Frugality

You do not necessarily get what you pay for.   An earlier post “Cheap Wine is Fine” showed how wine enthusiasts rated wine higher when it had a higher price tag but in a blind taste test they ended up preferring the $5 wine over the $90 wine.  Now there is a similar example in which audiophiles couldn’t tell the difference between music passed through coat hangers from that which passed through pricey Monster cables. The full story is at the Consumerist.   This shows again that quality is often perceived rather than actual.

There probably is a general correlation between higher priced goods and higher quality but you shouldn’t assume that to be true.  Many times even if an item is higher quality it isn’t enough to make it worth the higher price.  Before spending more on an item in order to get higher quality determine if it truly is higher quality and if you actually need the higher quality.

My electric bill came this week and I can now evaluate the results of my heating experiment designed to reduce the cost of my natural gas bill.  My previous gas bill was $103 and the current one was only $69 for a savings of $34.  Quite surprisingly my use of an electric space heater only resulted in a $2 increase in my electric bill making my overall savings $32.  This is enough for me to consider the experiment a success.  The figures were probably helped a bit by the fact that I was gone on vacation for one week of the month.

In backpacking a common piece of advice to those who want to reduce their pack weight is to reduce the weight of their big three first.  The big three consists of  a backpack, sleeping bag, and shelter.  These are usually the three heaviest items one carries.  It makes sense to concentrate on reducing the weight of these first since this is where the greatest progress can be made.  It doesn’t make much sense to be drilling holes in your toothbrush when you’re carrying a backpack that is twice the weight you need.

The same concept can apply to personal finance.  There isn’t much point in washing out your plastic baggies and re-using them and then driving a luxury SUV that you can barely afford.  You need to identify what your big three are and then see what you can do to reduce them.  Most people would have housing and transportation as two of their largest expenses.  Taxes would probably also be in most people’s three biggest expenses but since you’re limited in how much you can reduce those you might want to concentrate on the next biggest expense. If you keep track of your expenses, which you should, then it will not be a problem to identify your largest expenses.

The old saying penny wise and pound foolish defines what this advice is meant to fix.  Of course once you are pound wise it is good to be penny wise as well.

My hack to increase my exercise and reduce my natural gas expense is to turn off my hot water heater.  With no hot water at home I have to go to the fitness center to take a shower.  Once I’m already at the fitness center I might as well exercise.  This solves the problem of getting motivated to exercise and will save me a little money as well.

My car has 223,000 miles and hasn’t had too many problems until recently.  I just replaced my clutch yesterday at a cost of $440.  This is on a car that is worth maybe $1000.  I’m not sure how much I should spend on the car at this point.  Before I took the car to the shop I told myself I wouldn’t spend more than $500 on it and the repair came pretty close to that.  There comes a point when it is better to quit repairing an old car and get a new(to you) one. I’m not sure what that point is but I do not plan on making any more repairs to my car.  I’m hoping to replace it with a van this summer so I’m not even sure that I should have fixed it now.  I could get by during school without a car if I had to.  I’d just prefer to get a little more use out of my car.