Yesterday, I wrote about ways of saving money which is, in some respects, a prelude to today’s post. I have previously interviewed Alan Corey who became a millionaire before he was 30. One of his biggest strategy on reaching his goal was to save money- over 60% of his income through a wide variety of techniques including eating a lot of instant noodles, going on cheap dates and watching every penny. Alan recently got called out on some of his money saving techniques being unethical. Alan’s response is here (readers: let me hear your thoughts).

I don’t agree 100% with all of Alan’s budgetary measures- the popcorn trick seems dodgy to me. But, not addressing the calling out per se, there seems to be an underlining tone in western society that being frugal is somehow unbecoming of us. Haggling, a staple of cultures in other parts of the world, is seen as “low class” in the west. In some stores in China, haggling is being replaced by set prices as a symbolism of its growing middle class sensibility.  We tend to mock those who save pennies and lauded those who spend beyond their means. Our economy is fueled by consumption and we are labeled unpatriotic if we don’t buy a SUV (Ben Bernanke: please stop lowering interest rates and throwing fuel into the inflationary fires; you can lead a spent consumer to water but you can’t make it drink from the credit pool).

I noticed when reporters review Alan’s book (note to media- remember he’s a comedian; literalism is not really the journalist bent you should be taking in this context) there’ s an underlying sub-text of “well, if it requires me being cheap to be a millionaire then I am not doing it since its so unbecoming darling.” Obviously, there’s a fine line to be drawn between being cheap and miser but, as a society, we really have our values backwards. We mock those who conserve and save (and, how ironic, that “green” is being used as a selling tool now) and, at the same time, complain about how broke we always are not putting two and two together.

Anyone ever get grief for being frugal? Is your partner frugal and its a source of tension? What’s the fine line between being frugal and just a financial kill-joy?

The stock market seems to have entered a definitive slide (good, stock may actually be cheap in the spring) which means, if you want to increase net worth in the short term, the emphasis has to be on finding ways to save money rather than focusing primarily on capital appreciation. Most of us know about the save 10% of your take-home pay rule but I came up with the following 10 ways to save money now based on my day-to-day life.

1. Carpool or, if you are in the market for a car, buy a car that takes regular gas or diesel and buy a used car. Last year, I bought a used car but it doesn’t take regular gas. I am getting killed at the pump. What I saved on buying a used car is being balanced off by the additional gas bills (one step forward, one step back one supposes). Ideally, buying a used car that takes regular gas and then leave it home to carpool.
2. Leave your credit card at home during the week-days. I use to work in an office tower with a series of underground malls underneath and I use to watch people die by a death by a thousand cuts buying something on sale here and something on sale there; all these unexpected expenses add up. Leave the credit card at home so you only spend what cash you have in your wallet.
3. Pack a lunch. I don’t think I need to expand too much on how much it costs to eat out every day. The additional benefit is that if you take a short lunch at your desk, you may be able to leave work earlier (this is my pattern now).
4. Watch those transaction fees. I give away money every month being on the wrong account plan at the bank and the wrong cellular plan. I am always over the maximum transaction/time allowed and paying through the teeth in additional charges. As counter-intuitive as this seems, I am adjusted my bank plan fees and cellular plan fee to pay more monthly to avoid those extra charges since the increased plan fees save me more money than the extra charges I use to incur.
5. Save more than 10% at the beginning of the month to make yourself “poor”. I set up automatic debit plans that take out large portions of my pay cheque at the beginning of the month to my retirement account, mortgage payment (I am prepaying my mortgage down every month), savings etc. By the 10th of every month, my bank account looks like I have no money other than for fixed expenses (I get paid once a month). I fool myself into thinking I have no discretionary income to spend.
6. Buy used or borrow….book, CD’s, DVD’s and all those other entertainment expenses. If you have kids, why do they really need brand new books or clothes- they tend to destroy both in months…
7. Find free entertainment. I am finding I am spending good chunks of my weekends at the library (books, free internet access, sometimes they have shows- well, they are for the kids but I am young at heart…), window-shopping (credit card at home), at the gym (not really free but it is included in my condo fee so might as well use it). There are a lot of free things to do especially in a large city.
8. Buy in bulk with other families to really save on items. My family use to do this when I was a kid. You buy in extreme bulk (I am talking about an entire flank of a cow or 60 boxes of tissue) and you divide it up among several families. The savings really add up buying in that type of bulk.
9. Wait before you buy anything. My friend and I walked past the Hide House two weeks ago (aka the Old Hide House) which is now in receivership (they sell everything you could think of in leather). I saw something I like there for 40% off but it was on my want list so I went home to think about it. It was gone the next week… which is good. The instant gratification would not have been worth the amount of money I was going to pay.
10. Find the most cost conscious person you know… and ask them before you buy something. They’ll point out to you where you can find the best deal; it seems to be built into their DNA to sniff out good deals. My brother is one of those guys who will research, research and research before he buys anything. I am in the market for a washer and dryer and so is he. I know more than I really want to at this point about front-loaders vs. top loaders and the pricing of each but if it saves me money, I am all for this knowledge.

Anyone care to add to the list?

I have spent most of this year emphasizing controlling costs than relying on the appreciation of investments. With the stock market the way that it is, I best to pay more attention to something which I can control than that which I cannot.  I do a budget on fixed costs but I have been worried lately about cost containment. I believe inflation is a growing issue caused by the increasing amount of currency the central banks are printing in order to avoid a mild recession (solve a small problem but creating a bigger one- yep, sounds like politics at its best). I have been focusing recently on these budget items:

TRAVEL

I have to drive to work- public transit is not an option. On Friday, I went to the gas station to fill up my car and the person before me had a $75 bill! Of course, I proceed to put $55 of gas into my car.  The only saving grace is that I do a lot of highway driving which has better fuel economy. This may be one budget item which is, unfortunately, unsolvable on the week days. On the weekends, I am trying to take more public transit. At least, I know what the costs are for a subway token.

FOOD

I throw away too much food every week. North American shopping habits encourage us to buy in massive bulk (”oh look honey, a 2L tub of mustard for $7.99! It will last us for 3 years!”) when we may save more money in the long run shopping like the Europeans- buy on the day of for the meal which is to be prepared. At the very least, the wastage factor would be reduced considerably.

I started shopping the European way; I have nothing in my fridge for dinner. I walk over the grocery store and buy only what I need.

CELL PHONE

I hate the Blackberry- it makes me accessible all the time, reinforces our increasing indifference to detail and it sucks up so much money in some many different ways (data plans, roaming charges, long-distance, text-messages).  If not for work, I would chuck the thing into the lake (other than doctors and other life or death service providers, why do we need this machine? Is the world going to fall apart if someone doesn’t have the opportunity to email me on a Saturday night about a business deal?). Some of it is covered by work but it can be a black hole expense sucking away dollars.

My choice is either to change my plan to cover charges not covered in my current plan or simply go low tech and get a plain old cell phone that does nothing but, shock and horror, act like a phone. I am afraid technology is being produced not to help our lives but to increase shareholder value.

What are you doing to budget better?

I spent a part of my holiday moving my office. Suffice to say, this activity isn’t exactly on the top of my list of things to do on a sunny August day.  However, it needed to be done at a time in which I needed to watch the pennies in order to amass a large acquisition fund to purchase stock.  Rather than hire movers, I decided to do this myself (along with my summer student) as an exercise in budgeting. Not including storage, the total costs of the move was approximately $300.00 (includes tax) to move 45 bankers’ boxes, computers and assorted furniture to two different locations. This is equivalent to four years of my professional life. If you remove how much I paid the student (which I have to do anyways regardless of the activity), the moving cost is cut in half- not a bad budget. Here are some budget saving moves that you may want to consider for your next move:

1. Rent a mini-van rather than a truck:  The Chrysler Mini-Van has a “stow and go” seating system which allows all the rear seats to be store into the floor of the van.  When you put all the seats down, you end up with a two seat van with lots of storage. In other words, you get storage almost equivalent to a cube van without all the blind-spots. The cost savings is not that great but I would prefer to move safely and a Mini-Van is more readily available for rent than a cube van. One more tip- always rent a vehicle on a down day (I rented it on a Tuesday). The costs is cheaper and you have greater selection. The van rental cost me $68.00 (the rest of my expenses, not including labor, was for boxes, packing tape etc).
2. Visit the rear of retail stores for boxes: My office is upstairs from several retailers on the ground floor. Every week, they throw away and/or recycle dozens of boxes of all sizes. Given how much the boxes have to carry, they are sturdy, large and FREE.  I still needed to buy bankers’ boxes for files but the large boxes were a great help for larger items.
3. Save those large shopping bags: How do you move objects with strange shapes and sizes like phones or computer keyboards?  I ended up putting a lot of odds and ends into large shopping bags. Partly for environmental reasons and partly for their utility, I tend to keep large and expensive looking shopping bags (if you ever bought anything from the Nike Store or Restoration Hardware, you know the type of bag I am talking about). They are great to just put things in when using a box would be a waste of space. Again, they were free (well, they came with the initial purchase of whatever I bought) and reusing the bags is better than throwing them away.
4. Moving is an opportunity to make money: I ended up selling several items of furniture to my landlords. I made $100 doing this. Thus, in reality, my net cost was $200.00 to move.  I also allowed several friends to sell some old computer hardware at their garage sales. Unfortunately, this didn’t work out too well. Someone bought a keyboard and a couple of mouses for $5.00 and, despite my best attempt, I could not sell a 2 year old printer- I ended up giving it away. The lesson to be learned- no one wants a used printer when you can buy a new one for as little as $50.00.
5. Buy office furniture keeping in mind your house as well: This isn’t a money saving technique per se on moving but when I started buying office furniture, I knew that one day I may not have an office or a large enough office to store everything. Thus, I ended up buying a lot of furniture from house furniture retailers rather than office furniture retailers. Buying office furniture is like paying for flowers and photographers for a wedding- it is the universal sign for service providers and/or retailers to charge you twice as much. Next time you goto Ikea compare the prices of shelves/desks/storage for the office versus the same for the home.  I ended up bringing home several pieces of furniture- my round meeting room table is now my kitchen table and I have a couple of new guest chairs. This helps me save on some home decorating costs.  If you are furnishing an office (at home or in a traditional office), keep this in mind. Buy furniture which would not look out of place at the office or at home.

I am hoping next vacation I don’t have to worry about these things.

Here are week four and final observations on my supermarket experiment. The rules are laid out here and the  links to results from week 1, 2 and 3.

Week 4 results did not prove to be too different than week three results. The biggest changes were that tissue and snack bars in the ideal locations went on sale. The sale did not change the tissue results but made the snack bars in the ideal location cheaper than the non-ideal location for the first time ever. As per my rules, the % difference in such a case is 0%.

The results are below. I have also added the average % difference over the course of the experiment as a summary.

Baked Beans (398 ml can)

Ideal location- $1.19 (Heinz)
Less ideal location- $0.79 (Compliments)
Difference- $0.30
% Difference- 21

Average % difference over 4 weeks: 23.25%

As my week 1 post and a reader pointed out, I could not find another name brand in baked beans in my supermarket. This has obviously thrown the results off somewhat.

Olive Oil (1 Litre bottle)

Ideal location- $10.79 (Bertolii)
Less ideal location- $7.99 (Carapelli)
Difference- $2.80
% Difference- 26 *

Average % difference over 4 weeks: 28.25%

Snack Bars (175g box)

Ideal location-$2.49 (Kellogg’s Nutri Grain)- this item went on sale
Less ideal location- $2.99 (Quaker Chewy Bar)
Difference- $.50 in favor of the ideal location
% Difference-0 (as per my rules)

Average % difference over 4 weeks: 4.5%

As discussed above, it took a sale in order to get this item below the non-ideal location price.

Shampoo

Ideal location- $2.19 (Finesse, 330 ml)
Less ideal location- $1.99 (European Formula, 350 ml)
Difference- $0.20
% Difference-9

Average % difference over 4 weeks: 9

Shampoo never changed its price structure over these 4 weeks.

Tissue

Ideal location- $1.99 (120 sheets of 2 ply tissue by Kleenex)
Less ideal location- $1.29 (140 sheets of 2 ply tissue by Royale Ultra)
Difference- $0.70
% Difference-35

Average % difference over 4 weeks: 37.5

The ideal and non-ideal location went from 3 ply to 2 ply tissue this week; I suppose people do not need thick tissues in the summer time. As I have stated before, the % difference between these two items is actually greater due to the quantity difference. Kleenex charges more for less tissues in a box.

Based on a limited 4 week experiment, I can conclude the following:

1. Not accounting for taste, generally, you can save more money buying items from less ideal locations in a supermarket.
2. It took a sale in order to get any item in the ideal location to be priced less than the non-ideal location suggesting that it takes some price movement to occur before an exception to conclusion #1 arises.
3. Price difference in a discretionary item such as snack bars tend to be less than in staples. However, the comparison between olive oil is inconclusive given that there was no ideal or non-ideal location for this product in my supermarket and I could not find 2 brand name baked beans in my supermarket. Thus, this conclusion has a huge disclaimer on it.
4. Tissue had an abnormally high price difference relative to the other products. I have no concrete theories for this other than, based on pure conjuncture, Kleenex has such a dominant strangle-hold on this product that it can charge whatever it pleases and still make sales.
5. Shampoo, which is generally an item you would buy at a drug store rather than a supermarket (at least I do), tends to display very little price differential based on a limited sample size. It may be interesting to see how pricing operates in these types of bodily care items in a drug store where these types of items are bigger pulls for customers into a drug store than a supermarket (experiment part 2?).

That’s it for this experiment. Thanks for reading about it. There may be some sporadic posting for the next two weeks due to business travel. I may post twice in one day and then no posts the next day. Bear with me. Thanks.

Someone commented recently that I should be spending more time attempting to save money on big-tickets items, such as house-hold appliances or a car, than on smaller items such as groceries (this comment was made as part of the supermarket experiment). I believe that saving money on the small items many times over will save me more money than getting the best price on a big ticket item every few years. I believe in this money saving strategy for two reasons.

The first comes down to opportunity cost. Do I spend days on end researching who offers the lowest price on a depreciating asset, such as a car or a washer/dryer set, or do I spend that time making money at work or doing research on investments (i.e. appreciating assets) or thinking about my financial future? Don’t get me wrong- I want to save money on big ticket items. However, at some point, the opportunity costs outweigh any savings that you may have. To quote the book Millionaire Next Door: “There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future.”

The same book found that the more one planned their financial future, the more likely they were to be financially independent. Thus, at some point in time, it makes no sense attempting to spend hours on end to find the best bargain on a big ticket item if the cost may be a less secure financial future (I am not even going to mention maintanence costs on big ticket items wiping out most of your savings).

Saving money on big ticket items is still important to me. What I have done is adopted a strategy that a friend of mine uses. My friend has to purchase vehicles every other year for work-related purposes but simply doesn’t have time to visit every dealer in the city. Thus, when he has to purchase a vehicle, he conducts a quick review of the market prices. He test drives the vehicle at one dealer close to him (it also makes it easy to service the vehicle if its close to his house). If he likes it, he tells the salesperson to call when the price is below X Dollars (usually slightly below the lower end of the spectrum). They will have an immediate sale at that point. If it is not below that amount don’t bother calling him or you will lose this sale and all future sales. It saves him time going from dealer to dealer attempting to haggle prices.

The second reason I concentrate on saving money on smaller items is frequency. I have to purchase milk and eggs every single week. Over time, the savings on this will begin to add up. If anyone has read a financial aid book on the amount of money you can save by packing a lunch or not buying Starbucks coffee, you understand how this adds up especially if you have the discipline to invest the money saved into investments.

I would like to know what people are doing to save money- are you concentrating on the big items or the small items? Any strategies on negotiating the purchase of big ticket items?

One last thing, since I am writing about saving money… John Chow dot com, a blog that helps you make money, is giving away a 24″ wide screen LCD monitor! Since I am a sucker for promotions, this is my entry.  Now give me the monitor! The contest is sponsored by BlueFur, who wants to let you know that they’re hosting Canada and the rest of the world. Wish me luck.

Here are week 3 results of my little experiment at the supermarket. The rules are stated here and week 1 and 2 results here and here respectively. As a weekly experiment there hasn’t been too many changes from week to week. I did hit my first sales item in tissue but it doesn’t seemed to have altered the fundamental trend arising.  Here are the results for this week:

Baked Beans (398 ml can)

Ideal location- $1.19 (Heinz)
Less ideal location- $0.79 (Compliments)
Difference- $0.30
% Difference- 21

No change from last week.

Olive Oil (1 Litre bottle)

Ideal location- $10.79 (Bertolii)
Less ideal location- $7.99 (Carapelli)
Difference- $2.80
% Difference- 26 *

No change from last week.

I am putting a huge asterisks here again though- the products have no ideal or non-ideal location- located on same shelf. Hindsight being 20/20 I should have used corn oil or vegetable oil instead.

Snack Bars (175g box)

Ideal location-$3.19 (Kellogg’s Nutri Grain)
Less ideal location- $2.99 (Quaker Chewy Bar)
Difference- $0.20
% Difference- 6

No change from last week.

Shampoo

Ideal location- $2.19 (Finesse, 330 ml)
Less ideal location- $1.99 (European Formula, 350 ml)
Difference- $0.20
% Difference-9

No change from last week.

Tissue

Ideal location- $1.99 (130 sheets of 3 ply tissue by Kleenex)
Less ideal location- $1.29 (140 sheets of 3 ply tissue by Royale Ultra)
Difference- $0.70
% Difference-35

The only change this week. The ideal location tissue was on sale and the less ideal location price also declined. The price difference expressed as a percentage decreased by 5%. However, I would attribute this decrease to the sale of the tissue in the ideal location more than anything else.

It is pretty clear with one week to go that location clearly makes a difference when it comes to pricing. As I stated last week, I am surprised that a staple like beans has as large a price difference. It also appears that the result in olive oil has to be thrown out.  Next week we finalize the experiment and report on results. Have a great weekend.

This is week 2 in an on-going experiment to see whether I can save money at the supermarket by using product location to my advantage. The rules are stated here and week 1 results are here.

Given that I am checking every week, prices do not fluctuate too much but we are beginning to see a pattern.

Here are my results for week two:Baked Beans (398 ml can)

Ideal location- $1.19 (Heinz)
Less ideal location- $0.79 (Compliments)
Difference- $0.30
% Difference- 21%

Olive Oil (1 Litre bottle)

Ideal location- $10.79 (Bertolii)
Less ideal location- $7.99 (Carapelli)
Difference- $2.80
% Difference- 26 *

I am putting a huge asterisks here again though- the products have no ideal or non-ideal location- located on same shelf

Snack Bars (175g box)

Ideal location-$3.19 (Kellogg’s Nutri Grain)
Less ideal location- $2.99 (Quaker Chewy Bar)
Difference- $0.20
% Difference- 6

Shampoo

Ideal location- $2.19 (Finesse, 330 ml)
Less ideal location- $1.99 (European Formula, 350 ml)
Difference- $0.20
% Difference-9

Tissue

Ideal location- $2.69 (114 sheets of 3 ply tissue by Kleenex)
Less ideal location- $1.59 (140 sheets of 3 ply tissue by Royale)
Difference- $1.10
% Difference- 40

There is a difference is product size so the % difference is greater if you calculated it per tissue.

There have been a few emerging trends after 2 weeks of this experiment. I am quite surprised at the high % price difference in staples (beans and oil). I would have thought that, being a staple, the price difference would not be that great. However, as the above notes, olive oil does not seem to have any ideal product placement. In hindsight, I should have compared corn oil which has a wider selection and more manufacturers. Conversely, the other pattern that surprises me is that a discretionary item like a snack bar has such a small % price difference (its discretionary to me). I would have thought these types of items would have a high end and lower end selection given the discretionary nature of the product.

However, after 2 weeks, one thing is consistent- in every case, picking an item from a less ideal location is cheaper than picking an item from eye level/ideal location. Not accounting for taste and quality, it is beginning to appear that working against product geography imposed by the supermarket will help saving you money. There’s 2 more weeks to go in the experiment. I welcome your comments.

There will be no posts on Friday since I am travelling. Have a good weekend.

As you may recall, last week I decided to start an experiment to see if I could save money at the supermarket by attempting to out-think the industry and to work counter-intuitively to how the supermarket wants us to buy; in other words, I would compare prices on products located at eye level with those in less than ideal locations on the assumption that the supermarket industry wants us to buy at eye-level and price accordingly. The full post, the products chosen as part of this experiment and my rules are found here.

I have had to make some adjustments on the fly based on the fact that my local Soeby’s actually has a pretty poor selection of some of the products I selected. The largest issue was that I could not compare apples to apples in tissue; the brand at the ideal location was 3 ply and there was no other 3 ply brand name tissues to compare this with-all that was available was 2 ply. Thus, across the street I went to the drugstore- this is the only product I compared at another location. I also could not find 2 name brand baked beans. I had to compare a no-name brand vs. a named brand.

I also added the following rules:

1. I compared the same size of product except where the difference was not negligible. For example, I compared 330 ml bottles of shampoo against 350 ml bottles given that the 25 ml difference was quite small (as a side-note, as a guy with short hair, this is the most I have had to think about shampoo in years).
2. I am calculated savings as an absolute dollar figure (ideal location price- less ideal location price) and as a savings % which I calculated as (difference between ideal and less ideal location pricing)/(ideal location price). Where the price of the less ideally located product was equal to or greater than the ideal location product, the % savings is expressed as 0.

Here are my results for week one:

Baked Beans (398 ml can)

Ideal location- $1.19 (Heinz)
Less ideal location- $0.89 (Compliments)
Difference- $0.30
% Difference- 25%

Olive Oil (1 Litre bottle)

Ideal location- $12.29 (Bertolii)
Less ideal location- $7.99 (Canaplli)
Difference- $4.30
% Difference- 35% *

I am putting a huge asterisks here though- the products have no ideal or non-ideal location- located on same shelf

Snack Bars (175g box)

Ideal location-$3.19 (Kellogg’s Nutri Grain)
Less ideal location- $2.99 (Quaker Chewy Bar)
Difference- $0.20
% Difference- 6

Shampoo

Ideal location- $2.19 (Finesse, 330 ml)
Less ideal location- $1.99 (European Formula, 350 ml)
Difference- $0.20
% Difference-9

Tissue

Ideal location- $2.69 (114 sheets of 3 ply tissue by Kleenex)
Less ideal location- $1.59 (140 sheets of 3 ply tissue by Royale)
Difference- $1.10
% Difference- 40

There is a difference is product size so the % difference is greater if you calculated it per tissue.

I only have one week’s results in so its too early for me to draw conclusions. Let me know how I can make this experiment better or your comments early on. Thanks and have a great weekend grocery shopping!