Sometimes, spending more is cheaper

Posted by Tad Johnson - Mar 17th, 2008 at 19:03

As a vicenarian, and reader of this site, you’ve heard the same adage before : spend wisely, save money, and you’ll end up rich. This equation works well, but that first point is often the hardest to master.

suit.jpgOne common mistake in spending wisely is thinking to always spend less. In many cases, spending less is actually counter productive–to put it another way, you can actually save money by spending more.

The difference, as you might guess, is quality. Often, you’re faced with the choice of spending $5 on a cheap item, or $10 on the more expensive version. You might reflexively reach for the former, and you might be wise to do so. The key question is, will the more expensive item last twice as long (or longer)?

Trouble is, it’s not obvious which items are worth the premium and which aren’t. I’ve written on these pages previously about generic brand food, which is an example where the cheaper version is a great bargain. By contrast, men’s business ware is an area where spending more can save you money in the long run. (I chose men’s clothing over women’s because that’s what I know. By all means, please educate me in the comments.)

When I was graduating from college and ready to start interviewing, I tried to save some money on buying nice clothes. I bought a suite, some shirts, and a few ties at the Men’s Warehouse. Big mistake! Sure, I spent less than I would have at a nice department store, but I ended up with less-than-high quality clothes. The shirts wore out quickly and the slacks already busted a belt loop. (And the tailoring wasn’t exactly top-notch either!)

Fortunately, a good friend of me steered me in the right direction. Since I started working, I’ve been buying dress shirts at Brooks Brothers. I pay a little more for each shirt, but they last much longer, fit well, and are visibly well made. By spending a little more up front, I’ve easily saved money over the long run.

What are your suggestions for buying quality vs. price? Share your experiences in the comments below.

Distinguish yourself at work : write!

Posted by Tad Johnson - Mar 14th, 2008 at 8:03

In college, I was shocked and dismayed by the range of writing abilities in my classes. Some students could crank out a well structured essay in their sleep; others struggled with basic grammar. Due in large part to the years of top-notch instruction offered at my Minnesota public high school, my skills marked towards the higher end of the spectrum. Assuming the university process would run its course, I didn’t dwell too much on this writing ability disparity–until now.technical_writing-1.jpg

My current employer (a very large, global corporation) is in the process of updating its quality policies and procedures. We’re operating in an FDA-regulated industry, so there’s a strong emphasis on written documentation. Therein lies the irony: by and large, the quality documentation we’re creating is low quality. As an organization, we love tracking schedules and cost, but there’s very little emphasis placed on good quality writing.

Just this week, I read through about 200 pages of documentation and found hundreds of errors. Some are benign–spelling errors, stray punctuation, etc. while others reveal a deeper problem: tenses that change mid paragraph (or mid sentence), adjectives that don’t agree with their nouns, over-use of the passive voice, fragmented and run-on sentences. The very documents that are required (by law) to spell out our quality systems and procedures are written such that they’re extremely hard to understand. This is a problem!

Fortunately, there is a very healthy industry built up around technical writers (mostly English majors who decide to seek a pay check). Unfortunately, my company does not seem to recognize or value the skill of clear writing so we aren’t hiring them.

My takeaway from this experience is a redoubled appreciation for strong writing skills. If you’re still in college (or high school), please take more English classes. If you’re early in your career like me, please take writing seriously. Read books (lots of them!) to study the work of other good writers (no, blogs do not count). Write your emails, documentation, and other correspondence with your favorite English professor in mind. Better yet, write a blog–and practice, practice, practice.

We live in an age of information abundance. Sharing that information through writing is a skill that will only increase in value. Do yourself, your colleagues, and our culture the favor of demanding quality writing from yourself and those around you.

A penny saved

Posted by Tad Johnson - Mar 11th, 2008 at 19:03

I believe it was Benjamin Franklin who coined the phrase “a penny saved is a penny earned”. In today’s economy, this isn’t quite true. A more accurate version is “a penny saved is a little more than a penny earned”. This extra, of course, is interest.

penny savedCompound interest is a pretty magical thing–it turns a little bit of money into a lot of money over a long period of time. This is why we all save money in Roth IRAs, 401(k)s, and the like. There’s just one little problem–saving money is no fun.

Sadly, I don’t have anything to offer that somehow makes saving as much fun as, say, a weekend in Vegas. What I do have is human psychology that affirms spending money isn’t nearly as fun as we think. I read about this most recently in the books Stumbling on Happiness and Deep Economy.

The thesis goes like this : we think that buying that new car, or new computer, or new pair of jeans will make us happy. More so, we think that the really expensive car/computer/jeans will make us really happy. But once we buy them and the initial glow has worn off, we discover that even a Porshe is just another car. And that brand new iMac is just a vehicle to the same old internet. And those designer jeans feel about the same as the less expensive pair.

For the vicenarian, understanding this psychology can be a powerful tool in happily saving money. Since you know (once you’ve read the above books) that buying stuff doesn’t make you as happy as you expect, you can more comfortably choose not to spend. Or, to be more precise, you’ll spend your money on the things that really make you happy (dinner with friends) and less on the stuff that won’t (expensive gadgets).

The dollars and cents of saving energy

Posted by Tad Johnson - Mar 6th, 2008 at 21:03

The green movement is [finally] gaining traction in the U.S. Driven in part by $100 oil and climate change science, companies are actively marketing to a green conscious consumer. In turn, the consumer is starting to prefer products that require less energy. In a moment of sublime corporate cliche, this is a true “win win”.

Most of us pay between $0.12 and $0.15 per KWh (killowatt hour) of electricity. This is a somewhat abstract figure; let’s see how it relates to real life.

Above is a graph comparing standard incandescent and compact fluorescent (CFL) bulbs. You can see that the dollars and cents really start to add up; over a month a CFL bulb will save you over $4 in electricity costs. (In the interest of full disclosure, this is assuming the bulb is on 24 hours a day; hopefully this is not the case. Even so, you get the idea.)

green-basics-cfl-white.jpgThe savings above reflects the energy savings of one bulb. Chances are, you have at least 15 light bulbs in your apartment/condo/house that could be swapped for CFLs. Not only are you reducing the environmental impact by cutting energy usage, you’re saving money as well. Excellent!

Of course, the savings don’t stop there. Turning down the thermostat by a degree or two in the winter (and up in the summer) will yield more savings. Reducing your hot water usage will likewise save money in the cost of heating that water. It’s surprising how easily you can save money on energy costs with a minimal effort.

Not only will you be saving money, but you’ll feel good about yourself for doing your part to cut energy usage. Fantastic!

Save on groceries : buy the store brand

Posted by Tad Johnson - Mar 4th, 2008 at 23:03

Here’s a fun little secret about groceries : nine times out of ten, the name brand and the store brand product are virtually identical. The only real difference is that one costs 20% more. In fact, most packaged food products are processed at the exact same facilities using the same ingredients. The only thing you’re buying by paying more for the name brand is just that–the name.

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As with all things, there are some cases where the flavor or quality is noticeably different. Cheerios and the generic equivalent are going to taste the same (toasting oats is not rocket science). The store brand Honey Bunches of Oats might not have the exact flavors or ratios down, so this might taste a little different. Even so, is it worth the added cost?

Knowing full well that their products are generally indistinguishable from the cheaper store brand, the major food companies spend millions (or is it billions?) every year on marketing. There are some very smart people getting paid very well to convince you that Pop-Secret popcorn is better than the generic. The irony to this is that the reason they charge you more is (in part) to cover their advertising expense. Since the store brands never advertise, you pay only for the food itself.

store-vs-brand.jpgIn the case of over the counter medicine, the savings are even better. Once a drug enters the generic market, you can buy a store brand of the exact same drug for 50% or less. It’s truly remarkable.

Armed with this knowledge, think carefully next time you’re shopping for groceries. You just might discover that you can save an extra $20 a week by switching to the store brand. And as we know, that makes a nice addition to your Roth IRA or 401(k).

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