01 Apr When ‘Cheaper in the Long Run’ Isn’t Better
Saving money often involves stretching yourself somewhat financially in order to enjoy a much larger return in the form of savings. When you purchase your groceries in bulk, for example, you spend more money on groceries at first, but your groceries last much longer, saving you money in the long run. Investments like this can help you live a much more stable life financially.
Sometimes, however, it can hurt you financially to apply this “cheaper in the long run” mindset. Here’s why.
Food doesn’t always last.
Buying food in bulk truly is a great way to save money on your groceries in the long run. However, this practice is best applied to canned and shelf-stable foods. Think about it—if you found lettuce on sale for a major discount and bought four heads of it as a result, only to get through just two heads of lettuce before the lettuce went bad, that would be wasting money on two heads of lettuce that you never used. So, when buying foods in bulk to save money, always be careful to buy only what you know what you will use.
Your “personal economy” could make something more affordable later.
Let’s say you are currently in the market for a new laptop. Right now there is a great promotion going on where you can get a $1,000 laptop for $100 less at $900. You truly do feel that you need the laptop, but it would be a little bit of a financial stretch to take advantage of that deal right now. That $900 might come in handy for purchasing groceries and paying for monthly bills, for example.
Meanwhile, if you were to wait a few months—when you might be expecting a tax return and a raise at your job—spending $900 on a laptop would be much more feasible. The only catch is that if you wait, you will have to purchase the laptop at full price for $100 more.
Here’s where the concept of a “personal economy” comes in. Sure, taking advantage of the $900 laptop deal may be cheaper in the long run, but when you factor in the fact that you will have overall more money in a few months’ time, spending the full $1,000 on the laptop may actually be relatively cheaper. In other words, $900 might feel like more money to you now than $1,000 will in a few months.
It’s not a good deal if you don’t need it.
Finally, there are those impulse purchases we make, thinking that if we take advantage of a major sale or discount now, we’ll save money later by not having to go out and buy it at the full price. Maybe, for example, you spot a stand mixer for a good deal. You don’t bake very often now, but you would love to get into baking more in the future. You know that if you buy the stand mixer now, you won’t have to spend potentially hundreds of dollars more later when you finally start getting into baking. But here’s the problem: So often we are overly optimistic about these types of impulse purchases. We make “good deal” purchases on the contingency that our lifestyles will change, only for our lifestyles to remain relatively the same. So remember: if it’s something that you do not currently need, chances are it’s not a good deal—not even in the long run.