By Brad Beckstrom
What if every time you thought of buying something, you decided to know something instead? You’d probably build up a pretty good “store” of knowledge. You’d constantly be refreshing that knowledge whether you’re in a grocery store, online or shopping for a large purchase. I’ve used this strategy on large and small purchases. Something simple like “that health bar has more calories than 2 whole eggplants.” Now whenever you look at those 240 calorie health bars you’ll think about the equivalent of eating two entire eggplants.
Knowing things can impact larger purchases.
I’ve been putting off replacing our old car. We probably should’ve sold it a year ago but that time has not been wasted. Since then we’ve been learning about:
- Making 30% more by selling a used car on craigslist instead of to a dealer.
- How new cars lose 20% of their value just 6 months after you drive them off the lot.
- You can find some really great cars using an app like Carvana once you know what you’re looking for.
- Whether an electric car or a hybrid car is a better fit for our daily driving.
- All of the benefits of having a car that’s paid for and skipping the commute.
You can even apply this thinking to investments. When you pay high annual fees on your investments, your spending money. Years ago I used to sell off underperforming mutual funds and search for up and comers. I stopped doing this and took a few years to completely revamp my investing strategy. I learned that many funds I had been buying had high fees of around 1% per year. I also came across a study that Fidelity had done about the most successful individual investment accounts. The winners were investors who were dead or had not touched their retirement accounts for years. After some research I decided to buy and hold ultra low-cost index funds with fees less than 0.060% and exchange them only when I needed to rebalance my portfolio. This one change has saved me thousands of dollars every year, and will continue as long as I hold these index funds.
Often when I’m interested in something, I decide to research it and by doing that I delay the purchase. I believe that delaying purchases is one of the best ways to cut your spending. Even a delay of one or two days to do a bit more research (learn something) can make you rethink that impulse purchase. I also have a simple rule of not replacing something until it is completely worn out or, in the case of perishables, gone. When you run out of something and stay out of it for a few days sometimes you realize you don’t really need it. If it was really amazing you’ll remember to replace it. (sorry kale snacks)
Here are some tried-and-true ways of knowing things instead of buying things.
- Know about wish lists. If you’re shopping online, just dump the item in a wish list. My wish list on Amazon is littered with things I once considered buying but later forgot about.
- Know about patience. Apply a minimum of a 48 hour wait period on any purchase over $100 dollars, I find this works better than anything else I’ve tried.
- Use technology. Scan stuff in stores with the Amazon app. You will most likely see a lower price with free shipping. Then save it to that wish list (see step one). If someone raves about something, do the same thing, save it in a wish list.
- You don’t need to buy most books. If you see a great book, save it with your Amazon app then use an app like Overdrive to get the same book in e-book or audio form from your local library (free). The audiobooks often have wait lists but you can have multiple books on hold so there’s always fresh content available.
- Decide that there’s always an alternative to the purchase you’re considering including fixing it. I have repaired a 25-year-old KitchenAid blender twice with two simple part orders. A replacement would have been nearly $300. Plus they don’t make them like that anymore, it’s a tank.
- Learn all about the fees you’re paying when shopping for investments. Once your portfolio grows, the savings can literally be in the tens of thousands per year. I use a tool called Personal Capital to track and evaluate mutual fund fees from multiple investment accounts. Over the years I’ve slowly sold off any funds with fees over 0.06%. The average is 10 times that. 0.6 % Over time we’re talking big bucks here.
- Become a life hacker, research ways to get things done that don’t always involve buying something new. I got four extra years out of a laptop by replacing the hard drive and adding some ram. If you see it on my desk you never know that it’s a 2010 MacBook Pro. versus a newer one.
- Avoid buying things on credit. Understand that most debt will bring you down especially if it’s used to buy something that immediately depreciates.
- Learn about living lean. You don’t need to become a minimalist, you just need to research the concept and why it works so well for so many people. Once you understand the core principles of minimalism, you’ll just find yourself buying a lot less stuff.
- Go deep. Do you have an old book you haven’t finished? A bike you haven’t ridden in a while? Hidden treasures in your closet or junk drawer, you’ve forgotten about? Spend some time to find them, finish them, use them or give them away. Finish the unfinished.
You’ve learned something instead of buying something. And that knowledge will continue to pay dividends.
Financial Independence Through Living Lean, Working Lean, and Traveling Lean
A quick disclaimer — Any concepts presented on this blog are simply opinions and should not be considered as professional investment advice. As with most other things in life, you are solely responsible for your own choices, make them thoughtfully.
I really like this method. Committing to learning something before making a purchase is such an interesting idea that definitely helps impulsive spending. I’ll keep this in mind!