Four Frugality Heuristics [That Will Make You Rich If You Use Them]

Frugality tips are nice, but frugality heuristics are better.

Heuristics--rules of thumb--let you function on a strategy level rather than on a mere tactical level. A few well-thought-out heuristics can take the place of a million specific tips and tactics.

Look, we know retailers and consumer products companies become more and more sophisticated by the day in persuading us, manipulating us and extracting money from us. It is my hope that today's post will help you avoid most, if not all, of the traps and pitfalls awaiting us in the consumer marketplace.

Frugality Heuristic #1: Don't use money to solve problems.

This rule helps you consider alternatives to solving a given need without automatically defaulting to the marketplace to make a purchase. If it's an item you need: could you borrow it, freecycle it, or use something you already own? If it's a service, can you learn to do it yourself, or trade/barter for it? Better still, can you just "don't want!" it? And so on. Bonus: by using this heuristic over the long term, you'll build enormous adaptability, flexibility and resourcefulness.

Frugality Heuristic #2: If they're offering it to you, it's profitable for them--and unprofitable for you.

Notice that things are sold to you if and only if it's worth doing so. It must be meaningfully profitable to the entity doing the selling. Faithfully using this heuristic will protect you from products and services like extended warranties, upsells, excess insurance, most high-fee investment products[1], etc.

Frugality Heuristic #3: If it's advertised, you don't want it.

Remember: You the consumer pay for all advertising. Ad costs are always passed through to the end customer in the form of higher prices, yet despite this, the advertising-consumption model is perhaps one of the best systems ever devised for triggering desires and then separating us from our money. Do not play this game. At the very least, find an equivalent product that isn't advertised. A savvy and intelligent consumer thinks about the enormous cost of heavy advertising, knows that she ends up paying for it, and thus lets advertising become a stimulus not to buy.

Frugality Heuristic #4: Avoid all payment plans.

Payment plans obscure the true price you pay for something, and they almost always substantially increase your final cost[2] while substantially increasing profits to the company offering the payment plan (see Heuristic #2). This heuristic will also save you enormous amounts of money over the course of your life by stopping you from buying things that, if you're honest with yourself, you can't actually afford.

Readers: What other frugality heuristics would you add?

READ NEXT: Good Games

[1] Note that this goes double for investments, and triple!!!!11! for complex investments like variable annuities, universal life insurance policies, unit investment trusts, etc. Which gives us Investment Heuristic #2a: Do not invest in any investment that is sold to you.

[2] This includes those seemingly attractive 0% financing arrangements from car dealers that calculate your monthly payment by way of a complicated and opaque process. You think you're getting a great deal on a too-good-to-be-true interest rate, while they are likely arranging things such that you pay more than you think. Once again, see Heuristic #2 for the real reason these plans are offered to you in the first place.

You can help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

And, if you are interested at all in cryptocurrencies, yet another way you can help support my work here is to use this link to open up your own cryptocurrency account at Coinbase. I will receive a small affiliate commission with each opened account. Once again, thank you for your support!


Juli @ Written Word Nerd said...

Helpful heuristics! :)

#3 reminds me of when companies include charitable donations with the purchase of an item. That's always been odd to me, as I know they're likely not giving those donations out of THEIR profits, but rather marking up the purchase price (intentionally or not), passing on the charitable giving costs to me, and then using it to SELL me their product by virtue of how virtuous their company is for the donation. :\

I prefer to do my own charitable giving, to the causes that are dear to me. And I don't want to pay for a company's virtue-signaling... especially when they're doing said virtue-signaling to get me to buy their products. o.O

M2B said...

The only payment plan I ever found that worked for me was "90 day cash" - and the item wasn't even available for about that long, so I paid before I got it home! That was some 50 years ago and yes, I still have that piece of furniture. :)

Offers and ads generally scare me off.