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Buying the cheapest thing you can find certainly isn’t always a great idea. It is good to be frugal but quality is equally as important as price. I fell game to the cheaper is better trap the other day when I was in the market for a cornhole set. You know the bean bag game where you toss bags at a wooden board trying to get them in hole. I used to own a set I built myself but they were to big and bulky so I ditched them.

I went out to buy a set and was presented with two choices, one at $79.99 and one at $99.99. The $79 one was built out of wood and the more expensive one was molded plastic. The frugalite in me decided the cheaper one was going to be the better deal so I bought it. This was actually very out of character for me. I typically research everything to death before I make a purchase. This was a spur of the moment deal and I went with the cheaper option on gut.

Turns out there is a reason I over research everything before i make a purchase.  When I make a spur of the moment decision to buy something it is a bad deal. I picked up the cheaper version and was sorry the first time I went to use it. The bags were like paper, too light, and the boards were cheaply made. If I wasn’t sorry the first time, I was crazy sorry the second time when the board actually fell apart. I tried to fix it but  it was the cheapest, most worthless, piece of crap I have ever purchased. I don’t know what I was thinking. I returned it the next day and I plan to build one from scratch.

The point I am trying to make with this lengthy diatribe is that just because it is cheaper doesn’t mean it is better. Especially if you are making a purchase of something you really will use regularly. I didn’t do what I knew I should have done and I bought a lemon. The more expensive option was better but even it wasn’t the best way to go. Looking back at it the best way to do it was to make my own. That way I know it is done right and better. Cheaper isn’t better, but sometimes more expensive isn’t so much better either. Weigh your options accordingly and then make your decision. Not much comes from split second decision making.

Photo: (GoMattOlson)

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One of the biggest problems facing the world today is our lack of patience. I am just as guilty as everyone else. It seems we are incapable of exercising patience and waiting until we can actually afford to purchase something before we pull the trigger and get it. By afford I mean actually pay cash for the object or service we desire. We want gratification and we want it now! Not next month, not next week, not tomorrow, we want it now. This requirement to be immediately gratified costs us thousands in interest and lost opportunity costs.

We make attempts to justify our impatience like how much more productive we will be with that new iPhone, or how much easier it will be to pick up the kids if we had a third row seat. In either case there is no reason why you can’t save the money up and pay cash for the iPhone or even a new car. The only obstacle in your way is time and determination. If you are determined to make the purchase and you really think your life will benefit from it then you shouldn’t have any problem socking the money away to make the purchase.

The easiest way to do this is to set a specific monthly goal amount to put aside for the purchase. If you want to have a new, well new to you anyway, car then take the estimated amount of the car and split it out into monthly payments which you make into your savings account setup specifically for this purchase. You really need a separate account so you don’t get confused or tempted to use other funds for your purchase. In this manner you are actually earning interest on your payments as opposed to paying it, you can get your car and make money in the process. Like I said the only thing standing your way is time and determination.

Lets say you want to buy a used car worth $25,000.00 that is a lot of money and you probably don’t have it right now. If you need a new car immediately get something you can afford to pay cash for and then immediately start saving for the car you actually want. Instead of making the car payments + interest and carrying the debt you will be on your way to doing something most people only dream of.

If you take the $25,000 car and assume your trade-in is worth $5,000 when you go to trade it in you are going to need $20,000 cash to pay for your car. The typical car loan runs for 5 years so you could take that $20k divided by 60 (60 months in 5 years) and you would need to make payments of $333.33 a month to get your $20k in 5 years. If you want it in 4 years it is $417 in 3 you need to pay $556 per month. Using this same scenario but getting a 36 month loan you would be paying around $2,300 in interest at 7.16%APR.

Using this method you would never have to get a car loan again. You can apply similar principles to any large purchase you plan on making in the future. If you are looking to buy a new TV but don’t have the cash, figure out how much you are willing to pay and how much the monthly payments would be and set aside that money in a savings account dedicated to that purchase.

Delaying your purchases until you can pay cash will not only save you in interest payments but could earn you interest income and reduce your stress brought on by looming debt payments.

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I love Christmas because it give me a chance to decorate my house and take time off of work. This is also one of those times of the year that has historically pissed me off. As you know I used to work as a debt collector for a mortgage company. The most popular excuse for not paying your bills on time during December is Christmas. This irritates me for two reasons; 1.) Christmas isn’t really about presents and 2.) Christmas is the same day EVERY YEAR. Christmas doesn’t sneak up on you and all the sudden half way through November go BOO it’s Christmas. I understand Christmas is an expensive holiday for a lot of people but that is all the more reason to plan accordingly. There are a several ways you can prepare better for next year

Decide early on who you are going to be buying for. If you have a large extended family like I do it may make sense to draw names for gifts. My family has taken it a step further and agreed to only purchases gifts for the children. Set limits on how much you can spend on the gifts too.

Decide now how much you want to spend next year. I know it is a whole year away but this is where you start planning ahead. You need to know how much you want to spend on gifts so you will be properly prepared for next year. I would suggest putting a new line item in your budget for Christmas so you can monitor your progress as well as any spending you do throughout the year.

Once you have your goal amount in mind start setting aside the funds now so you will have the money to spend when it comes time next year. If you plan to start your shopping in November and want to have $600 to spend on gifts start setting aside $60 a month now. A good way to do this is with a  goal oriented savings account. You could open a sub-account with INGDirect or there is SmartyPig which offers goal oriented accounts where you can currently earn 2.01% on your deposits. SmartyPig is designed for saving for specific goals. You can setup a direct deposit to transfer the money to your goal oriented account and track your progress. Saving in this manner will allow you to have a worry free Christmas next year. One of the best features of the accounts is the “Cash Boost” you can receive by withdrawing your money as a gift card for one of their bonus retailers.

Start shopping now. Ok well maybe not right now wait until after Christmas when people are trying to unload all their unsold Christmas goodies. You can pick up some pretty good deals for gifts next year. This is also the best time of the year to pick up decorations for next year. They can be 50% off or more. The more you spread out your shopping and your saving the more likely you are to fund your Christmas with little to no impact on your regular finances.

Photo: (HermanTurnip)

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Review – Secrets of a Stingy Scoundrel

September 28, 2009

About the Book Secrets of a Stingy Scoundrel is essentially extreme tips for saving money and losing any semblance you may have of dignity. Phil Villareal provides 100 tips to help you learn how to do things like: Get free meals at restaurants Finagle your way into a cheaper hotel room Save money at the […]

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Win $5,000 with Upromise

September 17, 2009

Upromise by Sallie Mae is running its Cash for College Sweepstakes through October 15, 2009. They are giving away a total of $25,000 to 5 lucky winners. Entering the contest is simple all you have to do is sign up for Upromise and then install their TurboSaver toolbar. The Turbo Saver toolbar ensures you don’t […]

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