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?

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?

Should cash be part of your emergency fund?

This post is by staff writer Honey Smith.

When I was in college, one of my co-workers at my part-time, on-campus job gave me a funny little gift that I use to this day. What was it? It’s called a “wallet fairy.” According to the note that came with my little talisman, you put it in your wallet and “you’ll never be out of money when you need it.”

I can’t honestly say that the “magic” has been foolproof. I believe I’ve mentioned on a couple of occasions the time I didn’t wash my hair for a month because I couldn’t afford shampoo. And I distinctly remember crying after going to the grocery store on a couple of occasions because I didn’t know how I was going to pay my bills after buying food. But I guess if the magic were foolproof, this fool wouldn’t have learned her lesson and started digging her way out of debt, right?

But you know what? National Preparedness Month (a.k.a. “September”) may be over, but it’s always a good idea to consider your plans if an emergency occurs. And after the flash flooding we saw this year in Phoenix, I am thinking a lot more seriously about what it would be like to be out of money when I need it. I’m starting to think that it’s important to keep cash readily available, but I wanted to really sort out why and how much and where. So here goes….

Should you keep an emergency “cash stash”?

To be clear, I’m not talking about keeping an extra $20 in your wallet (not that that’s a bad idea). I’m talking about keeping a significant amount of cash on hand in case of emergencies — in the hundreds or thousands of dollars. Here are the pros and cons for doing so that I can think of:

  • Pro: Out of sight, out of mind. Even if you put your emergency fund in an online-only account such as Capital One 360 (formerly ING), at least it’s there. You receive bank statements reminding you of its presence. Maybe it factors into your Mint net worth. Stashing actual physical money somewhere out of the way means you are less likely to think about it (and thus, be tempted to spend it) unless there’s a true emergency.

  • Con: Not earning interest. If you invest your money, you are (hopefully) earning interest faster than inflation can erode the value of your cash. The “common wisdom” is that inflation is about 3 percent annually, so you should aim to beat that benchmark, taking into account things like diversification and your own risk tolerance. Even parking your cash in a savings account with their interest rates of 0.95 percent or less (based on this week’s savings account rates) is better than nothing, right?

  • Pro: Peace of mind. Cash can’t be garnished like a paycheck or bank account, and it isn’t easily traced. For some people, having access to money that flies under the radar, so to speak, may make them feel more secure.

  • Con: If it’s gone, it’s gone. See above: Cash isn’t easily traced. If you lose the money, it gets destroyed, you are robbed, etc., you may have very little recourse.

Are there other significant pros and cons to having cash on hand that I am missing?

How much should you keep?

Assuming that you’ve decided keeping some amount of cash on hand is best for your particular situation, the next question becomes: How much cash, exactly, should you keep? A solid emergency fund may be three to six months’ worth of expenses, but that is probably more than most people are comfortable keeping in cash. Not to mention, even at sub-one-percent interest rates, when you start getting into the thousands of dollars, you start missing out on a decent chunk of change.

The logical question to ask yourself at this point is, What emergency situations do you think would require physical cash? For example, if you live in an area that is prone to natural disasters, keeping enough cash on hand to buy food and supplies in the event that credit/debit isn’t an option (due to a power outage or what have you) may be smart. It’s important to be realistic, but there’s no need to be paranoid.

Where should you keep it?

I suppose theoretically, you could keep it anywhere. However, if you want to make sure that you’re the one who is actually keeping it, your main options are likely these:

  • In your home, in a diversion safe. A diversion safe is something that looks like an ordinary household item or product that actually is used to hide items of value. Diversion safes might look like books; cleaning chemicals (think a can of Ajax); cans of soda, water, or food; or even toiletries (think a can of hairspray). The pro is that diversion safes are relatively inexpensive, but most don’t actually require a lock to open. So if someone does happen upon it, the gig is up. Diversion safes also tend to be relatively small, which may be a pro or a con depending on your needs.

  • In your home, in an actual safe. A real safe is usually larger and can thus accommodate more items, if you have other valuables besides cash that you’d like to protect. It may require a key or combination to open (some are even biometric!) and, unlike most diversion safes, many are fireproof/waterproof or fire/water resistant. Accordingly, they also take up more space, are difficult to hide, and may be expensive.

  • In a safe deposit box. For a rental fee, your cash, other valuables, and important documents may be stored in a bank, post office, or other institution. The fee is usually fairly minimal for most needs, and you have the reassurance that most institutions offering this service are under some form of guard 24/7. However, that does mean if you want to access the contents of your box, you must leave your house. Depending on the circumstances under which you need to access your cash, this may or may not be feasible. After all, when was the last time you went to the bank?

There may also be indirect costs when storing items at home. If you have large amounts of cash or valuables, you may need or want a robust alarm system, for example, and that may entail an up-front cost and/or a monthly subscription.

Like most aspects of personal finance, I suspect that opinions on this topic vary widely. Do you keep physical cash? Why? How much cash is too much? And how do you balance issues of accessibility with the desire to keep your money safe?

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. You can then look on websites like https://www.vizio.com/en/shop/remotes to find a remote that works for your new television, whichever one you end up buying.

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.