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I consider myself to be a frugal person but this post is not about frugality in itself. What I would like to discuss is the effect of spending choices made by individuals on the economy.
In my case I hate spending money on consumables. I much prefer to spend my money on durable goods where the return on the spending can be realized time and time again. Here is an example. Suppose I have ten dollars. Choice one is to spend that ten dollars on food and a beverage at a cafe. Choice two is to spend the ten dollars on a movie (either digital or disc format, does not matter). In my opinion the movie is a better deal as I can watch it multiple times which makes it easier to justify the purchase price as I can break that ten dollars across the number of times I view the movie. If I watch it ten times over the life of ownership then watching the movie becomes a one dollar cost whereas the foray into the cafe will always cost ten dollars.
I have felt this way for as long I as can remember. When I was a child I would not spend my money on candy, soda, gum or snacks and people thought I was stingy. As I got older and my vocabulary increased, I fought back claiming I was frugal as it sounded better. Simply put I try to minimize my spending on things that are used once and gone but I will spend reasonable amounts of money of things that can be used multiple times.
Now as a longtime homeowner I am beginning to wonder if I am really frugal after all, as I am more and more willing to spend money with less forethought on durable goods for the good of my home (tools, appliances, etc). However I am still as tough as ever on myself on the consumable side. Some of the hardest spending decisions for me are done without any thought by others. To buy an unplanned beverage or sandwich is almost impossible for me to do. I have yet to find another person with this spending idiosyncrasy.
I think this topic boils down to perceived value. From what I see, I judge perceived value differently from many other people (at least in my social circles). What I am wondering is whether there are other people out there like me and what would be the effect on the economy if there was a social movement in line with my spending choices? Would reduced spending on consumables harm the economy even if the dollar for dollar spending was simply shifted to durable goods?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Things are not that bad, most people don't have to worry about where to spend $10. For me watching a movie at a theater is a waste of money, unless it has spectacular sound and/or special effects. Buying one is worse, because once is often enough and if you don't like it you have wasted $10. Investing in Netflix is a more cost effective way to go. On the other hand, I don't know of many places where you can get a meal at a cafe for $10. Even a light breakfast or sandwich and drink, with tip is going to be $15 or more. I do like to eat out a few times a month but would rather have the pleasure of a great meal and spend $60-80 for the two of us. I don't spend for candy, soda, gum or snacks but not to save money, for health reasons. What other than food do you consider to be consumable? I tried to think about it and came up with gas, but you have to get to work (though I take the bus) and I like a nice road trip vacation a couple of times a year. Another is airfare, but sometimes you like to go to a place that's too far away to drive in the time available. I do also buy things that are durable and save me money over time related to the home, like appliances, tools, lawnmower, ladders and other items that I can use many times. I don't buy an unplanned beverage or sandwich very often, but I may have the need for an occasional stop at a good coffee shop or stand.
Things are not that bad, most people don't have to worry about where to spend $10. For me watching a movie at a theater is a waste of money, unless it has spectacular sound and/or special effects. Buying one is worse, because once is often enough and if you don't like it you have wasted $10. Investing in Netflix is a more cost effective way to go. On the other hand, I don't know of many places where you can get a meal at a cafe for $10. Even a light breakfast or sandwich and drink, with tip is going to be $15 or more. I do like to eat out a few times a month but would rather have the pleasure of a great meal and spend $60-80 for the two of us. I don't spend for candy, soda, gum or snacks but not to save money, for health reasons. What other than food do you consider to be consumable? I tried to think about it and came up with gas, but you have to get to work (though I take the bus) and I like a nice road trip vacation a couple of times a year. Another is airfare, but sometimes you like to go to a place that's too far away to drive in the time available. I do also buy things that are durable and save me money over time related to the home, like appliances, tools, lawnmower, ladders and other items that I can use many times. I don't buy an unplanned beverage or sandwich very often, but I may have the need for an occasional stop at a good coffee shop or stand.
I was just using the $10 as a generic example to illustrate the one time versus multiple use scenario. I am aware cafe food is much more expensive than that.
What I was focusing on was the impulse end of the consumable spectrum. Certainly no one can live without food. What I try to do is purchase food in the most cost effective way possible and adjust my lifestyle to compensate.
I remember one former co-worker who would blow through at least $30/day on lunch, coffee and other incidentals during the workday. Rather than do that, I prefer to buy in bulk and prepare my work lunches from that, potentially saving $15-$20 per day over what that co-worker did. I also have a high tolerance for low quality coffee so I will always consume the stuff made in the office.
Other consumables that I can think of are soap, shampoo, toothpaste, paper products and cleaning supplies. I just try to find the best 'deal' on these items. With durable goods I am not necessarily beholden to the lowest cost option as I understand that mid or top range features can make the product much better or easier to use.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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OK, then I'm probably similar to you in that I prefer to pack my lunch, buy large quantities when on sale and at Costco and have a big freezer and huge pantry. I still like to go out to a nice dinner a few times a month, though.
I'm more the opposite. I'd rather spend money on consumables than items as experiences are generally worth more to me than material goods. I get more enjoyment out of having dinner with family/friends at a restaurant than I do another pair of shoes. I have plenty of shoes, which is about five pairs. Marginal value to me of another pair of shoes is non-existent. I've got all the shoes I could need or want and won't buy another until one of the current shoes wears out. Of course, if I had no shoes it would be a different story since shoes are very nice to have.
The wife and I saved a good bit around 40% of gross income. We live in a house well below our means, I just upgraded from an 04 accord to an 11 so nothing extravagant there but where we spend money that most don't is traveling. I posted this in another thread but we have gone to Phoenix, New Orleans and to Spain this year and will be in San Diego this weekend, the Bahamas in September and Las Vegas in November. Travel is something I have no problems spending money on when at times I have a hard time buying dress shoes or a dress shirt
I am the same as the OP in this regard! It KILLS me to have to spend money on a consumable like a cup of coffee or a lunch "out"- to me that is money wasted. It is especially a problem if going to dinner at a restaurant that is more expensive- to me there is zero value in buying dinner at a place where you pay maybe $25 per plate- I would feel ashamed of myself walking out of there having blown $50 or more (for two of us) with nothing to show for it. I would keep thinking about the other things we could buy with that $50 that we would have around for a long time to use over and over again.
I've always been this way- even when I was 20 or 21 working my first real job after college, all of my coworkers went out to eat every day for lunch but I was just packing sandwiches and bringing my lunch because I quickly figured out how much it would cost me even buying the bare minimum lunch at Arby's or McDonald's every day (even that would have added up to $80-$90 per month back then).
I am the same as the OP in this regard! It KILLS me to have to spend money on a consumable like a cup of coffee or a lunch "out"- to me that is money wasted. It is especially a problem if going to dinner at a restaurant that is more expensive- to me there is zero value in buying dinner at a place where you pay maybe $25 per plate- I would feel ashamed of myself walking out of there having blown $50 or more (for two of us) with nothing to show for it. I would keep thinking about the other things we could buy with that $50 that we would have around for a long time to use over and over again.
This actually hits exactly on the issue.
People like to say money doesn't by happiness. That's false. You can buy it, but you get diminishing returns. What you need to figure out is where do you get the most happiness for your dollar.
Taken to the extreme, I'm sure someone out there would enjoy seeing their bank account at $1,000,010 instead of $1,000,000. The question is, does that extra 1 in the account balance generate more happiness than buying a movie. Odds are, it probably doesn't.
Go to the other extreme and I'm pretty sure that guy who sees a balance of $15 vs $5 gets a lot more happiness out of seeing the higher balance. This example focuses on the happiness from just having the money.
From there, you now need to figure out when you go to spend that $10, where do you enjoy spending it the most. Do you enjoy going out to coffee because you enjoy the social interaction or the break from your day? If not, it's probably not worth it.
Do you enjoy getting ice cream because you really love the taste and it's your favorite dessert? If you don't like ice cream, it's probably not worth it either.
Let's say you buy the DVD. Sure, you could watch it 10 times, but is watching that same movie 10 times over better than watching 5 movies on netflix over the course of a month?
It ultimately comes down to comparisons. To some people, they enjoy spending the money to eat out because it's something different. To others, it's money that could have been better spent elsewhere. The other extreme of the eating out argument is that you could probably last a really long time on the college kid ramen noodle diet... but sometimes it's worth it to pay more for nicer things.
On a seperate note, there are a lot of studies indicating that people often over estimate how much enjoyment they'll get out of reusing a durable good. Clothes shopping tends to be one of the prime examples.
People like to say money doesn't by happiness. That's false. You can buy it, but you get diminishing returns. What you need to figure out is where do you get the most happiness for your dollar.
Taken to the extreme, I'm sure someone out there would enjoy seeing their bank account at $1,000,010 instead of $1,000,000. The question is, does that extra 1 in the account balance generate more happiness than buying a movie. Odds are, it probably doesn't.
Go to the other extreme and I'm pretty sure that guy who sees a balance of $15 vs $5 gets a lot more happiness out of seeing the higher balance. This example focuses on the happiness from just having the money.
From there, you now need to figure out when you go to spend that $10, where do you enjoy spending it the most. Do you enjoy going out to coffee because you enjoy the social interaction or the break from your day? If not, it's probably not worth it.
Do you enjoy getting ice cream because you really love the taste and it's your favorite dessert? If you don't like ice cream, it's probably not worth it either.
Let's say you buy the DVD. Sure, you could watch it 10 times, but is watching that same movie 10 times over better than watching 5 movies on netflix over the course of a month?
It ultimately comes down to comparisons. To some people, they enjoy spending the money to eat out because it's something different. To others, it's money that could have been better spent elsewhere. The other extreme of the eating out argument is that you could probably last a really long time on the college kid ramen noodle diet... but sometimes it's worth it to pay more for nicer things.
On a seperate note, there are a lot of studies indicating that people often over estimate how much enjoyment they'll get out of reusing a durable good. Clothes shopping tends to be one of the prime examples.
This is an excellent post. The problem with people evauluating how happy saving/spending money will make them is that humans are actually very bad at predicting what will make them happy, which you touched on in your last paragraph. In general, there is way too much focus on short term pleasure, and not enough on long term happiness.
I strive to maximize average utility I gain from every dollar I spend. Of course, I may not have the foresight, brain power or judgement to maximize the average utility from every single dollar I'll spend for the rest of my life but I will make a reasonable estimate and direct my spending that way. Bigger ticket items will be scrutinized far more in my utility-maximizing planning than smaller-ticket purchases.
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