What can we learn from Gen Y’s view of money?

Gen_Y-skeptic-274x300[1]This article is by staff writer Kristin Wong.

Recently, Fidelity released another survey about millennials and money. They found that 47 percent of us are saving for retirement. To me, that stat was really telling about our generation’s view of personal finance, and it’s not unlike other findings. When TIME wrote about the survey, they reported:

“Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35.”

It is self-reported data, sure. But it seems hard to deny that there is a heightened, post-recession interest in finance and our economy. We’re pushing for every manner of financial education — in schools and on the Internet. Personal finance has become an increasingly popular niche in the blogosphere. Even Paul Allen, co-founder of Microsoft, is involved in the production of movies designed to explain how our economy works. To me, it’s harder to believe there wouldn’t be some sort of new-found interest in personal finance after the Great Recession.

Another finding from Fidelity’s poll people found interesting:

  • When asked whom they trust most for information on money matters, 33 percent of millennials say they trust their parents, but 1 in 4 (23 percent) say they trust no one.

Considering the economic climate, it’s no wonder that millennials are skeptical. At my own blog, Brokepedia.com, one reader brought up a point that I hadn’t really considered: Our parents’ money advice might not apply because they come from a different time. Obviously, there’s some financial advice that is standard. Spend less than you earn, for instance, will always be the formula for financial independence. My parents taught me that at a young age, the advice stuck, and it’s working.

However, there’s stuff my parents couldn’t predict. I wanted to save money by going to a community college, for example. But their idea was for me to go to a “real university” — the more prestigious, the better — so they didn’t think my choice was very smart. After witnessing my younger brother’s massive tuition, though, I think they changed their minds a bit about saving money on college.

Sure, all of these studies on millennials and how they handle money are generalizations. The huge focus on our behavior borders on obsession if you ask me. Until recently, that focus has been pretty negative. But more studies and surveys are showing that Gen. Y is actually better with money than they’re given credit for.

Even if you take the stats with a grain of salt, I think there are a couple of lessons we can learn from the data.

It’s okay to be skeptical

For their study, Fidelity asked me if I’d like to produce a man-on-the-street video for them. It involved talking to people my age about money issues. The conversations I had with people closely mirrored Fidelity’s findings.

Most of the people I talked to said their parents gave them basic advice and they appreciated it, but there’s some stuff they’ve simply had to learn on their own. Because of the aftermath of the housing crisis and now the student loan crisis, young people seem to be skeptical of what other people tell them to do with their money.

That’s not a bad thing.

Separate from the video, I talked to a recent college grad about money. She complained about her massive student debt. What really bugged her about it was that most of it wasn’t necessary. Her student loan company approved her for $100,000. She told them she didn’t need that much.

“But they told me, ‘No, it’s fine. You’re approved, it doesn’t matter. You can just spend it.’ I was 18,” she told me. “Someone gives you $100,000 at 18, all you can think about is all the stuff you can buy. I learned my lesson.”

To me, this is a microcosm of why our generation, as a whole, has learned to be more careful, and yes, maybe even more skeptical, about financial advice.

In the man-on-the-street interviews, I asked the subjects where they got their money advice. Again, the response was mostly, “I learned on my own.” And this is going to make me sound like the worst money snob, but when they told me they were learning “on their own,” I assumed that meant they didn’t actually know anything. I was wrong. (Sorry, interviewees.)

We talked about personal finance books I didn’t think anyone outside of my money nerd friends would recognize. We talked about investing and homeownership and how your money mind-set changes as you get older.

One 26-year-old, on his way to lunch with a friend, said something that sounded like it came straight from the pages of this blog:

Now Me wants to have fun, but Future Me wants to have fun, too.”

It seems like Gen. Y is learning through a filter of skepticism — but they are learning. Our economy is changing, we’re recovering from our mistakes, and we want to make sure our moves are steady and well-calculated.

Learning to adapt

Millennials have been criticized for postponing families, not buying property, moving back in with our parents and even commuting.

I’ve done three out of four of those things, and they contributed immensely to my financial security. Moving back in with my mom was the last damn thing I wanted to do at 22. We were going through a rough time. And, of course, I wanted my freedom. But I saw it as an opportunity to get my finances in order, and, thankfully, my mom welcomed me. I didn’t think it was selfish, and she didn’t think it was selfish. In fact, she suggested it as a smart money move.

The economy sucks. The system sucks. Stuff needs to change. But in the meantime, millennials seem to be adapting and taking control of what they can — and that’s a good thing. To me, the way people are challenging traditional measures of success is an indication that we’re adapting. Yes, that might mean moving back in with your parents for a while so you can build an emergency fund. It might mean that you decide that renting is okay, because you don’t want to be house-poor.

We should try to make the bigger picture better; but in the meantime, it’s productive to work toward improving our own personal financial situation.

What do you think about the (generalized) financial habits of Gen. Y? Obviously, there’s room for improvement. While we might be surprised at the finding that 47 percent of millennials are saving for retirement, it’s also a concern that 53 percent are not saving.

Still, sometimes it seems like the stuff we get criticized for is the stuff we’re doing right. The headlines point out our flaws — but, to me, skepticism is healthy. And so is adapting.

I stand by the fact that I think there’s a shift toward financial security. It might not be any more attainable than it was (probably even less so). But it seems like more people, young and old, are interested in what it takes to recover from an economic crapstorm. After coming of age in the middle of that crapstorm, is it so hard to believe that millennials might be interested in developing better financial habits than previous generations?

Nine Debt-Forming Habits and How to Break Them

paper-pile-brendanc-600x400[1]The average American household with a credit card carries more than $15,000 in credit card debt, according to debt.org. Add to that $1.2 trillion (and growing) in student loan debt, sprinkle in car loans, a mortgage, personal loans, and medical debt, and we’ve got ourselves an issue.

How did we get here?

The reasons we’re in debt, of course, vary from person to person. But there are some habits and behaviors that can lead to debt or cause existing debt to grow instead of dissipate.

 Here are nine habits that might be adding more debt to your life, and suggestions for breaking those habits before they get worse:

1. You Rationalize Your Purchases

One common habit of people in debt is rationalizing the unnecessary purchases they make. And there are even several ways people can rationalize.

First, there’s the “Hey, I deserve this!” line we tell ourselves. We work hard for our money; we deserve a little treat, right? The answer is yes, but only if you can afford it. If you’re going into debt for an item, you shouldn’t be getting it. It’s simple.

There’s also the “I need this” or “I need to do this” theory. I have an important work function, and I need these new shoes to look my best. All my friends are going on this trip, so I need to go. I didn’t have a lot of toys when I was a kid, so I need to give that to my child.

How to break the habit: This habit can be tricky to break since you need to change your perspective. Instead of spending money to reward yourself for working or to feel good, find free or more affordable ways to give yourself that gratification.

Second, don’t make purchases right away. Before you buy something or plan a trip, really reflect on your current financial situation. Is this really a need? Or is it actually a want? Can I wait to buy this until I have the money for it instead of using credit?

2. You Assume You’ll Make More Money Later On

We assume we’ll get a better job, earn a promotion, or somehow be earning more money later on. Why do without now when we can simply pay off our debt later when we have more money?

A prime example of this habit is with student loan debt: The average student graduates with more than $40,000 in debt.

The unfortunate truth is, that great pay increase isn’t guaranteed, and may never come. Then you’re dealing with massive debt.

But even if it does come, you’ve been paying interest on these items. So while you may be charging a $20 dinner, a $100 jacket, or a $1,500 vacation, those items are actually costing you much more with interest.

How to break the habit: Don’t make assumptions. You can only work with the true reality of what you have in front of you. If you want to buy something, save for it until you can afford it. And think about it: Even if you do end up earning more money later, do you really want to have to spend it paying off old debts and racked-up interest?

3. You’re Disorganized With Your Bills

It’s easy to get disorganized with your bills. After all, there are a lot of them to keep track of, and they come at all different times of the month. You might get a portion of your statements online and a few in the mail. Some bills may get automatically deducted from your account, while others you pay yourself.

 Unfortunately, this inconsistency can create debt for a number of reasons. If you’re not monitoring your statements or keeping track of your bills, you may be spending more than you can afford. Plus, you may never know if there’s a mistake on your statement and you’ve been charged for something you didn’t purchase.

Also, late payments can cause your debt to increase with late fees, or, in some cases, cause your interest rate to go up.

How to break the habit: Find a system that helps you get organized and stay consistent with your bills. Set reminders on your calendar when bills are due each month, or set aside an hour each week to check your statements and schedule or send payments.

4. You’re in Denial and/or Not Dealing With Your Debt

An estimated 35% of Americans have debt in collections, according to a study by the Urban Institute. One obvious reason is that some people are simply unable to pay their debt. But there are also those who choose to ignore it.

Being in debt can feel like you’re drowning, leaving you completely overwhelmed. You may feel like you don’t even know where to begin; when you think about it, you grow anxious. It can be tempting to simply ignore the debt.

That’s a bad decision. The debt will do nothing but increase with interest. Plus, you’re going to cause harm to your credit report, which can make it difficult to get a mortgage, qualify for a loan, or even rent an apartment.

How to break the habit: While it may be hard at first, face your debt head on, since that’s the only way you’re going to deal with it. Understand what you owe, what the interest is, and form a plan of attack. If you’re unable to make payments, call your credit card companies or lenders to see what type of plan they can work out with you. If student loans are an issue, you may be able to explore an income-based repayment option or an economic hardship deferment that could temporarily help your situation.

5. You Don’t Budget or Keep Track of Your Money

A recent poll showed that only 32 percent of people actually have a budget. If you’re not budgeting, you may not realize how much you’re spending every month, or what you’re spending it on. Since we use credit cards for so many purchases, it can be quite easy to spend more than we earn, which is going to lead to debt.

How to break the habit: Create a budget by figuring out your income, then subtracting your set bills, such as rent, utilities, cell phone plan, and whatever else you spend every month. Now you can figure out what you have left to spend on food, entertainment, transportation, and other more flexible expenses.

The trick is to make it balance. You may need to cut your bills (e.g., cancel cable, turn down the thermostat, downgrade your cell phone plan), cut expenses (stick to sales and coupons at the grocery store, carpool to work, find free things to do for entertainment), or earn more money (take on extra shifts at work, get a part-time job, sell unwanted items) to strike a balance between what you earn and what you spend.

6. You’re an Impulse Spender

You see something, you want it, you buy it. Sound familiar? With the swipe of a credit card, a click of a mouse, and even now a tap of the phone, we get what we want. If you’re an impulse shopper, this could be a habit that is causing you debt.

How to break the habit: Create a new “one-week” rule. Take a photo of something you want to buy, and take time to think about whether or not it’s a good decision. Consider opting out of e-mails from your favorite stores and deal sites that could create temptation to buy. When grocery shopping, try planning your meals in advance based off what’s on sale and make a list. Stick to the list to avoid those impulse buys.

7. You’re Using Credit Cards the Wrong Way

Credit cards aren’t the reason you’re in debt. It’s how you’re using them. In reality, if used correctly, credit cards can be beneficial. If you’re able to pay off the balance each month and not accrue interest, they can help you build a solid credit score and improve your credit report. This can help you get a better rate on a mortgage or student loan in the future.

Plus, using credit cards in a smart way can earn you cash back or other types of rewards. And many cards offer fraud protection and other benefits, so they’re a safe and sensible way to spend when making big purchases you’d be making anyway.

However, a debt causing habit is using credit cards the wrong way. Almost a third of Americans report having more credit card debt than savings. If you’re using credit cards to fund a lifestyle you can’t afford, that is a bad habit.

How to break the habit: Reevaluate your relationship with credit cards. Tally up what you’re actually paying in interest every month, and use it as a motive to stop spending before it gets any farther out of hand. If you’re in credit card debt, stop charging and start working on paying that balance down.

8. You Don’t Think ‘the Worst’ Is Going to Happen

More than 28% of Americans have no money saved for emergencies, according to Bankrate.com. If something unexpected occurs and you don’t have an emergency fund or savings, you’ll most likely turn to credit cards for help.

No one wants to think something bad is going to happen, but the truth is, things go wrong. From a car breakdown to a job loss, bad stuff happens — stuff that would cause a lot less havoc in our lives if we had money set aside to help. If you’re turning to credit cards as a security blanket, interest charges will cause that debt to rise quickly.

The same is true for health issues. If you don’t have health insurance, you’re putting yourself at risk for the burden of medical debt, which is the single biggest cause of personal bankruptcies in America. Nearly half of low- and middle-income households have medical expenses on credit card debt, at an average amount of $1,678.

How to break the habit: Start saving a portion of your earnings every month for an emergency fund. Even if you’re only able to save a little each month, it’s better than nothing, and it will add up. Find ways to make extra money or cut expenses to add to the fund. Anything you have saved in an emergency fund is that much less debt you’ll need to take on should something happen.

If you don’t have health insurance, visit Healthcare.gov to explore affordable plans.

9. You’re Trying to Keep Up With Others

Our culture generally associates success and happiness with material things — like a big house and an abundance of money. If you don’t have these things, you may feel like you aren’t successful.

Unfortunately, people often feel pressure to “keep up with Joneses” and purchase items they can’t afford just to impress — or simply feel like they’re not being surpassed by — those around them. According to a Federal Reserve Board study, an astounding43% of families are spending more than they earn in America.

Buying things to maintain a certain image or lifestyle is unlikely to bring you fulfillment or happiness. In fact, if you can’t afford it, it’s more likely to cause you stress and anxiety as you fall deeper and deeper into debt.

You may not even be trying to impress anyone — maybe you simply don’t want to miss out. If you have friends that earn more money than you do, you may be tempted to go to the same restaurants or take the same pricey trips as they do. It doesn’t bother you, or them, that you make less money than they do — but you want to do what they do, because you enjoy their company.

How to break the habit: If you are in a social circle where people are judging you on your income and the price of items you are buying, it may be time to break away and find friends who aren’t concerned with your money. Understand that it’s not what you have, but it’s what you do and how you live your life that makes you a successful person.

If your friends are earning more money than you, and you feel pressure to spend what they’re spending, be honest. Let them know you can’t keep up with expensive dinners and pricey nights out. Suggest more affordable things you can do together instead.

 

This article is provided by Brothers Kitchen Blog

To what do you attribute your success — hard work or good fortune?

This article is by staff writer Kristin Wong.

Every now and then, I get an email from a fellow writer who’s just starting out and wondering where to begin. “How did you do it?” they ask. “How did you make freelance writing your career?”

It’s flattering, but what do I say? First of all, I’m still working to reach my own writing goals, so I’m not even sure I’d be the best person to ask. But also, any success that I may have had as a freelancer has at least a little to do with luck. True, it’s mostly hard work, but auspicious timing and lucky breaks have also helped my career along the way.

For example, when I started writing for MSN, it wasn’t because I worked hard to get their attention and relentlessly pursued their editors. It was also because I had an enormously talented and kind friend who landed a job there, and she happened to be hiring freelancers right as I decided to leave my job to become a freelance writer.

I’m not saying I wouldn’t have gotten that gig had I not worked hard. But it also helped that I knew someone whose department was hiring at the right time. As important a role as hard work plays in success, it’s also important to acknowledge good fortune. Here’s why.

Self-attribution bias

Disregarding the role of coincidence can make you believe a certain behavior is effective when it really isn’t — or worse, that behavior can actually work against you. Carl Richards of The Behavior Gap called it “lucky fool syndrome.”

“What sets off the lucky fool syndrome? Psychologists call it the self-attribution bias. It means we’re inclined to take all the credit for things going well, but we have no problem blaming outside forces when things go wrong. On top of our bias, we have a very difficult time separating skill from luck. As a result, we’re susceptible to the lucky fool syndrome and the problems that come with it.”

Investing is a perfect example. Richards cites a 2013 study, Self-Attribution Bias in Consumer Financial Decision-Making. In it, researchers studied the impact that investment returns had on how people perceived their own skills. When returns were good, subjects credited their awesome investing skills. When the market sucked, as it sometimes does, investors blamed it on bad luck.

This sounds harmless enough. What’s wrong with a little innocent self-delusion? The problem is, it can lead to costly mistakes.

Take my own example of self-attribution bias. When I decided to try my hand at active trading, I had huge returns within the first few months. I convinced myself I had a natural talent for it. (Embarrassingly, I believe I referred to myself as an investing genius, only in my head, of course.) I deluded myself into thinking that somehow I was able to accurately calculate the future, even though the most skilled and experienced investors can’t time the market.

So I repeated the “skills” I thought I possessed that helped me get those returns. The result? I lost $400 — more than half of my earnings. I should have cashed out when I got lucky. Instead, I learned the hard way that discounting the role of luck can come at a cost.

There is another problem with self-attribution bias. It limits our empathy and understanding. We think that, because one method or formula for success worked for us, that must be the magic formula for everyone. We think we have all the answers, so we stop considering any other possible problems or solutions. And sometimes we actually offer terrible insight. This article I wrote a year ago is like the case in point:

“I’ve found that it usually helps, when asking for something, to remind people that you’re human. When arguing for a raise, I reminded my boss that my financial situation was suffering due to inflation…”

I cringe reading my own words. Readers totally called me out on this, and rightfully so. This is the exact opposite of what most experts agree you should do. But because it happened to work for me, I figured, without giving it much additional thought, that it would work for everyone. Sure, my own good diligence helped me nab that raise, but I think it’s a good example of how self-attribution bias can limit your understanding.

Maybe it’s a balancing act

None of this is to say that hard work isn’t absolutely necessary. With most things, if you want to succeed, it takes a great deal of effort. Take my mom’s savings story. Despite being poor, she did whatever she could, sacrificing quite a bit just to save a few bucks a week. That’s the hard work.

But she acknowledges a few things out of her control actually worked in her favor: interest rates, overtime availability, and a part-time job opening. She told me:

“Not everyone sees overtime as lucky. Everybody gets lucky breaks, but it depends on you seeing it as a lucky break.”

Maybe the key to success is taking advantage of both — seizing those lucky breaks by being willing to do the work when they happen. Maybe it’s about recognizing the opportunities and taking advantage of them in the right way. Most of us aren’t lucky enough to make it on our good fortune alone. In fact, without effort, any luck that does come your way could easily be squandered. For example, if you are an over-spender, you might blow through a windfall. But if you’ve been working hard to get control of your finances, you may be more inclined to use that windfall to reach your financial goals.

Luck alone probably won’t get us far. But it seems that recognizing it can work in our favor. It helps us take advantage of those auspicious opportunities and, plus, it gives us a better understanding of our skills and exactly how our hard work pays off. It seems to me that understanding this balance is a little more realistic anyway.

Do you attribute your success to hard work or good fortune? Have you seen self-attribution bias backfire before? Have you changed how you view working hard versus being lucky?

Ten Questions to Ask Yourself Before Making a Purchase

10-questions-to-ask-when-choosing-a-doula[1]There are few things that leave me feeling worse than an impulsive purchase that wound up being a piece of junk or wound up sitting in the closet gathering dust.

Not only am I frustrated with the item itself, I’m also frustrated with me. It was my own personal choice to go ahead and make that purchase. It was my money that vanished into something poorly made or something that I didn’t find useful.

That money represents lost opportunity. I could have saved that for the future. I could have spent that on something that was genuinely useful or something that I genuinely enjoyed.

My solution to all of this is to be rather careful about how I spend my money. Before I buy anything at all, I ask myself at least a few of the questions on this list. Before any significant purchase, I ask myself all of the questions on this list.

I don’t make a purchase unless I can get honest answers to those questions.

That doesn’t mean that I stand there in the grocery store thinking to myself about everything I put in the cart. My meal planning system generates a grocery list and all of the items on that list have already faced the questions and survived, so I can buy those items without thinking. I do the same thing when I go into department stores – I usually have a purchase or two planned in advance and I usually avoid making any others.

For a major purchase, I work through these questions at home. Some of them just go through the back of my head while I’m doing other things. Others might require some research. In either case, before a major purchase happens, I’ve thought about all of these questions.

I don’t apply all of these questions to things that come out of my personal spending allowance, but I do use many of them. I even want to use that money – the money I can spend freely on whatever I want – as intelligently as possible, buying stuff that I’ll get lasting joy out of.

Here are the questions I use to evaluate my purchases.

1. Do I already have something that can do the job?

Whenever I buy something, I have some sort of purpose in mind for it. If it’s clothing, for example, I intend to wear it. If it’s a new skillet, I intend to cook foods over the stove top with it.

This question simply looks at whether or not I have something that already fulfills that purpose. Do I really need this clothing item? Are there items I already have that fill up that perceived gap in my wardrobe? What about that skillet? Do I already have skillets or cast iron pots that can do what I’m hoping to do with that skillet?

This question does a great job of pointing out the times when I am thinking about upgrades that aren’t entirely necessary. Do I really need to upgrade my laptop? Do I really need to do something with it that my old laptop doesn’t already do or my desktop computer doesn’t already do? When I start making a use case for what a new laptop could do that my current computer couldn’t, it becomes a lot less persuasive.

Sometimes, this involves looking for things in our home that can do the job in an unexpected way. For example, a chef’s knife does a pretty good job of “pressing” garlic on a cutting board, making a garlic press largely unnecessary unless you’re using it several times a day. Since I already have a chef’s knife, a garlic press isn’t very necessary at all.

2. Can I borrow it from someone?

Often, when I need an item just for a one-off use or for an extremely rare use, it makes a lot of sense to just borrow it from a neighbor or a friend.

For example, I was installing several shelves recently and found that our cordless drill was not providing enough torque to be helpful beyond two or three screws before recharging was necessary. Usually, our cordless drill does what we need, but not for a bigger job like this one. Instead of talking myself into a corded drill – after all, we had a great use case for it right there in front of us – we recognized that this was a pretty rare case for us and just contacted a few friends. It turned out that one of them had a corded drill with a lot of torque. I borrowed it a couple of days later and finished the project in about half an hour.

The best way to get this kind of borrowing started is to be very giving and lend your stuff to your friends whenever they ask for it or even when you hear them lamenting a task that they need to complete. If a friend needs a few extra casserole dishes for a large party, hand yours over. If a neighbor needs to chop some large branches, bring over your branch trimmer. You’ll find that if you’re very willing to give, they’re much more likely to be willing to lend, and the end result is that you’ll have access to rare-use items that you might have otherwise purchased.

This does require some awareness of the items that your friends and neighbors actually have. One good way of knowing that is to work with them on projects, both indoors and outdoors. Offer help when they need it and don’t be shy about asking for it when you need it. You’ll find that borrowing becomes second nature after a while if you have a great relationship with friends and neighbors.

Another great example of borrowing comes from your local library. Instead of buying a book, why not just borrow it from there? You can do the same with DVDs, CDs, and audiobooks as well. I love stopping at the library and picking up an audiobook before a long road trip, for example, and you better believe that I use it to check out books of all kinds. I generally only buy books that I’ll reference a lot or highly discounted ebooks for my Kindle at this point.

3. Can I trade someone an item or a service for it?

What if you need to “borrow” something that isn’t something you can return when you’re done, like some food items or a few hours of their time or some skill that they have? That’s when a trade can solve your problem perfectly.

It’s simple. If a friend or a neighbor has an item that you’ll rarely need, ask to borrow it instead of buying it yourself when that rare need comes about. Often, you’ll have items or skills or time that your friend or neighbor needs in his or her rare moments as well and you can give them in exchange.

I’m a big fan of “indirect” trading with my friends and neighbors. When they need help with something, I just offer it without hesitation. That way, when I need some help, they’re usually willing to offer it right back if I ask. The same goes for items that can be used up – if a neighbor needs to borrow the proverbial cup of sugar, I’ll happily hand it over under the assumption that when I’m in a pinch, I can do the same thing.

This keeps me from buying a lot of little things. It also keeps me from hiring repairpeople.

4. Have I asked my social network about it?

Beyond the direct borrowing of items and bartering for items, friends and neighbors can also be extremely useful in terms of offering ideas and suggestions that you might never have considered.

For example, let’s say you’re looking at buying a new laptop and you’ve already considered many of the other factors in this article. Instead of just heading straight for the store to buy one, you instead send an email to several friends and write on Facebook about how you’re searching for a new laptop and are looking for advice or discounts that your friends may know about.

In my own personal experience, I’ve seen friends jump forward with store discounts that they’re eligible for or access to special buying programs. I’ve seen people offer free software items and other things that they have around. I’ve seen family members jump in with lengthy detailed recommendations about what exactly to buy to get the best “bang for the buck.”

All of that stuff is incredibly valuable, both in terms of making a more informed purchase and in terms of finding a nice discount. Sometimes the value can be even better than that – I’ve had friends just give me things due to a Facebook post or an email, keeping me from buying them altogether.

Use your social network. They’ll rarely let you down.

5. Can I make it myself?

There are a lot of household items that we buy that we can simply make ourselves. Sure, there are the simple things like window cleaners or laundry soap, but you can also assemble a lot of food items yourself, like loaves of bread or frozen burritos.

Many of these items are ones where you’re actually just paying extra for convenience. I can make a good frozen burrito for half the cost of the same burrito in the store, for example. I can make homemade laundry soap for a fraction of the cost per load of soap from the store. Buying those items at the store doesn’t save me anything but time.

Thus, those purchases are weighed solely on the convenience factor. Is it reasonable for me to just make some laundry soap while sitting on the couch in the next week or two? If so, I’ll just buy the ingredients and save about 80% of the purchase price. Do I have time to make a couple of loaves of bread in the next day or two? If so, I’ll just buy flour instead of bread loaves.

Most of the time, there are some real fringe benefits to making things yourself. You have far more control over what kinds of chemicals are in the item. You have far more control over the quality of ingredients. You have far more control over the environmental impact of what you’re making. You have far more control over the flavor of the end product and the healthiness of the end product. Those benefits are usually on top of spending money.

In the end, many grocery and household purchases boil down to convenience, but there are times when convenience should be set aside to have better results for less money by contributing a bit of your own time and effort to the mix.

6. Can I delay it?

What exactly happens if you wait a month to buy this item? Six months? A year? Are there life problems created from waiting on this purchase?

If you can delay a purchase a month or two, you probably should do that. It means that you have an appropriate short-term solution to the problem already in hand.

If you can delay a purchase for a year or more, you should be asking yourself why you even need to make this purchase at all. If you don’t need it for a year, why on earth would you be buying it at the moment?

Unless there’s a real reason for buying now – your current item is failing, for example, or there’s an incredible bargain available to you if you act immediately – you should try hard to delay that purchase for a while. The longer you delay, the longer the lifespan of your previous item and thus the longer you’ll be able to wait before you have to replace your replacement.

Another great factor for this question is that it causes some purchases to vanish entirely. Let’s say I convince myself that I can wait a month for some item that I really really want. More often than not, at the end of that month, my desire for that item has completely cooled off. Sometimes, I’m left wondering why I even wanted that item in the first place.

7. Have I looked for lower-cost alternative solutions?

Sometimes, there’s a good solution for your problem that’s looking you right in the eye, but you somehow managed to overlook that great idea again and again and again.

Perhaps you’re caught up in buying a new car, but the truth is that you can just as easily commute using mass transit and don’t actually need that car at all. Maybe you’re obsessing over a new television, but you actually don’t watch it that often except for background noise and a simple small television will work for your fairly limited needs.

Sometimes, when you’re looking to buy something you, you don’t need to match or exceed what you already have. Instead, you should sit down and look at what your actual needs are related to that item. You may find that a simpler solution – usually a lower-cost solution – is a better option for you. Bigger and newer and more feature-laden is not always better.

This question does require some creativity. One good way to rethink the alternatives for any purchase you make is to simply visit blogs that discuss this type of item. Many of them do a great job of looking at alternatives to your originally considered item. For example, I had decided not long ago that I needed a better headset for listening to music and podcasts and handling Skype calls while I work. After a bit of research, I had settled on a particular headset, but when I spent some time reading blogs about headphones and found some posts on good headphones for listening in mono (I’m deaf in one ear, so everything is essentially in mono), I ended up going with a much less expensive setup that almost perfectly met my needs.

8. Have I looked at a thrift store or discount grocer or consignment shop for it?

At this point, I’ve eliminated a lot of purchases, but there are still many buys that seem like a good idea. If you’re still convinced that you need to make the purchase that you originally planned, the best first step you can make is to start at the thrift store or the consignment shop or the discount grocer.

In other words, start at the low end and don’t ignore used items.

The reason for this is that quality items often “slip through the cracks” and find their way into thrift stores and discount grocers with an absurdly low price tag. I’ve found amazing clothing items for my family at thrift stores. Sarah and I used a toaster that came from Goodwill for many years and we had a few furniture items from Goodwill in our living room for many years.

As for groceries, we often buy marzipan, stollen, and many other items at highly discounted rates at Aldi, paying half or less of what the items would cost elsewhere.

The nice part of shopping at secondhand stores and discount stores is that if you don’t like the quality of the items they have on offer, you can always just say “no” and walk away.

9. Have I looked online for discounts for it?

If you’re still looking, let the internet be your friend. There are very few purchases out there that can’t be chopped in price by finding a discount online or a low-cost website somewhere on the internet.

My first step is to price-check the item across every reputable online seller I do business with. I always check Amazon for almost everything for starters, and I also check out sites like Overstock and eBay. If it’s more of a niche item, I try to find discount retailers that serve that niche, like Coolstuffinc (for board games).

If an item isn’t urgent, I’ll use tools like Camel Camel Camel to wait until the price comes down to the level that I want to spend before jumping on the purchase.

For groceries and household supplies, I’ll also search for coupons on any item that I might be buying. I frequently check weekly coupon sites like Redplum and save the coupons for anything I might buy. I don’t use them immediately – instead, I wait for store sales on those items so I can stack the coupon on top of the store sale. This sometimes gets me items for free.

Final Thoughts

For any major purchase, I use all of these questions essentially as a checklist. The goal, at first, is to make sure I actually need the item. Then, if I can actually show myself that this item is a significant need, then I’ll start moving through the steps to secure a truly low price on the item.

I don’t use all of these questions on smaller purchases, but I do use some of them on everything I spend. Mostly, I try to evaluate whether or not I actually need the item I’m considering and, when I’m honest with myself, I recognize that an awful lot of what I’m spending my money on is a want – and a short-term one at that.

Using this list of questions has really helped me to make smarter spending decisions in almost every dimension of my life, from items bought for personal pleasure to the items found on my grocery list, from items I personally need to the items bought for my children, from big-ticket items like expensive electronics and cars to the toothpaste in our bathroom. The process, in the end, is the same: we trade our hard-earned money and expect something in return. I want the most – and the best – when I trade away my money.