Sunday, September 7, 2008

When Frugal Becomes Cheap

(or, "Sometimes You Have to Spend More to Save More")

A few weeks ago, my good friend got a hankering to buy a new handbag. Nothing fancy with all the bells and whistles of a Gucci couture bag. She simply wanted a well-made, fashionable leather bag that would hold up better than her previous Target bags had fared over the course of only a few months.

So she set out on her quest, knocking on the door of every website on the web, desperately seeking not Susan, but a somewhat stunning, quality handbag sans the stunning, unaffordable price. I empathized with her purse plight. We're a lot alike in the frugality department, and both thrive on finding the best deal possible (maybe that's why we're such good friends!). Initially she wanted a Coach bag ... lower-end designer, a pinch more affordable than, say, Marc Jacobs, but still quality. Even though she had the money saved up for said handbag, the $350 to $400 price tag chilled her to the core when push came to shove. So she kept searching. The more she searched, the lower her price point became until finally she inevitably found herself in the below-$100-range, looking at handbags made not of leather, but what looked to be parachute vinyl and faux croco-pleather.

She had lost sight of what she wanted: A quality leather purse that could withstand the wear and tear of (at least) a few years. Instead she had become consumed with the number on the price tag alone. The cost, and not the value, had become the determining factor in her what-turned-out-to-be-vinyl-laden voyage.

Which brings me to the topic du jour: When is that line crossed when the art of frugality becomes just plain being cheap? How do you know when you've become too frugal? Is there really such a thing?

I think that frugal people see the inherent value in potential purchases, whereas cheap people only see the cost.

Lets face it: It feels great when you find a bargain, be it in the clearance bin at Circuit City, a special deal on flat screens at Target, or a mega sale at Banana Republic. But finding a bargain can become a habit -- one that may not always be the most cost-efficient over the long term. Case in point: I always buy my most frivolous purchases on sale. These include DVDs, books and CDs, where I turn to the Amazon marketplace and usually score any item I want for under $10. Also under the frivolous purchase category are trendy clothes that I want for cheap (usually bought at places such as H&M, etc.), coffee when I'm on the go and those yummy spiced-cinnamon-scented candles that remind me of Fall (they're a guilty pleasure). These sort of purchases are illiquid and don't hold much value.

I've conditioned myself to always find everything at the cheapest price possible -- it's become an exciting challenge of sorts, and gives me a fabulous feeling of pride and accomplishment when done right. This is great for when I buy knockoff jewelry I don't care about losing or some shirt I know will go out of season by Winter, but unfortunately, applying this mentality to even the slightly bigger purchases in life can end up costing more in the long run. How? Well, by buying the cheapest, say, laptop now instead of investing in the mid-priced one, you invite the probability of expensive problems occurring in the short term and the likelihood that the laptop will need to be replaced sooner than one with perhaps a better brand name or better parts. The same could be said for vehicles, vehicle maintenance, kitchen appliances (such as coffee makers, blenders and refrigerators), or (ahem) quality handbags.

Notice that I used the word "investing." These types of purchases should be viewed as investments into securing at least the next few years as dependable and maintenance-cost-free. Granted, if Home Depot is having a 4th of July sale on refrigerators, then by all means take advantage of those savings padded with the premise of red, white and blue. But don't wander into BestBuy and purchase a $20 Apex DVD player just because it's the cheapest find. Why? Because you'll probably have to replace it by year's end after it's eaten your copy of The Devil Wears Prada and refuses to give it back, even after repeated verbal pleas, coaxes and eject button presses. (I speak from personal experience.) Bargaining with said generic DVD player also doesn't work. ("If you give me back my Devil Wears Prada, I'll trade you with Love's copy of Minority Report. ... No? ... Sigh.")

So that $20 DVD player could actually cost you more in the long run, with the initial $20 cost on top of whatever you pay to either have it fixed or replaced with a slightly-more-expensive, better-quality one.

Going back to my handbag-hunting friend, if she invested in a more well-made, "pricier" handbag, her need to buy a new bag every few months would diminish. Say she bought a leather Dooney and Bourke bag for $300. The price seems shocking to us savvy savers, but considering that this isn't the type of purchase we make on a regular basis -- and it's one that will literally last years (think 10 to 20) -- it's okay. Really. After you've gotten over the initial sticker shock, consider how much you'd spend on a handbag from Target or Nine West, and how often each cheaper bag would need to be replaced.

A $50 handbag will probably last two years, on average. It varies from girl to girl. To replace it with new bags, whether because of wear and tear or because it's plain not in style anymore, would cost $500 over the course of 20 years. And let's face it, ladies: The cheaper the bag is, the more you feel "okay" about buying others to add to your growing collection of cheap bags. If you bought the more classic, well-made Dooney and Bourke bag for $300, that's how much it would cost. Plain and simple. (I recently bought a D&B giraffe bag as a birthday present to ... myself ... in April, and believe me -- the leather and stitching will definitely carry me into at least my 40s, if not beyond!)

That saves you at least $200, if not more due to the psychology of buying things cheap. What do I mean by that? I believe we feel that when we save money on items, we feel like we've earned the right to buy more ... we saved by finding that fabulous deal in the first place, after all. This, of course, negates the whole idea of finding the cheapest buy. But it feels positively marvelous leaving a mall or store with bags of goodies versus one bag with one or two items. Like we've gotten our true money's worth. But have we, really? I think we've gotten too used to the feeling that we need more items for our money versus less. Quantity, in essence, has become our mantra over quality.

So don't just look at the cost on the price tag. Look at how much your purchase will actually cost you overall. It may be a higher price upfront, but after you've gotten over the sticker shock, know that it could end up saving you more money in the long run.

11 comments:

Budget Mama said...

Well said.

I'm actually on the market for a laptop in a few months and I need to save money. I found a Dell for about $600. Then my friend told me that Walmart had an Everex for $379.00.

While I'm seriously on a super budget, I think I'll hold off and save up for the Dell. No offensie to Everex, but I have never heard of them and when I buy my laptop I don't want to buy another one in a few months.

And who knows maybe through comparison shopping, I can get my Dell for even less than the $600 by the time I'm ready to buy.

Emilita said...

Good post. Spending a little more money for better quality and longer product life is worth it to me for exactly your rationale.

By the way, I don't tap now but once I get settled at my new place in Kensington, Md., I hope to find a studio in suburban Maryland or the District. Like you, I really like The Graduate and Steely Dan...and persimmons. ('Persimmon' was my nickname on a political blog site to which I used to contribute, lol.) And poodles! My family has two mini poodles and a Boston terrier. It is a small world!

Also, since I saw it on your reading list...I actually couldn't finish The Unbearable Lightness of Being. Too 'post-modern,' perhaps. I might pick it up again one day. My fiction picks include Graham Greene and Kazuo Ishiguro, who is an absolute literary master in my eyes. (Time and the Booker Prize people like him too. I'd def recommend Never Let Me Go or When We Were Orphans.)

Unfortunately I don't know much about finance but yep, I recently left school with an undergrad degree in journalism. I just got a job as a staff writer with a newspaper geared toward older adults/seniors...and now, I have to figure out what to do with my life! That'll probably be journalism for the next few years, but the details remain to be seen.

If you don't mind me asking, how did you end up as a financial news editor? I'm kind of curious, as someone starting out in the publishing field who's also trying to brainstorm her next steps.

You can reach me on my blog or at Emma.Zayer@gmail.com. Thanks!

Abby said...

This is always a hard balancing act in frugality...

For example: What if, instead of "investing" in a $400 designer bag, she found a great knockoff leather bag? Still leather, same style.

One option.

Personally, I don't think I can ever get to the point where I can buy a D&B bag for myself. The way I don't think I'll ever be able to buy a $300 shirt. I'm financially wimpy like that. Also because I'm not likely to bring in a lot of money in my lifetime.

But I think you know you're becoming cheap when a) people tell you (some people will always think you are, but when several close to you chide you) or b)you have nothing of quality because you're always buying cheap stuff.

After all, frugal doesn't equal cheap. "Cheap" is the reason poor people spend so much more than rich people. Rich people can afford long-lasting stuff. Poor people can only afford the stuff that will last them until the next time they can afford stuff.

I think finding a good mid-range is the best route. Personally, I drool over leather designer bags (or knockoffs, when at various flea markets) but there will always be non-designer leather bags out there. So if the label doesn't matter, just be sure the stitching is good and the leather is supple.

And when it comes to electronics ALWAYS research and don't go with no name brands. As Brunette says, you'll live to regret it. Either it breaks quickly or just performs poorly. Best to save awhile longer and get a brand name that has a decent warranty. It'll be worth it in the end.

Networking4Biz said...

Thanks for the great article and great advice!

Amanda

Anonymous said...

I think brunette made a good point about how purchasing cheap items can cost more in the long term, but the $300 Dooney & Burke handbag isn't the best example. Sure, it may last 10 years, but how many of us are going to use the same handbag for that long? My guess is that most women who purchase these items trade them in for another after a year or two.

Anonymous said...

I don't know about considering a purse as an investment. It can be considered a worthy splurge at most. Plus the people I know who buy designer bags rarely limit themselves to one a year. Maybe it becomes a slippery slope where once you spend $300, next year you send $400 and so forth?

Jane said...

I would have to disagree with the last two comments on two really quick points.

1. Quality bags are often handed down to daughters who become fascinated with their mother's era . . . leads to incredible efficiency/utility/return for those of you economics inclined individuals.

2. It's about retained value. How much would you expect to sell that $50 pleather bag for in 5 years . . . that's right nada. However, a more expensive and recognizable brand will sell for likely at a minor discount should you want to cash out on your "holdings"(assuming that one has a reasonable taste in fashion).

Revanche said...

I experienced that very same phenomenon when I first embarked on my search for a perfect long lasting purse. After a few months, my acceptable price point kept dropping while my quality concerns stayed the same. I realized that the purse I was looking for either didn't exist yet, or I wasn't ready to part with any amount of money for it, if it did. Until I have the cash in hand and a clearer sense of being able to exchange it for my new shoulder companion, I'll wait!

While I can't see it as an investment, quite, I do see it as one part of building the more polished image I want to project.

Saving Cents in the City: said...

Nice post!
People always wonder how I obsess over coupons and prices for food and little things, but carry a Michael Kors bag. When I used bags in the $75 or less range I went through them very quickly. I've had my Michael Kors for a year and it looks beautiful and I still love it.

ange tombé said...

so true! i have splurged or asked for designer bags on sale at Nordstrom's every few years (say, the $200-$300 range) and never regret it! they last a while, come in awesome colors, and are just smarter to buy than a cheap knock-off that you'll have to replace in a few months.

ange tombé said...
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