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Do you really save when you buy discounts?

I was thinking about Black Friday and how hundreds of people camp out overnight to get massive discounts, such as 60-inch flat screen LCD TVs for $150, 70% of laptops, and buy 1 get 1 free digital cameras. Most people go through the hassle of waiting in line and waking up before dawn, so they can save money.  But, do they really save?

My questions to you are: When you buy things on sale, does that mean you’re actually saving money?   Do sales really help you keep more cash in your bank account?

What do you think?

Think about it . . .

A little bit more . . .

Got a final answer?

Alright, time’s up .

My answer: Often discounts and sales actually hurt your bank account! Let me explain with a personal example.

A few years ago, I went into Banana Republic to buy a winter jacket during the after Christmas sale.  I planned to buy one item—a jacket for about $125.  The sales were better than expected! The jacket was marked down from $300 to $32! (You already know what happened next, don’t ya?) I bought more stuff, for a total of 1 jacket, 3 pairs of pants, and 3 tops. The total cost was over $200. I walked out smiling about much money I saved.

But did I actually save money? Here’s the math:

Planned Actual Difference
# of Items 1 7 Bought 6 impulse buys
Average Price per Item $125 $32 Average price per item was about $95 less than expected, due to great discounts
Total Price $125 $225 Spent $100 more than planned, a full Benjamin gone from my bank account

I walked out happy and smiling because I bought 7 items on sale–1 that I needed and 6 that I bought on impulse.  I wasn’t thinking about the bottom line: My bank account was $225 poorer. Did I actually save money?  Was this actually a net plus to my life or finances? No to both!

I can’t tell you how many times I went shopping with the mentality that if I got discounts per item, I saved overall.  It took a while, but it finally sunk in–I save money only when my total shopping bill is less than planned or the extra items are things I needed. (Ladies, I mean need like food, water, shelter, etc. Not the way you “need” another pair of black pumps or a new LBD.)

By buying extra items I didn’t need, I wasted money.  I could have bought just the jacket, and had about $195 to spend on something I really valued.  (Like 3 -4 nights at a hotel in Greece!) Store owners are smart.  They get us in the door with sales, hoping that we’ll buy more overall. 😉

Proving the point that impulse buys often waste money, I rarely wore the 6 impulse buys and no longer even have them.  The jacket, which I needed, has lasted 4+ years, is still worn regularly, and is hanging in my coat closet right now.

Now it’s your turn: When you get discounts, does it feel like you saved money? Even if you spent more overall?


Testimonials for Financially Fab’s Personal Finance Consulting

I created a Personal Finance Program targeted for us–young, professional, women.
It is a comprehensive, end-to-end financial management program in just 5-sessions.  Each session has specific goals, so you accomplish a lot & quickly!
By the end of the program, you will have a:
  • Personalized plan for meeting short- and long-term goals
  • Simple, automated system for managing finances in just 30 minutes per month
  • Optimized credit and checking accounts to lower fees and rates while increasing freebies
  • Financial system and budget designed for your lifestyle
  • Complete plan for 401K, IRA, and other investments

Here’s a testimonial from Sabina, who took the Financially Fab Personal Finance Program.

“To capture where . . . I am now, I would use the word ‘confident’. Your advice helped me realize how easy it is to get a basic understanding of my financial situation, both near- and long-term, how to think about my financial goals and how to take the steps to meet them. I’m no longer . . . afraid of that! And I know now that any time I have a question, all I have to do is ask (i.e. call the bank). But of course it’s also nice to know that I can always call you!

You definitely explained things clearly and turned managing my finances into something interesting and fun, rather than confusing and dreadful. Perhaps what I appreciated most of all was your . . . encouragement. That made the sessions fun and helped me feel confident.”
— Sabina

Here’s a testimonial from Sonny for Credit Card Consulting.

After hearing Yvette’s experience with keeping a high credit score,I decided to take my credit score into my own hands! I called my credit card company and got a 200% increase in my credit limit. I’m not going to increase my monthly spending, so I’m using a lower percentage of my credit- which improves my credit score! Thanks, Yvette!
—    Moshe

About Me – Why I’m Doing This

Thanks for checking out Financially Fab.  Here’s background on why I’m doing this.

My Passion

I’m passionate about helping middle class people hold on to their money. I want you, me, everyone, to confidently make savvy financial decisions. To make those savvy decisions, you need information that makes sense for you, right now. I started Financially Fab to offer sound, timely, information for your life, speaking your language as young professionals. This is not your parent’s website.  I use examples from my life and the lives of other young professionals.

Financially Fab is about helping you and creating a safe space to learn about personal finance, especially if you’re starting from scratch.  I want you to ask questions! Write comments! Email me at FinanciallyFab at Gmail . com. I respond to all emails and comments.  And if you’re really shy, write an anonymous comment. 😉

The Beginning

When I was 18, my parents divorced, kick starting my current views on personal finance.

I was born in Nigeria and moved to the US at age 6 with my family. My parents moved halfway across the world, leaving family and friends, partly so their kids would never worry about money. Like a good immigrant daughter, I was expected to get outstanding grades, go to a good college, get a professional masters or PhD, and pursue a professional career.  I followed that plan and willingly handed over my financial life. I expected them to manage my finances behind the scenes until I finished grad school. 

During the divorce, finances became more transparent. My college tuition, housing, and other expenses got thrown into their arguments.  In an 8-month period my mom took full financial responsibility of her 3 kids, got divorced, and buried her father.  I was very close to my mom.  I saw firsthand how money touched all areas of our lives—funerals, education, Christmas holidays, relationships, and lying awake stressed each night. I’m sure my parents, like all others, experienced financial worries several times during my childhood. But this was my first time seeing the details.

I was almost Kicked Out of College

On my end, I kept spending like nothing had changed. I had less cash each month and was using more credit, but I wouldn’t admit it to myself. For example, I hoped that $1,000 dollars in my account would stretch to pay for $700 in rent and bills, $200 in food, $200 in shopping, $150 in other random expenses.  I was stressed.  Seven days before spring semester started, I didn’t know how I would pay for tuition.  If couldn’t pay, the university would drop my classes—I would be kicked out of school.

That woke me the hell up. I got a short-term university loan.  I asked myself how I could spend $5,000+ shopping and studying abroad, but didn’t have $3,500 for tuition. I was spending money like it grew on trees.  I realized it wasn’t mom’s or dad’s problem. I was accountable for my finances.  It was my life, not theirs. That spring and summer, I dove into personal finance, reading about mutual funds, budgeting, efficient market theory, consumer debt, etc.  I also started budgeting, got a federal student loan, worked part-time, and paid off $5,000+ in credit card debt within 5 months.

Starting my Financially Fab Lifestyle

For the rest of college, I increased my financial control, using a combination of support from both parents, loans, part-time work, and scholarships.  While still in college about two years later, I had a 6-month emergency fund and opened an IRA with $4,000.

Over time, the sense of control expanded to other areas, including choosing the job I wanted, moving to my 1st choice city, picking up ballet as an adult, and travelling the world.  I became Financially Fab.  I became accountable for my decisions, worried less, and enjoyed more.

Realizations that Changed My Life Forever

  • If I don’t prioritize my spending, I could lose what really matters–in this case, my education.
  • When I take ownership of my finances, I sleep better.
  • I worry less when I have an emergency fund.
  • Going forward, I will be 100% accountable for my finances, the good and the bad.
  • I will never blame someone else for my spending decisions.
  • I am in control of my life.

Ready to take control of your life?  I’m here to help. Wanna dive in? Check a post and post comments!


How I Almost Threw my Bonus Down the Drain

 A few months ago, I got promoted at work! I called my dad to share the news.  After we discussed the new level and responsibilities, I get excited about the larger salary. “I have more cash now!  I can travel more, buy a new suit, move to New York City . . .”

As I continued listing items, my dad jumped in, “Don’t start spending more just because your salary increased. Buy one special item to celebrate and don’t change your spending habits.”

In responce, I was annoyed.  I thought, “I’m the personal finance guru in the family. Why are you lecturing me?

The next day, I thought more about my dad’s comments—still confident he shouldn’t be lecturing me, the expert,—and decided I’d do one better. “I won’t buy anything to celebrate.  The summer was so fabulous that I don’t need anything extra.”  I went to South Africa for 2.5 weeks and went to the beach in Cartagena, Colombia for a week.  I also went to NYC a lot.

However, deep-down inside, I still wanted to buy something to celebrate the promotion.  Over the next few weeks, I found myself frequently thinking, “I just got promoted, and I am not buying anything big to celebrate.   I can splurge a little. It’s only an extra $3-$10.”   

“What does it matter if I buy lunch at Whole Foods instead of eating at home?”

“I’ll just take a cab this one time. I’m too tired to walk.”

After 2 weeks of spending a little more here and there, I noticed I was running out of cash.  I have a $60 per week cash allowance ($240 monthly) that I spend however I want without tracking.  I had almost finished the month’s cash during the week #2!  Then I checked my credit card balance and found an extra $150 on here! WTF! By splurging on $3-$10 here and there, I’d spent about $360 in 2 weeks without noticing.

Right then and there, I decided to buy a bike to celebrate. I admired how people in Cartagena, Colombia completed their daily errands on foot.  I wanted to buy a bicycle and start riding to work, to the grocery store, and for other errands, so I could incorporate more exercise into my daily life.

My New Bike - Schwinn Women's Searcher

Once I choose a concrete gift, I stopped creating little ways to treat myselfI was content. I got a $420 bike on sale for $350 ($70 savings) and spent $150 on accessories (helmet, light, etc).  Every time I rode or saw the bike, it reminded me of my travels and commitment to living a healthy, fabulous life.

If I had bought the bike initially, I would have spent only $570, instead of spending a total of $930, with $360 wasted on crap.

I hated to say it, but my dad was right.  The experience reminded me that psychological factors affect my buying habits.  When I tried to sweep the feelings under the rug, they trickled out, and I spent on little extras.  I had to admit my feelings to myself before I could stop hemorrhaging cash.

Sometimes the best answer is to go ahead and spend the cash—like in this case where I had the money.  Other times, the best solution is to understand why you want to spend money and find a cheaper or free alternative that provides a similar feeling.

Being Financially Fab means being aware of why you spend money. When you understand your motivations, you have a hell of a lot more control over your cash. 😉

When was the last time you were in a similar situation?  What did you do? Do you know how feelings and psychology affect your financial decisions?

Why brand names aren’t worth it?

Not worth the brand price

Brand names aren’t worth it if I’m paying for extra bells and whistles that I didn’t want in the first place.

I pay for extra brand names only when the brand adds something that’s necessary to meet my requirements.

For example, I buy store brand canned foods, frozen veggies, laundry detergent, and just about anything else that isn’t important to me.  I could buy Tide detergent. Tide makes a great product. But the cheapest detergent on the shelf also washes my clothes just fine. Why spend more money on Tide if a cheaper product meets my requirements? Why pay more for bells and whistles that don’t matter?

Traveling abroad has made me appreciate fresh produce.  Now, I avoid buying fruits and vegetables from your standard American grocery store because the produce is neither delicious nor fresh.  I usually buy produce from Trader Joe’s, (which has higher quality produce than most grocery stores but lower quality than Whole Foods).  Occasionally, if I want something that isn’t available at Trader Joe’s or the quality there is subpar, I go to Whole Foods. For example, I’ll go to Whole Foods for a good mango. Other groceries stores don’t meet my requirements for a juicy, fresh, delicious mango. Hmmmm.

Delicious mangos worth the extra dollar!

Notice that I don’t go to Whole Foods for all my produce. I know that Whole Foods and farmer’s markets have the best fruits and vegetables available to me.  I don’t need best.  I just want food that meets my taste requirements.

To use a shopping analogy, when I want Macy’s quality produce (Trader Joes), I’m not going to Neiman Marcus (Whole Foods and farmer’s markets) for groceries.

How do you decide when to spend extra on brand names? For which items do you buy the store brand? Or always buy the brand name?

How I stayed at the Hilton in Bali with ocean views and a private beach for free!

Private Hilton Beach in Bali

Traveling is part of the FinanciallyFab lifestyle.  It’s an expensive hobby, but when you’re FinanciallyFab, you can do it on a budget!  In descending order, the 3 largest costs are usually lodging, flights, and food.  The key to traveling in style while cutting costs is managing at least 1 or 2 of these large costs.  For my Asia trip last summer, I cut costs from all 3 buckets and paid $Free.99 for hotels!

Flights – book early, save $100s

  • I bought the flight on 3/14 and departed on 5/17. Notice the dates. By flying after the 14th, I got the 2-month advanced purchase price, saving over $100.
  • I normally book flights 2-3 months in advance.  Flight prices go in waves: booking too early (4+ months) or too late (within 1 month) is usually more expensive.
  • When I travel internationally, I prefer foreign airlines. They are usually cheaper and often have more leg room and better quality food. Don’t be afraid to fly non-Western airlines.  I flew ANA, a Japanese airline and had a blast.  The food was good and the customer service was wonderful!

Hilton Pool in Bali

Lodging – pool resources with friends

Lodging is usually where I save the most cash.  On this trip, I stayed at the Hilton for FREE!

  • Singapore: My friend was living in Singapore as part of a 6-month rotation program with his company, which housed him in a 2-story loft apartment in a fancy downtown hotel!  I stayed with him for free.
    • Benefits: $Free.99 for pool, prime location, breakfast, and house keeping
  • Bali and Malaysia:  I was traveling with four friends and one of them used his hotel points with Hilton to book the rooms.  We stayed at the best hotels in South Bali and Kuala Lumpur, Malaysia for $Free.99.  🙂
    • Benefits: Private beaches in Bali, free dinner appetizers & wine, free breakfast, gorgeous pools, gyms, internet, and downtown location in Kuala Lumpur

Food – enjoy lower cost of living

  • Since every place we stayed offered free breakfast, I only had to think about 2 meals a day. I bought a few snacks from the grocery store to use for day-time snacking and cut down on lunch costs.  We chose reasonable restaurants for lunch and dinner, splurging occasionally.
  • A fancy meal at the Hilton may cost $75 / person in the US and only $20 in Bali. A key reason I started traveling abroad is that my dollar goes much farther.

You can trim costs traveling anywhere in the world! Let me know where you want to travel in FinanciallyFab style?