Save your way to poverty

"Look how much money I saved!". People love a good deal, but is it really a good deal if you don't need it, or weren't going to buy it anyway? Many times it's really not such a great deal.

Just because something is bulk or store/generic brand doesn't necessarily mean it's a better deal. We've been conditioned to think that if you buy more at a time, or an off-name brand that you will get more for less money, and retailers take advantage of this by, every once in a while, making it not such a great deal.

If you actually do get more for less money when buying in bulk, will it cost you less? Will it be lost, expire or go bad before you use all of the bulk? Are you going to use it more often because now you have plenty? Cell phone minutes are a great example. For just $10 more a month you get a trillion minutes. But can you get by with the lesser plan and save $100/year? Or texting, I text occassionally. Some months I spend enough to actually add texting to my plan, but overall, I don't text enough to make it cost less to add it to my plan.

You also have to consider the time-value of money. A dollar today is worth more than a dollar next year, and for two reasons. We continually keep improving technology, making thing faster, better and cheaper. This means that even though something is on sale now, it may be less expensive in the future. The other reason is that, due to inflation, the money will be worth less in the future. That means the money in your wallet now is very valuable. If you buy enough of something to last you 20 years, not only will it probably be cheaper in 20 years, but you no longer have that valuable today money, but instead have devalued future item.

Another trick retailers pull is to inflate the price so they can advertise huge discounts. This is very apparent in jewelry sales. Walk into just about any jewelry store without the intention to buy, and start looking at what you like. Ask to try it on. Watch as they start dropping the price. The more you seem to want to buy it, and the less you seem to be able to buy it, the more they seem to discount. Look at them pull out a calculator and "figure out the best price they can get you." It was marked up high in the first place so they can either make a huge profit on those who will buy at "retail" and be able to entice those who weren't going to buy with deals too good to pass up. This kind of thing is also prevelant in auto dealerships.

In the end, the bottom line is: are you actually going to spend less than you would have otherwise?