Author Topic: Buy for Life vs. Savings  (Read 7734 times)

smalllife

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Buy for Life vs. Savings
« on: September 10, 2012, 06:24:20 PM »
I was hoping I could pick everyone's brain about an inner debate I've been having.   

Let's assume for the sake of discussion that there is no debt over 4%.

Is there a point of diminishing returns when buying quality products?  Is there a point when the upfront cost for quality is not worth it?  Would circumstances - debt, mortgage free, savings rate - affect your answer? 

I keep going back and forth.  On the one hand I can't fathom "wasting" money on a product that may last a few years only to replace it with the version I wanted to begin with. (And yes, I have done that in the past.  I've tried to stop).  On the other hand quality item x is a good chunk of my monthly income and keeps me in housing debt that much longer. 

Thoughts?

Peter

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Re: Buy for Life vs. Savings
« Reply #1 on: September 10, 2012, 09:55:42 PM »
I have a hard time saying "no" to once in a lifetime purchases that won't become outdated.
One justification I like to keep in mind, is that the thing you want is subject to inflation. If you wait 5 years the item is going to cost 10-15% more. So you might as well get it now.

arebelspy

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Re: Buy for Life vs. Savings
« Reply #2 on: September 10, 2012, 10:31:25 PM »
One justification I like to keep in mind, is that the thing you want is subject to inflation. If you wait 5 years the item is going to cost 10-15% more. So you might as well get it now.

..and the money you invest by not spending will increase as well (hopefully faster than inflation).

Ditto if you're comparing it to paying down debt.

That doesn't mean it's a bad idea in the OP (or a good one), I just don't see the inflation argument holding water at all.
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smalllife

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Re: Buy for Life vs. Savings
« Reply #3 on: September 11, 2012, 07:30:17 AM »
I have a hard time saying "no" to once in a lifetime purchases that won't become outdated.

This is what hangs me up as well, especially as these purchases are replacing broken items - I would be spending some money regardless (just not as much). 

I worry about not finding similar quality 5-10 years from now rather than inflation.  5-10 years from now a chunk of the debt would be gone just paying the minimums.

So I guess I'm leaning towards buy, even though it feels decadent to spend a significant amount of money on any item.

arebelspy

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Re: Buy for Life vs. Savings
« Reply #4 on: September 11, 2012, 07:53:56 AM »
I'm not in a buy for life phase yet.  I still plan on moving around, shedding "stuff," etc.

At some point, once my life is settled into a "doing X for the long haul" I may buy long term items (nice furniture, for example).  For now, I'd rather wait on buying those things and throw all money into the FI fund.

The wife and I keep a "someday" list of items we'll own someday.  Stuff we want, but not necessarily right now (especially in our small condo).  A KitchenAide mixer, for example, is on her list. 

I guess it really depends on the item though, because if we want it now, we will buy it now...  Do you have some concrete examples in mind, something you've wrestled with whether or not to buy?
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smalllife

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Re: Buy for Life vs. Savings
« Reply #5 on: September 11, 2012, 08:29:45 AM »
I've "inherited" a lot of quality furniture free from relatives who are downsizing.  I'm talking about

-quality cookware (I've been hunting craigslist for two months searching for a cast iron pot and pan with no luck)

-a leather purse (A want yes, but I would use it everyday forever. This is really the one I'm debating: I can no longer morally justify buying items from Target or other big box stores. I have my eye on one that is near perfection.)

- a few select clothing items (Same deal with big box stores.  I have a hard to fit body type: aka 2nd hand stores aren't worth the effort and you pay for quality/fit.  I am by no means a big shopper, just replacing cheap clothing as it dies - all classics and in the same style I've had for years, just better.)

-a second bike for longer distances as opposed to by sub 5 mile daily travels.  Unnecessary and at the bottom of this list, but I have been putting a little bit here and there towards this purchase.  I would love to get into touring and really exploring my city by bike. 

I should say that my ideal is to pay off the house and work part time for the rest of my life.  25-30 hours is perfect for my temperament, to keep me occupied, and to have a high enough level of social interaction to stimulate my brain.   I don't make a ton of money but am frugal and able to focus on long term goals.  Thus, purchases such as these might delay that by a few months or a year but I can't put my life on hold for a decade while I get there. 

bogart

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Re: Buy for Life vs. Savings
« Reply #6 on: September 11, 2012, 09:16:51 AM »
We debate this somewhat too.  I've bought new cars (sometimes) because I drive them forever and the marginal (if any) extra cost of those early, trouble-free years together with getting to choose exactly the features I want (can) seem worth it (depending on assorted factors).  And after living in our house for ~12 years we had a major remodel done on about half the total house which -- OMG has made living there SO much nicer.  I've recently worked out what I want to do to the other half of the house and am now itching to do that, but waiting.  I plan/hope to live out my life in this house, so can enjoy the improvements for decades (and some are specifically intended to help with my "aging in place" goal), but have some other priorities ahead of that in line.  Still, it is one of those things, i.e., knowing that every year I don't have the (second) remodel done, is a year I enjoy living in the house less than I will once it's remodeled...

OTOH I've recently started to contemplate getting a tablet (Ipad or similar) and of course there I know that any positive interval of time I delay, I'll be able to get a better machine cheaper down the road.

TwoPupsOnACouch

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Re: Buy for Life vs. Savings
« Reply #7 on: September 11, 2012, 08:28:44 PM »
I try to think of cost per use when making a decision.  For example, I gladly drop $60-$100 on chaos sandals.  My current pair looks brand-new, but I've worn them almost everyday for over two years.  I even use them as watershoes in my water aerobics class.  So since my last current pair was $65 and we'll assume I've worn them for 730 days so my CPU is .089 so far.  I only wear heals 2x per year (weddings) and my last pair cost me $35 at an outlet, two years ago.  So my heals have a CPU of (35/4) $8.75.  Not bad, but certainly it does seem that my chacos sandals are by far a better purchase although they cost almost twice as much up front.

ShanghaiStashing

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Re: Buy for Life vs. Savings
« Reply #8 on: September 12, 2012, 03:20:26 AM »
If you look at your life like a business, you are effectively trying to determine how to allocate your scarce capital against a series of opportunities to minimize cost and maximize financial returns. Companies weigh these decisions all the time (e.g., when deciding on technology purchases many companies will weigh retrofitting existing devices for ~2 years additional usage, buying or leasing older models and buying or leasing new models), and these decisions are ultimately no different in your personal life. The only difference is that companies are driven by a series of rational investment imperatives and have to answer to their shareholders. We are driven by our emotions and often buy based on gut feel over hard, calculated facts.

In order to accurately determine this, I think we have to actually look at total cost of usage and ownership over time (I haven't read all his posts, but I think Jacob at ERE basically says something identical). All of the items we purchase have a function that they perform for us and come with a unique set of purchase, ownership and operating costs. When you take all of these costs together they form the 'lifetime cost of achieving X activity'.

This is effectively the argument behinds MMM's vehicle purchasing schematic. Instead of looking at a vehicle as a product, he views transportation as an activity and looks to minimize the all-in cost of going from point a to point b when utilizing a vehicle. To make this more practical, the MMM effectively says the average person drives 10K miles per year (ok less if you are actually moustachian), with an average active driving lifespan of 69 years (85 average lifespan - 16 years old when starting to drive = 69). The goal is to find the cheapest possible way, while still being safe of driving those 690,000 miles over the course of your life, including vehicle cost, repairs, insurance, gas, opportunity cost, etc. There is an optimal purchase price and model, length of vehicle ownership, and operating circumstances that will allow you to minimize the costs and make the correct vehicle choice.

This concept can be extended to virtually any capital item you will purchase, but with admittedly diminishing returns as you get into smaller dollar amounts of capital. In order to do the calculation properly I think you need to know the following: purchase price, expected usable lifespan, cost of ownership (repairs, insurance, etc.), operating cost (e.g., power consumption, gas usage), opportunity cost (e.g., lost financial returns from capital investment). I likely missed a few things in this list.

I'm too tired to give a highly detailed example, but I'm sure a simple excel spreadsheet could be built that would allow the easy calculation of different ownership scenarios to minimize cost for a given function that you want.

Richard3

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Re: Buy for Life vs. Savings
« Reply #9 on: September 12, 2012, 03:45:21 AM »

JJ

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Re: Buy for Life vs. Savings
« Reply #10 on: September 12, 2012, 05:06:52 AM »
... I likely missed a few things in this list.
Yes - one big one which is hard to quantify is the joy of using something which is made properly, and the other, which is often overlooked by business, is the cost of using poor quality.  A couple of examples - decent pots pans v. crappy ones.  Crappy ones are thin and you get uneven heat transfer so you don't just suffer from having a pan where the handle breaks in 13 months (just after warranty runs out), you burn more food which is a hidden cost in a typical cost of ownership calculation.  For a business buying IT gear there is often a huge hidden productivity cost with unreliable equipment.  A system freeze when you are "working in the zone" doesn't just lose the 5 minutes to reboot, it loses the 45minutes it takes to get back in the zone after an interruption.  For tools which you use all the time (kitchen, workshop, office) it always pays to pay a little more and get something reliable and long lasting.  Of course, you can swap dollars for time on Craigslist chasing down a bargain.

ShanghaiStashing

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Re: Buy for Life vs. Savings
« Reply #11 on: September 12, 2012, 10:40:54 PM »
@JJ

While I definitely agree that there is an inherent joy in using something well made, it is something I personally struggle with as I think this can pretty easily lead to anti-frugal behaviour in the name of 'joy'.

One thought I had as I was reading your post is that I think you were describing two separate types of costs. The first being an emotional cost to using something that is inferior, or a lack of joy from it. The second is a real cost that is harder to detect, e.g., wasteage from crappy cooking pans or downtime from reboots.

I suspect there is a broader point in what you were saying that I think is quite good, which is simply to consider all costs of specific products you use. In many cases buying a better quality product offers more return than a lower quality product.

JJ

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Re: Buy for Life vs. Savings
« Reply #12 on: September 12, 2012, 11:08:54 PM »
Hi ShanghaiStashing,

Spot on - there were two key points - is it nice to use, and are there hidden costs in going cheap.  In my opinion, they are related.  Something that's a joy to use usually has hidden lower "inefficiency" costs.  However, you do need to balance inefficiency per use with number of expected uses. 

smalllife

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Re: Buy for Life vs. Savings
« Reply #13 on: September 14, 2012, 03:18:44 PM »
While I definitely agree that there is an inherent joy in using something well made, it is something I personally struggle with as I think this can pretty easily lead to anti-frugal behaviour in the name of 'joy'.

I think that is a very good point, and one that runs dangerously close the the "I deserve it" reasoning for consumption.  Unfortunately that's one of my weak spots - justifying having minimal belongings by having quality.  And yes I do consider it a weak spot because I tend to gravitate towards the more expensive quality pieces.  I have had only two purchase regrets along these lines, both "classics" (I did read Jacob's post and that is where my question originated from) but not "me". 

JJ

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Re: Buy for Life vs. Savings
« Reply #14 on: September 14, 2012, 11:11:22 PM »
While I definitely agree that there is an inherent joy in using something well made, it is something I personally struggle with as I think this can pretty easily lead to anti-frugal behaviour in the name of 'joy'.

I think that is a very good point, and one that runs dangerously close the the "I deserve it" reasoning for consumption.  Unfortunately that's one of my weak spots - justifying having minimal belongings by having quality.  And yes I do consider it a weak spot because I tend to gravitate towards the more expensive quality pieces.  I have had only two purchase regrets along these lines, both "classics" (I did read Jacob's post and that is where my question originated from) but not "me".

Buying something of poor quality which you hate using every time you pick it up seems a lot closer to mindless consumption than buying something of lasting quality which you enjoy using.  You can put your own checks and balances in to avoid the "I deserve it" mentality.  You can do the maths too - good gear doesn't disintegrate in your hands as you use it so typically it doesn't depreciate fast.  If you regret buying your classics you can probably sell them for not much less than you paid, particularly if you bought them second hand to start with. 

Maybe I've just reached a point in my life where I realise time is running out and I don't want to waste it struggling with rubbish, then having to go out and buy another piece of rubbish to replace the first one which broke.  I also don't like the mentality of a business that it happy churning rubbish out, wading through the planet's resources to make something which they know full well will end up in landfill within a couple of years, most likely building it in a factory in a developing country with appalling working conditions.

There are a couple of interesting side effects of seeking out high quality.  First, you typically take the time to look after well made gear so it doesn't degrade.  Second, you do tend to break the habit of impulse "I deserve it" buying naturally - these days it takes some effort to seek out quality and this tends to make purchasing more thoughtful.

C40

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Re: Buy for Life vs. Savings
« Reply #15 on: September 15, 2012, 09:57:28 PM »
(Sorry if this has been said, I didn't read all the posts)

If you do so reasonably, definitely yes. Jacob covers this well in his blog and book (and maybe in the link posted in this thread?)..  The way to do this reasonably is to buy items for life when you can get them inexpensively.

Here's one example - Cast Iron frying pans. You can find old pans on Ebay (Griswold is a common brand) that are in good shape and really can last the rest of your life. I bought a pan about a year ago that I believe is much older than myself and it is in great shape - for around $20-40  (can't remember). So, don't go out and buy a super expensive item brand new and make an excuse for yourself that you're buying for life. Do the comparison... do the math.. and make reasonable decisions.




smalllife

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Re: Buy for Life vs. Savings
« Reply #16 on: September 16, 2012, 12:11:04 PM »
Here's one example - Cast Iron frying pans. You can find old pans on Ebay (Griswold is a common brand) that are in good shape and really can last the rest of your life. I bought a pan about a year ago that I believe is much older than myself and it is in great shape - for around $20-40  (can't remember).

I just wanted to say thank you.  I've posted quite a bit of things on Ebay over the years but never the heavy stuff - that went Craigslist or Goodwill.  I had given up on Craigslist in my area for cast iron pans but looked at Ebay after your post.  Looks like I found where I'm getting my pots and pans from :-)

I do have a question for you though.  There are a few items, clothing and accessories, that rarely show up used or on sale precisely because they are well made and the owners put thought into the purchase.  I wait for sales when I can and rarely buy unless it fills a gap or I've given it a 30 days waiting period.  Would you buy a "for life" purchase at full price, expensive up front but still a fantastic price per wear over time?

igthebold

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Re: Buy for Life vs. Savings
« Reply #17 on: September 17, 2012, 10:54:10 AM »
I do have a question for you though.  There are a few items, clothing and accessories, that rarely show up used or on sale precisely because they are well made and the owners put thought into the purchase.  I wait for sales when I can and rarely buy unless it fills a gap or I've given it a 30 days waiting period.  Would you buy a "for life" purchase at full price, expensive up front but still a fantastic price per wear over time?

If it's a *need* and I literally can't find it used, I'll happily pay retail for something that will last a long time. If I have a bad feeling about buying it retail, I'll try to write out why, since it may end up not being a need. Sometimes, I'll just wait a long time and try to convince myself it's not a need. If it stands up to that test (and all the while I'm looking for sales and used), I'll just buy it. I seldom have buyer's remorse after a gauntlet like that.