Poor people try to find the best deal. Rich people have better things to do.
At least as far as small purchases are concerned.
Think about it. Many poor and middle-class people do anything they can to save a buck. They clip coupons, drive across town to get $5 off, wake up incredibly early for Black Friday sales, and spend hours online trying to see which website has the cheapest Keurig coffee machine knock-off.
On the other hand, could you imagine a wealthy person doing this? Probably not. It’s not that wealthy people don’t like a great deal. They just understand what is and what isn’t worth their time. They also understand the 80/20 rule.
So for starters, rich people don’t really care about saving a buck here, $20 there. They understand that if something is really a lot cheaper, it will usually come with a catch. And sure, some stores have loss leaders but those items usually take a lot of time researching to discover when they are coming and you also must need the item when it comes up for sale. Rich people understand that the effort expounded to save a small percentage of the regular purchase price usually isn’t worth the time and stress.
Though you may be thinking that your Uncle Scott has a lot of money and he clips coupons. That’s great. Good for Uncle Scott. But I’m willing to bet the only way he got fairly well off was the easy way. That is, he doesn’t spend much money and he’s never really made that much money at any given point in time. So Uncle Scott may be doing alright for himself but he’s not the type of rich we’re using in this example.
The 80/20 rule is understood by the wealthy. They understand that 20% of their efforts yield 80% of the rewards. Sorry to anyone who loves coupons but the only way couponing could fall into the 80% rewards category is if you live well below the poverty line. Rich people just don’t care about these small wins.
A point does come in which rich people do like saving money. These are on big ‘wins’ such as car buying, house buying, business buying, expensive suit buying, and maybe even yacht buying. That’s because, for about the same amount of time as it takes to wait in line outside of Best Buy on Black Friday, they can negotiate a better price on something that really matters.
Okay, you’re now probably thinking that you have nothing better to do than to price comparison shop on the weekends. And you may find it exhilarating (I believe that’s why most people like saving money – because it’s fun – not because it makes sense). You may think that since you “can’t” work on the weekends making money, you may as well try to save it. Stop. Stop now.
Everyone can work whenever they would like. You may not be a freelance writer who can write an extra article on a Saturday morning, but you can advance your career at any time even if you think you only work a mundane 9-5.
Focus on rewards that take some time to pay off. Search job postings to see if you’re being paid justly. If not, research ways to ask for a raise. If you are paid well – look at getting a promotion. You can also network with people from your industry by sending emails – even at odd hours. You can spend time taking online classes or picking up skills on your own that will advance your career. Pretty soon – you’ll have what it takes to make another $10,000 per year.
So stop focusing on the small wins that take far too much of your valuable time. Don’t seek out the best deal. Seek out a fair deal that doesn’t take too much of your time. Then use that time to invest in yourself so you can make more.
Sorry to burst your couponing bubble. If I’m wrong, feel free to let me know in the comments.
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I think it all comes down to context. There is nothing wrong, when one needs to do a big grocery shop, to take 20 mins to look through where the best deals on the majority of what you want to buy are, if there are any readily-available coupons or extra discounts to be accessed, so much the better. But there’s a tipping point, and that involves driving anywhere further than your normal orbit for a small saving. People don’t count time or petrol and they should, those things are expensive!
It’s nice, I always do 80/20 rule. Don’t spend so much money on it.
I agree with this post. It takes a lot of work hunting for deals, small deals that many times it’s not worth the trouble. You may waste more time and money in gas driving across town to use that coupon at a particular store….just to say you got a great deal.
Actually I’ve been a lifelong comparison shopper and this significantly accelerated my path to financial independence. But I see your point so let me explain.
As you suggest I don’t shop for ‘stuff’, I need very little and a huge percentage discount on something I don’t need doesn’t save me squat. What I invest my time and effort shopping for is stocks. Over the years I’ve learned how to better distinguish bargains whose share price will likely recover from crashers who will continue to languish. These ‘best deal’ market mispricings are what my money goes into, and over the years the returns have added up.
So while I agree it’s not worth the time and effort to shave pennies here and there on personal expenses, I would suggest to any young person with an analytical bent just starting out is to (1) keep a high savings rate and (2) learn how to parse financial statements in order to accurately appraise future valuation prospects. As you’re climbing the learning curve put the proceeds of (1) into an index fund, but as you make progress on (2) wean yourself into individual share trades based on your research. And BTW do take the time to shop for low fees and expenses on your mutual funds!
I admit I tend to try and look for the best deal. In some ways it’s fun for me because I’m trying to think of creative ways to find a bargain. But at the same time I am an aggressive saver and try to put as much money into my stock portfolio. I mostly have ETF’s, but only invest in large single stock companies that are easy to understand and visibility.
Freebird, any tips on trying to find undervalued stocks?
Ron, just a few thoughts that may be obvious to the experienced–
(1) diversify your bets, don’t put too much into any one idea because these turnarounds are statistical in nature and you don’t want to get hurt badly by one wrong call. My batting average is sub 250 and net returns come from the skew (winners more than make up for the losers even though they’re way outnumbered).
(2) my preference is towards small caps that nobody has heard of because I think widely followed names are less likely to be mispriced significantly. But with the greater opportunity comes greater risk from adverse selection, so you really have to know what you’re doing in this space.
(3) read the classics like Graham & Dodd and use their methodology as a starting point. You’ll have to tweak it to make it work in today’s market, but understand how the pieces of financial statement data fit together to give a rough picture of recovery odds. For example over the past few years small bank workouts have done well for me, but I never buy shares before combing through their FFIEC reports. I think doing this homework kept me out of trouble after a rash of early disasters.
Buying stocks, even if they are overvalued, can be argued to be a good purchase since any money going to investments is less going to wasteful spending. Of course, buying shares on a discount is even better!
Don’t get me started!!!!
My wife and I have this debate all the time. She’ll drive 10 miles and spend 30 minutes saving 10 cents on a bottle of ketchup!
Ok, so it’s not that bad, but the idea is the same. There’s a cost of time as well as other costs (car wear and tear in my example) that are unseen and really make that “deal” not a deal.
My advice to you is “Happy Wife, Happy Life :)”
Pick your battles!