How-to Guide: Spend Smarter
Put the car keys down. Don't flip through the Sunday sales circulars or fire up the Net just yet. It's time to learn how to shop like a Fool.
If you want to save some significant coin on your retail expeditions, you first need a game plan. Even if you're rarin' to score deals on every last item on your shopping list, trying to do so will no doubt result in extreme retail fatigue.
The most evolved shopper-gatherers concentrate their effort on the biggest prey. They've done the math: 20% off a $500 item nets $90 more than what they'd save scoring the same discount on a $50 trinket.
However, this basic rule of retail eludes the majority of consumers. Instead, we clip coupons for canned soda, look for the generic brand of our favorite cereal, and wait until the end of summer to score half-priced swimming trunks. And then we're too tuckered out to save money on the things that will put some serious cash back in our pockets.
Consider the biggest slices of your spending pie, and practice cost consciousness where it counts: vacations, transportation, holiday and home expenses, and electronics. Really planning a shopping strategy to procure these items could save you some serious cash.
Get it done: Plan your next big purchases
Before you scratch that retail itch, you need to devote some time to composing a shopping list like no other.
1. Compile a major purchase shopping list: Depending on your budgetary constraints and the time you're willing to devote to cost-cutting work up front, start off by defining what a major purchase entails for you -- for example, it might be anything that costs more than $100, or $1,000.
2. Organize your wish list: Separate the items based on the time frame in which you intend to buy them. Which purchases do you plan to make during the next month? The next three to six months? The next six months to one year? More than a year from now? Remember, this is not a shopping agenda set in stone. Circumstances and needs change, so keep an eraser handy.
3. Make a list of must-have features: Take a first crack at compiling each item's features that you absolutely cannot do without. (This is more essential with complex products and services than it is for ones that have no moving parts and limited color and size options.) Bonus points for ranking them in order of importance. While you're at it, jot down the gadgets and add-ons that you really don't need. Doing so will help you stay strong when the salesperson puts on the hard sell.
4. Pick a price range: Again, committing this item to paper in this initial stage helps you keep your resolve while others fall under the gleaming trance of whistles, chrome, and blinking lights.
Congratulations! You've now shielded yourself from the flurry of marketing madness designed to get you to buy bigger, stronger, faster, and shinier things than what you really need.
Still, in the face of retail might, even those with the strongest resolve get weak-kneed when the lighting and mood music are right. Don't fret. We have advice on how to resist the most dastardly of retail tricks -- the impulse purchase.
Get it done: Three tricks to curb the urge to splurge
The key to keeping your mind from playing tricks on you and your wallet is to master an emotion-free, neutral frame of mind during every shopping foray. Doing so prevents those mind games from invading black-and-white money decisions. Maintain this detached state with three simple tricks:
1. Fend off "the wants": Kids aren't the only ones who scream "I want! I want!" from the supermarket aisles. A little voice in all of our heads can be as stubborn as a toddler in a candy store. When you see a supposed deal on something that is not an immediate need, ask yourself two questions:
- Is it really a deal? Do you know the prices on similar products elsewhere and recognize when the price you're seeing on the item is really a rare bargain?
- Do you really need it -- now or later? It's easy to convince yourself that you absolutely cannot get by without the latest and greatest thingamajig. Yet somehow you've survived up until now without it. If you do run across an item that you know will come in handy a month or two down the road, pick it up, so long as the next time you're at the grocery store you don't forget about those three tubs of peanut butter already in your pantry. One way to control the "once-in-a-lifetime" bargain temptation is to keep with you a list of long-term items that you need.
2. Keep separate tabs: "What's another $50 when I'm already spending $500?" Contractors, car salespeople, and electronics-store clerks bank on this kind of faulty thinking. In the context of a larger purchase, somehow $300 cupholders and $3,000 Corian countertops start to make sense. Don't let upgrades and add-ons pad your tab. Instead, consider each option separately and ask yourself whether you'd pay that same amount were you shopping solely for that item.
3. Leave home without your credit card: It's easy -- too easy -- to pay with plastic. Studies show that people spend more -- and more impulsively -- when no actual cash changes hands. Gary Belsky and Thomas Gilovich, authors of Why Smart People Make Big Mistakes and How to Correct Them, say that plastic makes us devalue what we spend because we don't experience the immediate loss of buying power that we do when we pay with cash. Like Vegas gambling chips, credit cards mask the tangible aspects of spending money. (Quick gut check: Visualize the difference between handing the cashier $40 of the $80 cash in your pocket versus putting it on your card. Feel the pain?)
Pay in cash only, and you'll probably see a dip in your daily expenditures. Imagine the results after an entire year. Now that's a rewards program that the credit card companies can't match.
Ready? Set? Shop!
With your emotions in check and a map to the retail minefield in hand, you're ready to tackle that shopping list like a pro buyer. An informed consumer can steer a shopping cart with confidence. So get ready to play ball.
1. Do some retail recon: Shopping before you go shopping might sound redundant, but the only way to spot the difference between a deal and a dud is by doing some retail reconnaissance work. Many ads leave out an item's original price and simply scream out the sale cost. Get to know the pricing history of the items on your wish list. Keep a folder for sales circulars on items of interest.
2. Make merchants play good cop/bad cop: After you've done your research, you may have already identified the retailer that has the item you want at the best price. But you might be able to do better. Flash your cash and a competitor's lower advertised price (you'll need physical proof) and ask whether the merchant can match the offer or do better. Don't get too cocky, though. Most will honor coupons or sale prices only if they have the exact item in stock. It's all about finding the right salesperson and being willing to settle for your second-best option.
3. Don't dismiss small chains and mom-and-pop stores: Many smaller chains and independent stores will meet or beat a big-box retailer's advertised price or provide free add-ons when presented with firm evidence and a ready purchaser. Service at such stores is often better than at the big chains, too.
4. Ask about other ways to save: Don't be shy. Chat up a sales clerk and ask when an item will go on sale or find out whether there's a price break for using cash or buying multiples. And if you have a coupon, go ahead and present it -- even if it is expired. You might be surprised how many stores will gladly accept it anyway.
5. Don't get suckered by the upsell: When it comes to most electronics, skip the extended warranty, which can pad the price of the item by 10% to 30%. With just a few exceptions -- such as treadmills and big-screen plasma TVs -- warranties are rarely worth the extra price. If you feel the need to purchase extra protection, pay no more than 15% of the product's price, and buy the manufacturer's warranty, not the store's version.
6. Reread return and exchange policies around the holidays: Holiday return/exchange policies become more labyrinthine every season. Restocking fees (particularly on electronics purchases) are commonplace -- last year, Target, Circuit City, and Best Buy charged 15% to return many items. Some stores have instituted tighter deadlines on holiday refunds and exchanges and may give you credit only for an item's post-holiday price. And some retailers like to crack down on frequent-return shoppers by limiting the number of returns you can make within a certain period of time. Christmas in July has never sounded better, eh?
Quick tips: Rebuy for holiday savings
Holiday shopping may not be your favorite sport. But if you leave it to the last minute, you could miss out on some bona fide bargains. Get a jump on the competition by checking out Black Friday websites (including BlackFridayAds.com, bfads.net, and Gottadeal.com) all season for a sneak peek at special promotions. Here's a trick for avoiding the crowds and limited availability of advertised products: Buy the item before the sale and return on the day of the sale for a price adjustment for the difference. Warning, though: Retailers are becoming a lot stricter about their return policies around the holidays, so don't assume that the same old rules apply. Scour the return policy with care, and be nice to the sales clerks.
Let your fingertips do the browsing
No trip to an outlet mall can match the breadth of product choices you can pull up on your computer screen. A crash course in your options is particularly useful if you're shopping for a complex product -- anything with a plug, for example. Plus, there are plenty of satisfied and unsatisfied consumers posting product reviews online.
Here's how to navigate the Web retail bonanza without getting overwhelmed.
2. Re-sort and revisit: Some comparison websites deliver results that are skewed by ad dollars -- in other words, the stores that pay for placement get top billing or activated links to their storefront. Try loading results based on price, location, or rating to get a full picture of your options.
3. Go to the source: To capture results from retailers that may not be included in comparison sites and to check on the latest promotions, type in the URL of the store directly.
4. Erase your electronic footprints: Delete all cookies from your browser and search again another day. You want to make sure you're getting as good a price on an item as a first-time visitor to the website would. Some e-tailers serve up your old search results (and old prices) to those who have browsed there before.
5. Compare clicks and mortar: Does your favorite store have an online outlet? Sign up for its newsletter for advance notice of sales and subscriber-only coupons. You should also compare online and offline prices, because they aren't always identical.
6. Get a rebate for your spending: Many websites make money when they refer you to a particular online shopping site. A few sites let browsers -- that's you -- in on the deal by offering a cut of the referral fee. Check out ebates.com and MrRebates.com. To get the dough, you need only register with the site and use its link to the destination store. However, before you click "buy," you have one last stop for savings ...
7. Crack the code: If you shop online, don't leave money on the table by leaving the "enter promotional code here" box blank. Get the scoop on possible savings at sites such as Currentcodes.com, CouponCabin.com, and RetailMeNot.com. Or type in the retailer's name and "coupon code" in your search engine to see what offers pop up.
Turn bad purchases into cash
There's nothing worse than the tangible reminder of an unwise purchase. Hanging in your closet with the tags still on or lingering on your credit card statement, retail blunders are a bummer.
If you are unable to return an item for whatever reason, the game isn't over just yet. Here's how to get rid of the evidence and possibly get a little something back, too.
1. Swap it: Several websites let holders of unwanted gift cards to sell or trade them. Listing is usually free, but you'll pay a fee if your card sells -- anywhere from $1 to a percentage of the gift card's face value. Check out swapagift.com, CertificateSwap.com, and Cardavenue.com. CDs, DVDs, and video games are swappable at zunafish.com for a $1 fee (plus shipping costs).
2. Sell it: You don't need to set up shop on the front porch to hawk stuff you no longer want or didn't need in the first place. Try your hand at copywriting and keyword-picking at sites such as eBay, Amazon.com's Marketplace, and Half.com (also owned by eBay). If you don't want to give these folks a cut for providing a selling platform, head to Craigslist. This online version of the local town crier offers free listings and person-to-person transactions.
For those who prefer not to deal directly with the bargain-clicking public, take your choice items (brand names and designer labels, in particular) to a local consignment store. The folks there usually take a 50% to 60% cut of the final selling price. But getting $25 for a tweed Polo blazer is better than letting it take up precious closet space.
3. Deduct it: The easiest thing to do with unwanted merchandise is to give it away or donate it to charity. However, doing the latter isn't as simple as in years past, when you dropped off a bag and grabbed a blank donation receipt. The IRS now requires that any noncash charitable contributions must be in "good used condition or better" to qualify as a deduction. If the tags are still on the reindeer cardigan from Aunt Ida, chances are it'll qualify. However, to avoid trouble with the tax man, Fool tax guru Roy Lewis advises his clients to take digital photos of everything donated and reference their current condition. Check out the Salvation Army valuation site to find out how much you can write off for common household items.
4. Regift it: Finally, when all else fails, there's always that regifting closet to stock. Nearly one in four of us admits to passing off unwanted gifts to others. Just make sure it's done tastefully and that you give us something that we really, really like.
Smart shopping may seem like a constant battle against the marketing machine, but remember that the ultimate reward is in what you do with the savings you've earned. By saving on big purchases, you free up cash for other pursuits -- college for your kids, an early retirement, vacation with the family, or a down payment on a house. That's something that only you can create -- so it's worth your time now to save for your future.