasts I listen to. Sometimes, I do also listen to music (it can help me set a walking tempo), but I listen to many hours of podcasts a week on this device and that’s what I would miss without it.

Second, many of the other features are either relatively unimportant to me or are replaced by other things. I can carry a paper notebook in my pocket to handle notes. I have other things (like my laptop) to help entertain the kids in the car. I really don’t need any device for these things.

What’s my solution, then? I’m purchasing a lower-end mp3 player. I’m looking at a lot of options at the moment before I settle on one. Some of the options I’m considering include a SanDisk Sansa 2GB ($40; a lower-end choice), a Sony Digital Walkman ($75, a more feature-rich choice), and even an iPod Nano ($130, has every feature related to walking and listening I could think of).

While I haven’t made a firm choice there, I have decided not to replace the iPod Touch, which in itself will save me hundreds compared to any of the above choices.

It all comes down to understanding the degrees of importance of the things you want.

The post Degrees of Want appeared first on The Simple Dollar.

Fire up your television. Fast forward through the commercials (I know many of you can). Think about the flickering images that still made it through. Now, watch the program for one minute and see how many products you can identify in the minute of the show you’re watching.

When was the last time you heard something positive about any politician? Positive campaign ads barely exist. Is it at all surprising that people think everyone in Washington is a dysfunctional crook when almost everything we hear about them is a negative ad or a fear-based “news” report?

Every time you glimpse a product placement or advertisement, even if your attention isn’t fully on it, you subconsciously gain a bit of emotional connection with the item.

Now, these subconscious connections are weak, to be sure, but they do exist. Walk down the laundry detergent aisle at your grocery store and notice the different brands. You’ll have different reactions to different brands, whether or not you’ve ever paid attention to their ads or not.

It’s these subconscious connections that make unplanned shopping dangerous. When we shop without planning, we’re no longer shopping based on external facts. We’re shopping based on internal responses, and all of those subconscious connections play a role.

Conscious connections, built through rational thought, are much stronger. I see an ad for a company or product I don’t like and it doesn’t help their image. I see an ad for a product I do like and it makes no difference, either. Negative ads against politicians I support make me not like the other candidate.

Most importantly, conscious connections can be informed through facts, unbiased reviews, and advance planning. A well-prepared grocery list, for example, is full of conscious connections – knowledge of what items you actually need, knowledge of what items are on sale in the store flyer, knowledge of which items are the “best buys” in Consumer Reports, and so on.

The more we rely on fact-based conscious connections and the less we rely on subconscious connections, the better. We make smarter choices that provide a much greater “bang for the buck” when we shop. We end up with products we actually have a use for. Better yet, we support products that do things the right way, however we define that (lowest prices, ethical business, and so on), and our dollars directly influence the marketplace.

How can you ensure you’re using more conscious connections and fewer subsconscious connections when you shop?

Use the ten second rule Whenever you consider buying an item impulsively, hold it in your hands and think about it consciously for ten seconds. Why are you buying this?

Use the thirty day rule Whenever you’re considering a major purchase (more than $20, say), wait thirty days before buying it. During that period, do additional research about the item and ask yourself whether you really have a use for this item.

Use shopping lists Make a shopping list before you enter any store. Prepare that list at home based on the things you actually need and the things you’ve figured out that you want. Do some research on that list, too, utilizing the internet and other sources to figure out what the best values and the top quality items are.

Think about your mistakes Don’t beat yourself up when you make a purchasing error. Instead, think about why you did that. What was the reason you made this poor choice? Then, focus on eradicating the reasons for that mistake so that the mistake doesn’t occur again.

The post Subconscious Connections appeared first on The Simple Dollar.

I decided to catalogue a few of these wonderful meaningless words that people pay for.

New The “cult of the new” is an expensive one that has a lot of adherents. New products are usually priced quite highly – and usually attract buyers who are simply looking for a “new” experience. At the same time, of course, “new” products are ones that have not stood the test of time. They might be good – they might be awful. For my dollar, I think I’ll stick with a Consumer Reports recommendation and pick up a product that I know works that doesn’t have that “new” premium price.

Now 28% better! Whenever you see a comparison like this, ask yourself two things: in what way is it better and how is that “better” actually measured? If you read this type of statement and think for a moment, you realize that it could mean anything at all – better blue color in the liquid laundry detergent and so on. Unless the product is precisely stating what the improvement is, such a statement doesn’t have any meaning – or value – at all.

Hypoallergenic It’s a nice-sounding term that doesn’t mean a thing. Why? There is no official standard for what the word means. There isn’t even a voluntary standard that defines the term. It does not mean that the product won’t cause an allergic reaction. It might, at best, mean that the marketers think that the stuff in the product probably won’t cause an allergic reaction – which really doesn’t mean much at all, does it?

Fragrance-free Wouldn’t it be nice if “fragrance free” actually meant that the product doesn’t contain any fragrance? In truth, the product is usually “smell-free” or some attempt at it. Instead of not including a fragrance, what often happens is that a finished product with a fragrance in it has something added to eliminate or mask the smell. If it’s done well enough, marketers will slap this label on it – but if you’re allergic to fragrances, it really doesn’t mean much at all.

All natural The word “natural” can basically mean anything. There are no standards at all for what this word means. Try this: compare a “natural” product to a similar one that doesn’t have “natural” written on the label and see what exactly is different in the ingredients list. I’ll go ahead and tell you: not much is different.

Never tested on animals This one actually is true on the shallow surface: the product hasn’t been tested on animals. However, that statement is saying nothing at all about the ingredients that make up the product – most of those were likely tested on animals before they were approved for wide use. There are almost no ingredients in cosmetics and medicines for human use that weren’t already tested on animals.

Best-of-breed Such statements usually imply that the product is the best among its competitors. However, when you’re allowing the company to define who the competition is, they usually define that competition as narrowly as possible: “dog foods that use these 25 ingredients and these 6 coloring agents” or something to that effect. It’s easy to be best-of-breed when you’re the only one in the group.

Organic A caveat: when you actually see the USDA Organic label on food products, that label has specific meaning: the item comes from (or the ingredients come from) a farm that lives up to the USDA Organic standards for plant and animal treatment, which encompasses quite a few things – no hormones, no pesticides, and so on. However, the word “organic” is often used in contexts that have nothing to do with farms or the USDA Organic certification – it’s just used as a buzzword for a product that’s trying to sell itself as being “all natural,” as mentioned above.

Superfood This is yet another term without any sort of legal definition. Thus, it’s ofen applied to all kinds of things to encourage sales – particularly high-priced fruits, vegetables, juices, and vitamins. Guess what? A well-balanced diet with lots of fruits and vegetables of all kinds will take care of your nutrition needs without spending extra money on the exotic semi-bogus “superfood” of the week.

Nontoxic Again, this is a term that has no standard definition and no verification process to ensure that the product meets that non-existent definition. If a manufacturer thinks the product probably won’t kill you if you eat it and doesn’t contain anything that’s blatantly known as a toxic chemical, they can put a “nontoxic” label on it. But if it’s not food, why are you eating it anyway?

The post Pay More for These Meaningless Words and Phrases! appeared first on The Simple Dollar.

If I’m curious as to whether a restaurant is worth trying out or not, I don’t consult sites like Yelp – I ask a friend. That way, I can hold the person accountable.

Accountable is the key word here. As time has gone on, I have come to value the accountability in a review or a recommendation very highly – and this has significantly altered how I make my purchasing decisions.

Why is accountability important? If there is no drawback to a person giving you misinformation and no benefit to them giving you good information, then that person is working strictly from their own agenda.

For example, take a restaurant review on a site like Yelp. If a competitor goes on the site and wants to trash that restaurant, they can toss up a poor review under an assumed name and no one is the wiser. There is no drawback to the competitor doing that – he doesn’t care about the reputation of the assumed name. There is no benefit in an honest review, either – there is only benefit in a negative review, which will drive customers away from the reviewed restaurant and (possibly) to the competitor’s restaurant.

On the other hand, if that person chose to use his or her actual name, there’s a lot more at stake. Honest reviews have the ability to help his business, while dishonest reviews can only hurt the business. The reviewer’s integrity is at stake here, and that integrity can be a help – or, if he chooses to post dishonest and biased material, it can hurt him, too.

Because of the accountability issue, reviews and recommendations behind a screen of anonymity have far less value than reviews and recommendations given by a real person with an identifiable track record.

Here’s how I decide which reviews and recommendations to trust, using the filter of accountability.

Personal friends The first place I look for recommendations is from friends, family, and other close acquaintances and associates. They have a vested interest in providing trustworthy information because they directly care about me and also know that my trust in them will drop if they provide bogus information.

Known reviewers Similarly, I tend to trust reviewers that I don’t personally know if they’re willing to put their true name out there and their career lies on the professional reputation of that name. Yes, that’s not 100% foolproof, but I know that people who do such a thing rely on their good name to find future work and thus there is a serious cost to them in providing bogus information. Consumer Reports comes to mind here, as do a big handful of the better blogs out there.

Major media sources I have some trust for major media reviewers, but that trust isn’t as strong as it is for independent reviewers with a reputation to uphold or personal friends. The reason is simply that many major media sources have agendas to promote and products from other branches of the media company to sell. Reviewers might be fully independent in what they write, or they might be told to “take it easy” on a bad product or “talk up” a mediocre-to-good product if it’s a product made by the company or an advertiser with the company. Thus, my trust in such reviews is lower.

An example of the distinction between “independent reviewer” and a major media source: I tend to trust movie reviews by Roger Ebert more than I do reviews by CNN’s website. For one, Ebert has a long reputation of great reviews and because of his reviews (and his efforts in building a reputation), he is fairly independent of bias. He has much more to lose by shilling for a bad film than he could gain in the payoff. On the other hand, a nearly-anonymous review over at CNN has less to lose by an unfairly positive review (and more to gain) than Ebert. I might not agree with Ebert’s reviews, but I can rely much more on a sense that he’s giving me his true take on the film than I can rely on other sources. He’s built that reputation on years and years and years of solid reviews.

Data from the manufacturer What are the specifications of the item? What is the warranty like? The raw, true numbers from the manufacturer – not reviews or anything else – play a key part in deciding which item to buy. Yes, many items seem identical or very similar from this data, but such information can also help you quickly toss away items that don’t meet your needs, saving you time when you’re seeking other reviews or shopping around for the best price.

These guidelines for purchasing a product all have accountability in common. Without it, a review isn’t worth very much because you don’t know anything about the agenda of the person providing that review.

The post Buying with Confidence: Reviews, Trust, and Accountability appeared first on The Simple Dollar.

Think about it for a minute. What reasons do you have for shopping at one store over another? Is it purely the prices? What about the location – is it because it’s close to your home? Cleanliness (like my Aldi story a while back)? Store organization? Convenience? Shopper rewards programs? How they treat their employees? How their company behaves? Availability of certain specific goods? Cost to get in the door (a la Costco and Sam’s Club and B.J.’s)?

All of these (and more) are factors when you choose where to shop. Some stores are going to excel in one area or another and do poorly in other areas. A store that excels on prices will often tank in other areas, like employee treatment (like Wal-Mart). A store that excels on prices and employee treatment fails on cost of admission and organization (like Costco). Experiences in some of these areas will also vary from place to place.

My choice of store centers around a handful of factors. At minimum, a store has to have a certain level of cleanliness or I’ll turn around and walk out.

I won’t bother to go more than about three miles farther than the nearest grocery store to shop, but that rule includes Hy-Vee, Wal-Mart Supercenter, Aldi, Fareway, Dahl’s, Sam’s Club, Super Target, and Cub Foods, so there’s plenty of choice in that range.

I tend to prefer stores where it’s easy to find what I want – the more bad experiences I have wandering around trying to find something, the less likely I am to come back, even if the prices are great. After that, prices rule, in my book.

I’m not too worried about the shopper’s reward policies or their corporate behavior, and the cost of entry issue mostly comes down to “do I save money over the long run.”

What am I left with? I have a handful of stores I prefer to shop at (topped by Fareway) and another handful I’ll stop at for specific sales or specific items.

That’s great and all, but why am I writing about this?

First of all, the sticker price is rarely the bottom line. Almost always, if I strictly chase the absolute lowest price on an item, I end up costing myself more because of the additional costs.

For example, I won’t drive an extra ten miles (and spend that extra time) to save an extra dollar. The automobile wear-and-tear and maintenance costs will eat the savings and you’ll have spent a chunk of an hour chasing that imaginary dollar. I’ll happily spend an extra dollar at a different store to save me that twenty minutes and the wear on the car.

Second, a bit of planning trumps most of the other factors. Be patient on your staples, for example, and don’t be afraid to buy a lot of them when the right price comes along. This requires some planning, of course, but it allows you to buy the items you need from locations that are acceptable for you, ethically or otherwise.

An example: I would have to drive significant extra mileage to hit a CVS (around here, DrugTown is the most common drugstore chain) in order to take advantage of their bargains. What I’ve learned, though, is that patience, planning, and coupon use often trumps their bargains elsewhere, which enables me to not have to spend time and money traveling to CVS to get a “bargain.”

So what’s the best solution?

For me, it’s simply a matter of knowing and using a small handful of local stores, being patient, and hitting the good sales there hard.

Knowing two or three local stores makes them convenient and increases my ability to find things in those stores, making shopping trips faster (and time is money).

It also allows me to narrow my searches for sales. I only really pay attention to a few different grocery store flyers when planning my grocery shopping. I pay attention to coupons, but only in the sense of “this is a coupon for a staple, let’s clip it and see if it eventually matches a store sale.” This attitude saves a ton of time.

In a nutshell, patience trumps “super” bargains for me in that it saves me time and allows me to be choosy about where I shop so I can take advantage of the other aspects of grocery shopping (like convenience and being able to easily find items).

The post What You’re Buying When You Go to a Store appeared first on The Simple Dollar.

I use PaperBackSwap almost religiously. I love shopping at thrift stores and consignment shops. I look forward to yard sales and make a day out of “community yard sale day.”

Undeniably, though, there are drawbacks. Sure, you get a nice financial bargain, but no purchase is a perfect one. Whenever I talk about my love of buying things used, I hear from people about the problems of buying used – and some of the same topics come up time and time again.

Used stuff smells funny or isn’t clean
Used books can sometimes smell musty. Used clothes sometimes don’t seem perfectly clean. The same goes with used dishes and countless other items. The amazing thing, though, is that things can actually be cleaned really easily.

Take those used clothes home and give them a washing before you wear them. Take used dishes home with you and scrub them. It doesn’t take that long and isn’t that hard – really!

If an item smells musty, it’s probably got a high moisture content and a touch of mold. Sit it in front of a running fan for a while, then put it in a box with a dish of baking soda for a few days. The musty smell will be gone.

It takes too much time to buy used stuff
Compared to just running down to Wal-Mart and picking up whatever $3 shirts they have freshly imported from China, buying used does take more time than buying new. However, if you normally invest at least some time in the purchase of an item, it’s not particularly more time effective to go to a “name” retailer than it is to buy used.

The key is patience. It’s not a matter of taking too much time to find what you want when shopping used. It’s more a matter of convenience. If you expect that you’re going to go out for a day of shopping and come home with two outfits, period, then you’re missing the point of buying used.

The point of buying used is to slowly make a list of the stuff you need. “I sure could replace that lawnmower … and I do need some new shirts … and maybe I could use a few cheap books, too.” That’s the attitude to take when you’re shopping used.

I feel cheap buying used stuff
The good old cult of the new rears its ugly head again and again. The idea that something “new” is inherently better than something “used” is often wrong, particularly when you consider that the “used” item is for sale at a lower price than the new item.

I view it a bit differently. For me, a good used item often has most of its lifetime left, but you’re only paying a fraction of the cost for it. Used books. Used shirts. Used pants. Used dishes. Used Kitchen Aid stand mixers. Most of the time, when you find these items used, most of their useful life is ahead of them.

I have a used stand mixer in my kitchen that would have cost $600 if I had purchased it new. Many (possibly most – I’d have to count) of the shirts in my closet, the ones I don’t mind wearing to any event, were purchased used.

The idea that we need new, new, new is planted in our heads by marketers who have a product to sell, so they make new look as sexy as possible and used look as unsexy as possible. In truth, used merely means you’re finding a new home for something great.

Used stores and sales simply don’t have the specific item I need
If you’re shopping for something highly specific, you’re likely going to have to pay for that specificity. Specificity has a price. If you must have a blue striped shirt made with at least 80% cotton, you’re going to have to search more and likely have to pay more than if you simply need a new dress shirt for work.

This is particularly true when buying used. If you go to a used sale with a highly specific item in mind, you’re likely going to be disappointed. The more general your desire, the more likely you are to find success.

So instead of looking for a very specific shirt, simply go in with the mindset that you simply need a shirt that fits. Instead of looking for a specific kind of dish, go in with a general idea of dishes you might buy. You’re much more likely to find just what you need if you’re a little less specific in your desires.

Used stuff is junk; no one else wants it
Over the years, I’ve taken a lot of high quality items to thrift stores. I’ve taken barely-worn clothes that just didn’t fit but were missing tags and gift receipts. I’ve taken countless gifts such as dinner plates because they were gifted without receipts. I’ve taken piles of barely watched DVDs and barely listened CDs. I’ve taken children’s toys that our kids simply don’t play with – practically new items.

And so do other people.

There’s an awful lot of good stuff at secondhand stores. Yes, there’s some dreadful junk, too. But that’s easy enough to handle – just ignore it and look for stuff you actually want.

I have no interest in 95% of the junk at an average thrift sale. I also have no interest in 95% of the junk at your typical department store. So what’s the difference?

The post Five Challenges of Buying Used – and How to Overcome Them appeared first on The Simple Dollar.

For almost three years, I saved money for a replacement for my truck. For almost a full year, we shopped for a replacement while continuing to save and, during that year, we passed over several potential replacements before finally settling on a 2004 Honda Pilot. We wound up spending significantly less than we had saved, but we also spent the last several months with the truck in various states of unusability which severely hindered our travel potential.

For about two years, I have saved for a tablet computer of some sort to make note-taking (and sharing and organizing these notes) and mobile web browsing and communication easier – in other words, the bread and butter of my work. I made a feature list defining exactly what I wanted in this device and began saving (using SmartyPig), socking away a few dollars a week. I now have plenty to buy a tablet and there are several tablets on the market that have about 80% of the features I’m looking for at various price points and configurations. Do I pull the trigger on one of these or do I continue to wait for the “perfect” one while making my current research trips and travel more challenging than they could be?

A close friend of mine has plenty of money saved for a laptop. She has a desktop computer at home that’s ailing and she constantly mentions how a laptop would be useful to her. The problem is that she’ll make up her mind to buy one, wait a month or two, and notice a very similar one that costs $50 less and a better one that costs $50 more. So she convinces herself to wait to get the “best” one, but misses out on a lot of time where she could actually be using and enjoying that laptop.

In each case (with somewhat different specifics and resolutions), a purchase was carefully considered, but the challenge of figuring out exactly when to pull the trigger has been the challenge.

If you wait longer, the prices might come down somewhat and you might get more features, but you miss out on the use of the item during the intervening time.

With the Pilot purchase, for example, I was often unable to go to the library to do research I needed to do for my book during my normal working hours because my truck wasn’t working and we hadn’t decided on a replacement for it. This created a cost: I had to wait until Sarah was home with the one functioning vehicle we had and use it to go to the library, missing out on family time (which is my favorite time of the day and the most important time to me) and, more than once, skipping out on fun events. By waiting, we gained a better deal on the car but I lost family time.

With the tablet, I could happily go out right now and buy one that meets almost all of the needs I’ve described for myself – but not all of them. I could continue to wait until the “perfect” tablet comes out (which might happen in six months or might happen in five years), but during that waiting period, my note-taking process and research process remains much slower than it otherwise might be (I’ve used a tablet without owning one and I already know how much of a boost it can be when doing library research or taking notes in a meeting or catching up on reading materials on the road compared to other options). By waiting, I might get the “perfect” tablet, but I lose efficiency and quality of resarch now.

With the laptop, there’s a similar equation at work. She might get more “bang for the buck” by waiting, but she’s missing out on working on her thesis at the park today while watching her kids play.

For me, the balance of factors goes like this.

First, don’t buy such an item if you don’t have the money saved for it. If you can survive without it, even if it’s not convenient, don’t go into debt for it and don’t alter your retirement savings and future planning for it. Ideally, you can set up a savings plan for whatever goal you have in mind (SmartyPig works great for this) and build up to it over time.

Second, separate the “must-have” features from the “nice to have” features. With my tablet purchase, for example, I separated out the “must haves” from the “nice to haves” and realized that there are at least two tablets out there that have all of my “must haves” right now. With the Pilot purchase, we really failed to do this until we were almost a year into our search, but doing this opened our eyes to the Pilot that we now own. With the laptop, I’ve advised my friend to just identify what purposes she intends to use the laptop for and focus on getting the best bang for the buck that meets those needs.

Third, make sure those “must-have” features actually benefit your life and just aren’t idle desires. I had long wanted a tablet, but I didn’t really see how much it could help my productivity until I tried one out. The more I investigated, I began to understand what features would actually really bump up my productivity and which ones were idly fun. In other words, I began to separate legitimate needs from “that’s cool” desires that I really didn’t need to drop my hard-earned money on. Quite often (as with my desire to buy an Xbox 360), this “must have” versus “that’d be cool” separation talks me out of buying the item, so it’s also useful in making sure that you truly do need the item at all.

Finally, if you find an item that meets your “must-have” needs, buy it sooner rather than later. The “must-have” features are the ones that will actually improve your life. If you have the money in hand to purchase an item that meets those needs, do it now because you’ll actually improve your life by acquiring it. Shop around, of course, but if you’re simply sitting there waiting to save another 1% on a “better deal,” ask yourself what you’re losing now by waiting.

So will I buy a tablet? Sarah actually thinks I should and is encouraging me. I’m still hesitant, largely (I think) because I’ve become very hesitant about every purchase. We’ll see.

The post Pulling the Trigger appeared first on The Simple Dollar.

I’ve heard this question (or variations on it) many times. I have a very simple answer to it.

Whenever you buy anything, ask yourself why five times.

That seems really off the wall at first glance, but I firmly believe that no single piece of advice can match it in terms of getting your money under control.

I’ll show you what I mean through the lens of three purchases I considered recently.

I have about $1,000 saved up for a big personal purchase. I had been considering buying an iPad with it, even before the Apple announcement in January. I held one in my hands a couple days ago and considered it.
Why do you want an iPad? It’s an impressive gadget to hold in your hands. I can see myself using it and enjoying it.
Why would you use it? I can surf the web on it and read books on it and periodicals, too.
Why not just use your laptop? This is more portable.
Why not just use your iPod Touch? …
Why not just read a paperback? …

And, boom, my argument for buying an iPad goes down the chute. Sure, I can afford it, but why? It doesn’t fulfill a need in my life that isn’t already fulfilled by something else, or at least not in a compelling enough way to pay hundreds for it. Yes, I’ll probably buy a tablet computer someday, but not yet. It doesn’t actually fiil any sort of need.

I allow myself $30 a month to spend on books. I was in the bookstore recently, considering whether to pick up a copy of a novel I’ve been looking forward to for a long while.
Why do you want this novel instead of the books you already have? It offers a compelling story, but I do already have a few to read.
Why not just wait until it’s on sale or in paperback? I want to read it now!
Why not just ask for it on PaperBackSwap? It’ll take some time to get it there because it’s such a new release.
Why not just request it at the library? I could do that… it might take a few weeks.
Why not see if one of your friends has picked it up and swap with them when they finish? Even if the library doesn’t have it, one of them might.

And, boom, I’ve got several avenues for reading the book without spending the money. This keeps me from buying a lot of books because my actual need (to read) is fulfilled in other ways for much less cost.

Another example: I’m considering buying a one pound small wheel of Maytag blue cheese at the store.
Why are you buying this cheese? I want to make some good blue cheese burgers and I want some to sprinkle on my salad.
Why are you buying a pound for that? It’s cheaper per ounce.
Why would you let the eight or so ounces you won’t use go to waste? I, uh, wont?
Why not get feta for your salad because it’s cheaper and tastes more appropriate? Hmm… that seems reasonable.
Why not just get a four ounce piece of the blue cheese? …

And there you have it. Instead of buying the one pound chunk, I bought a four ounce chunk and some feta.

In each example, I came up with a result that either made me realize I didn’t really need the item at all or pushed me to another purchase that met my needs for a much lower cost.

The five whys push me there every time. The simple process of thinking through a purchase almost always leads me to a better solution that my first impulse points me to. This saves me money and prevents me from making impulsive, wasteful buys. Instead, I find I have plenty of money left for the things that really do matter in my life.

The post Why Do You Buy? appeared first on The Simple Dollar.