I’m not too good with setting budgets. I generally just try to save as much money as possible by finding deals or being honest with myself about whether or not I really need something. Most of the time it’s a want rather than a need. One area where I could use some help is in the dining department. We tend to eat at restaurants a lot on the weekends since we’re usually out and about. With a family of three, it’s becoming increasingly difficult to dine out for less than $25 after tax and tip. Even fast food adds up to around $15 per visit. So why do we continue to do it? It’s convenient, and we’re mostly just being lazy. We rationalize that it’s easier to eat out and it’s less time consuming than going home to cook and save some money. When you add up all that rationalizing, we’re looking at $100 to $200+ each month in dining expenses alone. That adds up to thousands of dollars each year. Yikes! If we could all stop trying to justify our purchases, just think how much money we could all save every year. Here are three mistakes I’ve noticed people make when making purchases:
Breaking Down a One-Time Expense into a Monthly Cost
Back when Sony Playstation didn’t charge a subscription fee to play games online, a lot of people said it was an advantage over the cost of Microsoft’s XBOX Live (XBL) service, which has an MSRP of $60 for a year-long subscription. On gamer forums, many people defended and justified the cost of XBL by saying, “It’s only $5/month. If you can’t afford that, then you shouldn’t be playing games online.” The only problem is that you can’t subscribe to XBL and literally pay $5 each month. The only monthly subscription option for XBL is $10. So you either pay in full or pay a smaller amount each month (but more in the long run).
Not Thinking About the Actual Dollars that Could be Saved
We often ask ourselves, “Should we dine out, or go home and save money?” That’s when the rationalizing starts. We talk about how late it is, or how long it will take to drive home and cook. Then we use our daughter as justification. “She needs to eat sooner than later.” So we dine out. Clearly the concept of saving money wasn’t enough to entice us to go home. What helps us is to think about how much we could potentially be spending. Now we ask ourselves, “Should we dine out, or go home and save $25?” Having an actual dollar amount in mind can be a lot more powerful. When you’re out shopping, you can see the cost of goods. We don’t think about it with food because the price isn’t staring us in the face when we’re making the decision.
UPDATE: After I wrote the previous paragraph, I found out that it’s just me who hasn’t been thinking about the actual dollars. I talked to my wife about this and she said, “You haven’t been doing that?” I told her I hadn’t and if she was, why was she still letting us spend the money? She said, “I was hungry.” Maybe I should rename this section to, “Not Being on the Same Page as Your Spouse.”
Buying More to “Save” More
You know the deal. Spend $50 and get $10 off, or something like that. There are two instances I can think of where it makes sense to buy more.
- You’re just a handful of dollars shy of the spending threshold.
- The cost of your items is already equal to the cost you would pay after the discount. In this case, it’s $40. You might as well go grab $10 more worth of clothes since you’ll be paying $40 regardless.
I’ve seen people go out of their way to find more stuff so they can “take advantage” of the promotion. If you only need to spend $30, then spend $30. Sure, you can get $20 worth of stuff for just another $10 but is it really worth it?
This also works with buying stuff at Costco. When you buy at Costco, the cost per item in each bundle is less, but in terms of total dollars, you pay more. If you choose to buy certain items individually rather than in bulk, you can find other opportunities to save money while not cluttering up your living space.