Be Cash Clever!

A colleague went to Subway and offered to bring back lunch or dessert.  I got some cookies and he said that I could just buy him a soda at some point instead of giving him cash.

The sodas out of the vending machine were $1.25 for a 20-ounce bottle.  This was about the same price as the cookies I got, so it was a fair trade.

I instead got a six-pack of 24-ounce bottles for $3.50 at the grocery store.  The cost of two larger bottles from the store was the same price as one smaller bottle from the vending machine.

“There’s a personal finance lesson somewhere in there,” I told him.

When you think “rent to own” if you’re at all money-savvy you know that this translates to “expensive.”  These kinds of stores make their money by marketing the “just $15/month” that ends up costing a small fortune over the cost of the rental period.

I know that there are some homeowners that wished they had rented a little longer before buying — especially if their property values fell enough to put their mortgages underwater!  If this is the case, then they generally can’t take advantage of lower mortgage rates because they can’t refinance.  Further, they’re stuck with their house now.  Had they been renting, they could move more easily — basically when their lease is up for renewal.

On a smaller scale, renting a piece of equipment that you don’t expect to use regularly can save you money as well.  Our church rented a cherry picker for a month when we needed to fix up the front of the church.  We pitched in to help while the equipment was there, and could return it on time.  Or, if you’re planning an anniversary party then it may be better to rent the party items like the china, serving trays, the portable PA system, the tents, etc.

One-time uses are perfect candidates for renting vs. buying.  It not only reduces the cost, it reduces the amount of stuff you accumulate as well!

Depreciation is the discounting of resale value that happens as something gets used.  No depreciation has happened when you buy something new.

If you buy something new, you get to suffer the ill effects of the worst part of the depreciation.  Did you know that a new loses about 15-20% of its value the second you drive it off of the lot?  That’s several thousand dollars.  Poof, just like that!

You can slay the depreciation monster by buying quality used items, like vehicles, CDs, books, clothes … just about anything, really.  There are only a few exceptions, but if you consider whether the thing you’re buying is still just as functional as when it was new, then odds are it’s fine to buy it used.

Buying things used means that the original buyer took the depreciation hit, not you!  You may still get hit with a little bit more depreciation, but not nearly as much.  It’s a lot easier to slay a monster that’s weak, and that’s what you’re doing when you buy used.

It’s not a bad idea to carry cash, of course, if the cash is in your wallet, it’s there to spend.  (That’s why you carry it, after all.)

If you carry cash only in denominations more than $5, it can help you to not make certain impulse buys:  vending machines. Most vending machines will take (a) change, and (b) $1 bills.  If you don’t have the right kind of money to feed these machines, it’s almost as if you didn’t have any money at all, because you can’t spend it!

I’ve found that this trick works really well for avoiding the snack machines during those mid-afternoon energy lulls.  I’ll just have some water or eat some of the healthier food I have in my cube instead.

Now, if you’re tempted to spend on things after work that are in the $20-$30 range just on impulse, and you know you shouldn’t, then just keep the cash out of your pocket.  And the credit cards, for that matter.  But if it’s the little expenses that get you, then you can still carry cash without being tempted to spend it on sodas and corn chips at the vending machines.  Leave the small money at home!