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Wednesday, February 18, 2009

Reduce Spending without Sacrificing Lifestyle #4 - Be Choiceful on Options

We've started tightening our belts in the My Wealth Builder household. Our target is to reduce our annual expenditures by 5% without any reduction in our current lifestyle. Our first idea was to eliminate waste , i.e. money that's spent on goods and services but not effectively used. Our second idea was to buy below the regular price. Our third idea was to take advantage of free offerings. Our fourth idea is choose only the options we need when making a purchase.

A common marketing tactic is to get consumers to trade up with additional options or features and, therefore, pay a higher price. While some options may be worthwhile, we are making a conscious effort to choose only the options we need in any upcoming purchases


  • Vehicles. Although we are not currently looking to buy a car, my favorite example is an automobile purchase. The base model is often a functional vehicle, with the requisite safety features. From there, a purchaser can add leather seats, electric locks, premium audio, sunroof, etc ... the list can be very long. It's quite easy to forget about the main purpose of the item and become caught up with nice but not necessary options.

    I admit that I have purchased cars with many of these options. However, I've now think that leather upholstery and a premium audio system may be better options for our home versus a car. For my most recent vehicle purchase, in 2003, I bought the base level truck, i.e. manual transmission, air conditioning, and cassette/radio. Even though it doesn't have any options, it gets me from point A to B as fast as any loaded luxury vehicle on the road.


  • Insurance. It's easy to be overly cautious and over insure against a loss. One way to reduce premium costs is to reduced the number of things for which one is insured. When we first purchased our house, I insured against sewer backup since we had a finished basement. After moving in, I caused the sewer management department and learned there had not been a sewer backup in our neighborhood since it was built. We dropped the coverage soon afterwards.

    We typically take higher deductibles when insuring our home contents and automobiles. I will be reviewing the deductible limits again since it has been five years since we purchased our house and cars. It may be worth dropping collision on our automobiles.

    Finally, we never buy extended warranties on any products we purchase. If it isn't made well enough to last past the one year warranty, then I would prefer not to buy it :-)


  • Gadgets. It's easy to get caught by the options offered by gadgets. GPS vs. reading a map. A laser level vs. a standard four foot level. An Ipod vs. a home stereo system. A blackberry vs. a cell phone. For me, the simple base option is sufficient for my needs. In the case of a cell phone, my choice is even not to own the base option.

    Of course, if I get an option at no additional cost, as I did with a free Ipod, I am happy to accept it:-)
  • Overall, we are already very choiceful when deciding about options. Our main opportunity is to review our insurance choices to determine if there are possible savings.


    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial or insurance advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    1 comment:

    Anonymous said...

    I wrote about a similar thing recently. Especially the thing about eliminating waste. I used the tactic of delaying purchases for that. What I did was tell myself that whatever I want to buy I will buy with my next paycheck. In a lot of cases I didn't even remember that thing in the next 15 days.