Avoid Spending $2 to Save $1

Many of us, myself included, may have made the mistake of spending $2 to save $1 at times. This penny wise pound foolish behaviour comes about through the way our brains are wired. As a result, there are certain blind spots that causes this behaviour to happen occasionally.

Let me illustrate with an example. You are shopping at your local supermarket for your groceries. As your laundry detergent requires urgent replenishment, you noted that this supermarket sells your favourite brand for $13.50. Then you recall seeing the local newspaper advertisement this morning for the same item selling at an offer price of $12.50 but at a different supermarket. However this other supermarket is some distance away requiring a bit of travel. Unconsciously, you wrap up your purchases at the local supermarket and then traveled to the other supermarket.  In doing so, you may have spent an additional $2 or even more to save $1 on the detergent.

This behaviour is more likely to happen if you drive a car. Somehow the costs of petrol and parking do not enter the driver’s mind. The process of using your ez-link card for a bus or train somehow likely makes you become more aware of the extra expense involved. However since no cash is actually used for the travel, there is a good chance of you being not too conscious of this additional cost as well.

The other day, I was talking to a successful businessman complaining about petrol prices. This person drives a luxury German sports car and was discussing whether the car could run on lower Octane rating petrol than Premium Octane. His intention was to save on the price of petrol as lower Octane rated petrol was cheaper. My answer was to ask him what his point was of saving a few cents on petrol while spending thousands of dollars more than an average car in depreciation and other costs. To this, he sheepishly agreed to my point.

This situation could similarly happen when you are shopping for an air-conditioner. At the store, you are likely to be faced with a choice of purchasing an energy saving air-conditioner versus one which consumes higher power. Since the energy saving air-conditioner would be more expensive, we frequently make the decision to secure an immediate cash saving by purchasing the higher consumption model. However over the useful life of the air-conditioner, we end up paying much more than if we choose the energy saving model.

The same goes with many other items. When changing a light bulb, go for the LED version even though it costs more. In the long run, you would incur substantially less cost. When buying a desktop PC, choose the low power version which uses similar components as notebook computers. Such versions consume only one-third the power of normal desktop PCs. See my other blogpost on this topic at this link.

(Note: The author did not receive any payment or incentive from any company or organisation for their citation in this blog.)