My very first “business” was buying and selling used Palm Pilots and Apple Newtons. I would negotiate back and forth over the smallest increments of money, both on the buying and selling side. When I first started, my inventory was one Apple Newton, so it was important that I get the best price possible.
After making a little bit of money buying and selling these things I had some savings and could start buying things for myself. As you might imagine, I used the same principles in buying those things and still tried to save the most amount of money possible.
I started all this in high school and college, and a lot of my peers were frugal, though often in different ways. I noticed that most frugal people care about absolute price rather than value, whereas I only ever cared about value.
As I grew up, though, I noticed that most of my peers stopped being frugal entirely. Frugality was a response to not having enough money, not to wanting money to buy them more utility. Once they had enough money to buy things, the frugality switch turned off.
To some degree, that makes sense. I used to scour the internet to save a few dollars on a purchase, but now I’ll just buy most inexpensive things on Amazon.
On the other hand, I still apply some ingenuity to all big purchases. I’ve never bought any car that was newer than 15 years old (except for a shared van in Hawaii that was 10 years old). I’ve split 4 different properties across the world with 6-10 friends each, but besides splitting the cost I did a ton of research on each one to find incredible deals. The average purchase price per property across our island and apartments in Vegas, Tokyo, Hawaii, and Budapest was around $75k (not per person, total).
Those are some of the biggest purchases, but I also do this for medium level purchases. When we bought solar panels for our house I got on the phone with all of the well-rated shops in town and negotiated the price. The price we paid to have our floors redone was 1/2 of the first quote I got. I wanted a solid wood door so I watched Craigslist until I found an awesome one for $80, instead of paying the $500-1000 a good solid wood door would cost at home depot. I waited to find the exact hot tub I wanted on OfferUp and got it for $500 vs $3000.
If you’re thinking, “yeah, but the whole reason I make money is so that I don’t have to save a few bucks here and there”, you’re totally missing the point. Frugality when you have money isn’t intended to make ends meet, it’s to multiply what your money can do for you.
If you develop the habit of trying to maximize the value you get for your money (above a certain threshold), you can have an incredibly luxurious life for less money than most people spend for a very average lifestyle. Or you can have an average lifestyle but save enough money that you can retire decades earlier.
How do you actually do this? The first is to think about purchases in terms of value. How much better is a new car than a car that’s 10 years old? It’s better, sure, but is it 3x better? If it’s not, then why buy it? Is it worth 10x the real estate prices and an extra income tax to live in California? If you can make 10X the money there than it probably is, but if you make the same money elsewhere, it may not be.
Next, be willing to put a little bit of time and effort into finding deals. The effort should be proportional to the value you will get out of it. The value of owning a private island was, to me, almost infinite, so I looked at every single island for sale within my price range. If I’m going to buy a pool pump and can save a maximum of $200, maybe I’ll put in 15-20 minutes.
At first finding deals feels like a hassle, but once you get good at it, just like most things, it becomes fun. I actually have to stop myself from going down rabbit holes to save small amounts of money because I enjoy it so much.
Many people follow the fallacy of “I make $X/hr at work, so anything that saves me less than that isn’t worth it”. While it’s true that you shouldn’t take an hour off of work to save half your hourly wage, that’s usually not the trade-off. Most of us have some underutilized time that could be spent saving money and dramatically increasing our lifestyles. For me the trade-off is more like, “Is it worth looking for deals or researching a big purchase instead of reading Reddit or Hacker News?”
Any time you’re making a big purchase, think about its value and what you could do to either increase its value for the same price or to lower the price you have to pay. Take pride in being frugal not because you have to be, but because it enables you to live a better life with less stress.
###
I just got back from Cabo, Mexico, where we got to go whale watching. This is the closest I’ve ever been to a whale and it was really cool.
Leave a Reply