SPEND MORE now to SAVE MORE later
October 23, 2013As financial educators, it is important for us to solicit feedback from end users so that we know if our education is making a positive difference in the lives of those that receive it. It is also important to report this information back to our clients, so that they can make adjustments to their programs based on the feedback we receive. Since our education is sometimes delivered through live workshops, we often have stacks of evaluations that must be mailed back to our home office in El Segundo, CA.
In order to process this information in a timely way, we often overnight the evaluations, which can cost as much as $50 per delivery depending on what part of the country the package originates. Since our planners may perform over a hundred workshops in a given year, the cost for shipping those evaluations can start to get pretty high. For this reason, our company decided to purchase scanners for each planner so that we may send the information electronically, thus avoiding the time and cost associated with shipping the evaluations.
To the company, I’m estimating an initial outlay of about $2,000, but consider the long-term cost savings. If the average cost to overnight the documents is $25 per delivery, then the company would break even after 80 deliveries. If just four of our planners made two deliveries a month, we’re breaking even in ten months! Everything after that would be savings—makes you wonder why we didn’t think of this earlier.
In the same way, we should be doing this kind of spend now/save later analysis with our own finances. I asked a few of my colleagues to share examples of how they’ve applied this principle at home. Here are their examples, along with a few of my own:
Energy efficient home improvements.
One of our newest planners, Doug Spencer, is looking to make some energy-efficient home improvements next year. Specifically, he would like to replace his windows—a rather large upfront cost, but according to his local utility company, Doug could save over $750 per year. He figures it could take 8-10 years (or less if tax credits are still in place) to break even, but Doug and his family intend to stay in their home for a long time. Doug used energy calculators provided by his local utility to estimate the cost savings of replacing his windows. Check the website of your local utility provider or visit Energystar.gov for more ideas on how spending more now on energy efficiency could save you more later.
Cell phones without a contract!
Our resident finance geek Linda Robertson recently traded in her old cell phone for a new one, this time opting for a phone without a contract. The cost of the new phone was much higher than if she simply upgraded her phone under her existing contract, but as she points out in her recent blog post, switching to a no-contract provider saves her $45 a month, allowing her to break even in about eight months. After that, it’s all savings! Look for a no-contract cell phone provider in your area and decide for yourself if it would be better to spend more now to save more later.
Quality fashion never goes out of style
When it comes to men’s dress shirts, our fashionista Bruce Young doesn’t fool around. For him, it is better to pay for a higher quality, more durable designer dress shirt than to save a few bucks by purchasing a cheaper brand that don’t last as long. For example, Bruce can get a high-quality designer dress shirt for around $90 that will last him several years or he can buy a $30 shirt that will need to be replaced every 3 – 6 months. Plus, he just looks so darn good in the higher-end wear.
A $1,249 vacuum cleaner?
Could you imagine paying this much for something as common as a vacuum cleaner? Neither could I. Yet when you consider how often those “cheap” models break down, maybe a high-quality model that will never be replaced is the way to go. You can read all about the thought process that went into this spend now/save later decision from my September 22, 2010 blog post—one of my boss’s personal favorites.
Don’t forget to rotate the tires
Another example of how spending more now can save you more later is when it comes to car maintenance. For example, whenever I buy tires, I always purchase the “lifetime rotation” program. It usually costs me about $35 at the time, but if I rotate my tires every 5,000 miles, I’ll end up rotating them ten or more times before I need a new pair. Since the grease monkey around the corner charges $15 per rotation, I’m saving over $100, not to mention how much I’m saving in free flat repair.
Stock up and save!
Another common idea among our planners is buying items in bulk. For example, this weekend I bought three filters for my water vaporizer on ebay for a total cost of $18. Each unit alone cost $10. Whether it’s shopping at a local wholesale club or stocking up on food when you have a coupon, buying items with a long shelf life that will eventually be used is another example of spending more now to save more later.
As you can see, there are a number of ways you can save using the spend now/save later approach. If you have any of your own, please share them with us. We LOVE saving money, just like you.