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The art and science of buying in bulk

by CreditScore.net Staff Writer on February 16, 2012

Buying in bulk is an essential skill of the frugal mindset. In many cases, bulk discounts are a great way to save money on everyday items and other disposable purchases. But it can also become a consumer trap. A trick that gets you to buy more of something you didn’t need, causes you to consume more/faster, or (in some cases) isn’t even a discount.

The following guide breaks down the art and science of taking advantage of bulk discounts for your frugal lifestyle. Simple concepts, that when applied to your own life and shopping habits, can save you a bunch of cash.

Confirm the discount

This study found that only 86% of food items were cheaper at bulk stores. Never assume that buying in bulk is cheaper, because sometimes it just isn’t. Bring a calculator with you if you have to, but do the math before you make any bulk purchase.

This also means you might have to do some research and comparison shopping. Before going to any bulk store, make sure you have a good idea of what you regularly pay for the items you’re shopping for. That way you’ll be able to fully optimize your shopping budget and find what items you save on the most by buying in bulk.

Don’t let it change your consumption habits

This goes especially for food, but not exclusively. The trap here is having so much of a single item sometimes causes you to simply consume more or become wasteful. As a result, you go through them faster, therefore spending more than you normally would. There’s a number of reasons why this happens and there are items you may want to avoid (depending on the person) to prevent it from happening, but it all comes down to self control.

Soda and snacks are a prime example. They tend to be expensive when purchased in smaller amounts, but in bulk are a fraction of the cost. Unfortunately having so much causes you to drink more soda and/or snack more. So not only does it become unhealthy, but it makes your bulk purchase more expensive than the alternative. This doesn’t mean you can’t buy soda or snacks in bulk, it just means be conscious of your consumption so that you’re actually saving money. Or simply be honest with yourself and avoid items that cause you to consume more.

Also, don’t buy things you normally wouldn’t just because it’s a great deal. If it turns out to be something you don’t like or won’t use you’re stuck with them further contributing to waste. Changing your consumption habits based on sales is another consumer trap.

Focus on items you go through the fastest

And things you can’t go without, like toilet paper. Those staples of your home and everyday lifestyle. Certain items, brands, and/or flavors that you run out of the quickest forcing you to make a quick run to the store. Focusing on these items first is going to be the best way to optimize your savings. It’s why even though you can save $1.00 per bottle of ketchup and only $0.25 per package of hot-dogs. If you don’t use up the ketchup by the time you’ve finished 4 packages of hot dogs, the hot-dogs are actually the better deal.

Using this and the first two suggestions, you can apply a formula to determine the best deals based on your own consumption and local prices:

First, calculate savings per item:

b [price/item (bulk)] – i [price per item (individual)] = s [savings/item]

Then, estimate item consumption per year and multiply by s

y [items/year] * s [savings/item] = Yearly savings

This formula is great for finding the best items to buy in bulk, but it’s especially useful for determining which items are specifically NOT.

Group purchases expand the possibilities

For the most part, bulk purchases should be generally limited to non-perishables, but if you can find a group or another family (perhaps) to split the cost, everybody wins! But that’s not the only advantage of group purchasing. You could also split fees, take turns shopping, and if you’re neighbors walk next store when you run out (in a pinch).

All that aside, still perhaps the biggest advantage of group purchases goes right down to the very premise of why bulk purchases are advantageous in the first place: Getting the best price.  In theory, the more you buy, the better the deal.

More bulk shopping tips:

  • Take bulk store “membership fees” into consideration – especially when calculating your savings…split the fees with someone else, if possible, or just avoid those stores all together.
  • Take advantage of overstock sales – stores looking to clear shelf room for other items often put special prices for when you buy more than one. (e.g. two-for-one deals)
  • Buy Generic – generic brands tend to be cheaper anyways, but bulk savings for these items is also usually better. Strongly consider this when bulk shopping.
  • Avoid the taste trap – avoid items that you enjoy a variety of (like salad dressings) or that you could grow sick of (like a specific flavor of food) don’t make your life bland for petty savings.
  • Note expiration dates – especially on canned foods, get too much and you’ll be forced to throw away your savings.

Categories: Advice

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Top 10 US Cities for Average Credit Card Debt

by CreditScore.net Staff Writer on February 16, 2012

As you can see in the graph below, the average credit card debt per person in the United States can get quite high. The graph shows the 10 cities in the US with the highest average amount of credit card debt per person. The average debt in the US is into the thousands as well, and many people only pay the minimum due and remain in debt for years. Being in debt can become quite stressful but it can be easily paid up with some discipline and budgeting. Underneath the graph are a few links to articles that give some great advice on ridding yourself of excessive debt.

Debt Clean Up Advice

Categories: Debt

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10 best tips for eating healthy on a budget

by CreditScore.net Staff Writer on February 9, 2012

How is your new year’s resolution going? If you’re like me, you’re about a month in and realizing how expensive eating healthy can be. So now you’re trying to find some ways to keep it going without spending $50/week (or more) on fresh veggies alone. So in looking up some ideas to keep my promise to myself alive without it cutting into my financial goals, I’ve compiled the 10 best tips (with links to the source article) that have already helped me on my way.

Cook at home

The single most important thing most people can do to eat healthier while saving money is to cook for yourself at home. Not prepared microwave meals. Real meals from fresh ingredients. And for many, this single piece of advice will be the most impactful on their weight, and their wallet.

have a plan

Set a budget, research acceptable foods/ingredients, find some recipes, and plan out your meals and snacks. Without a plan you can easily fall into traps that impede your budget/health intentions. Traps that make you go off diet and over budget, like ordering takeout.

Buy in bulk

If you’ve followed the above two tips, buying in bulk not only becomes easier (as well as cheaper) but it also makes things so much more convenient. That convenience will play a vital role in the persistence of your goal of better health.

Variety

This tip came up a lot, but I linked to a blogger who decided to challenge herself to start a healthy and frugal eating routine. But she had some rules. And right at the top of them was “rule #1 – I will not suffer from this challenge”. And variety is how. Learn new recipes, find new healthy foods, and even build variety into your plan. And while it isn’t always the cheapest way to shop, eating less expensive foods one day may free up some budget for a more expensive splurge meal (healthy, of course) the next.

Eat less

DUH! – Alright, this isn’t the best 2 word piece of advice, but if you take a look at the article, they do a great job outlining some of the best foods to stop eating so much of. Cut back on junk food, salty snacks, and alcohol. But for your health and your wallet, also try not to replace them. Stop snacking.

Drink Water

If this list were ranked in order of effectiveness, this would be #2 behind cook at home. For one, drinking more water is just healthier. Most people don’t drink enough. Second, many people tend to drink sugary drinks that have empty calories, a double no-no. Finally, water is cheap. Even if you can’t drink tap water. A 5 gallon jug of water is a significant amount less expensive than any other beverage by volume.

Eat less red meat

The American Heart Association has this at the top of their list and they do have a point. Red meat is a rather unhealthy and expensive protein, so cutting it from your diet will not only increase your health, but ease your wallet as well.

Emphasize grains and legumes

These categories of food tend to not only be nutrient rich and healthy, but they also can be incredibly inexpensive. There are (of course) more expensive varieties of each, but a good portion of your daily meals should focus right here if health & budgeting are your goals.

Whole grains/Brown Rice

To be more specific than “grains”, focus on the whole grains. In some circumstances whole grains can be more expensive than their counterparts. However, with things like whole grain bread and brown rice, the price differences are negligible. And while we’re on the topic, brown rice isn’t just inexpensive, it can provide 5-10 good meals for under $2. It’ truly is a godsend for the frugal health nut.

Buy Frozen Fruits & Veggies

Finally, this tip comes from stronglifts.com that may change the way you percieve fresh veggies. See, buying fresh is expensive. Not only because the food is pricey, but because you need to use it right away so you end up throwing much of it away. But certain fruits and veggies can actually be healthier frozen rather than fresh. Plus (as stronglifts.com points out) the convenience of frozen veggies is also a big plus.

Categories: Advice

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How to pay cash for every car you buy for the rest of your life!

by CreditScore.net Staff Writer on February 2, 2012

Car ownership isn’t an investment, it’s a cost. With few exceptions, cars generally depreciate in value at a rate of about 15%-20% per year. So in financial terms, your return on investment is always going to be negative. But that doesn’t mean you don’t need (or shouldn’t have) a car. It’s just that the financial implications of vehicle ownership means the more valuable your automobile(s), the more value you lose year to year. So those who learn to live with less, more often than not, will get the best bang for their auto buck.

But perhaps a more pressing concern for most consumers isn’t even the economics of owning, but rather the economics of financing a car. The first step to making your money go farthest when it comes to your automotive purchase is understanding and limiting the costs associated with the different financing options.

So in this article we’ll first explore the (purely financial) economics of the different ways to finance your next vehicle. Then, we’ll outline a realistic long term plan, that anyone can follow, that will allow you to pay cash for every vehicle you buy for the rest of your life.

Leasing vs. Buying

Leasing is appealing to consumers who want to drive a newer car for lower monthly payments than they would require to purchase the same vehicle. Because of this, on the surface, it seems that leasing is less expensive. But the reality is it’s almost always going to end up being more expensive.
When you lease a car, you pay the owner/dealer directly for the car’s value depreciation plus interest (on the car’s value). That’s the majority of what’s built into the monthly payments. At the end of the lease term, you will own nothing nor will you have any equity in said car.

Buying, by comparison, you pay for the value of the car directly, and after the car (loan) has been paid off, you own the car (and its remaining value) outright. In theory, leasing a car for 4 years will cost you the same as financing the purchase of that car on a 4 year loan (at the same interest rate as the lease), then selling the car at it’s remaining value. Simplified, it will look something like this:

Car = $20,000 (including tax) | Interest = 4% APR
Lease: $250/month * 48 months = $12,000 (total cost of leasing)
Loan: $450/month * 48 months = $21,600 (total cost of auto loan) – $9,600 (remaining car value) = $12,000 (net cost of financing after 4 years)

What makes the lease option more expensive is what happens at the end of the 4 year term. The leaser has two options: either begin a new lease, or purchase the car from the dealer. Purchasing the car then will always be more expensive than purchasing the car from the get-go. Starting a new lease, however, even though you’ll be driving a brand new vehicle, you’ll continue to pay the high rate of value depreciation and interest on a new car. Meanwhile, the person who took out the loan now has no monthly payments to make and only loses value in their car, but at a slower rate than when the car was new. After another 4 years (8 total), it will look something like this:

After 8 years
Lease: $24,000 (total payments) / 96 months = $250/month (net cost to lease)
Loan: $21,600 (total cost of auto loan) – $4750 (approx. remaining car value) = $16850 / 96 months = $175/month (net cost to finance)

The lesson here: the longer you plan to own your car, the more clear the financial benefits of buying (vs. leasing) becomes.

Cash vs. Loans

Paying cash for a car is obviously preferable over taking out an auto loan because you don’t have to pay interest. But most people simply don’t have that much cash laying around, so they opt for the loan, particularly for their first car. And while there’s nothing wrong with doing this, what most people fail to do is take advantage of the time after they finished making payments and own the car outright. If you continue to save money during this time, you may even be able to pay cash for your next car. Here’s how:

Let’s continue using the above example and say you opted to finance the car and plan to own it for at least 8 years. After paying $450/month for 4 years, you own the car outright. For the next 4 years, however, instead of making car payments, you instead save $350/month (note: less than loan payments) into a savings account (earning interest). So after 8 years, not only do you own the car free and clear, but you’ll have saved a significant amount of money for your next car:

Saving for 4 years after the loan is paid off
$350 * 48 months = $16,800 (cash) + $4750 (value of car) = $21,550 (towards your next car)

Keep up the momentum

Now that you’ve paid cash for a brand new car, you’re done, right? Wrong. Why stop there? Continue to save money each month to put away for your next vehicle so you never have to pay interest on another car again. What’s more, the car you now have, you don’t have to make payments for in the first four years. You can even reduce the amount you save each month because in 4 years, the value of your car will be double what it would be in 8.

Saving for your next car:
$220 * 48 months = $10,560 (cash) + $9,600 (value of car after 4 years) = $20,160

In other words, with this plan, it’s possible to buy a brand new $20,000 car, every 4 years, with cash, for an overall monthly cost less than leasing!

It works for used cars too

Buying a brand new car is generally thought of as a poor financial purchase. Most frugal experts will tell you that buying a used car (even 2 years old) is a much more sound decision. At a relatively conservative 15% depreciation, your $20,000 new car will lose over $5500 in value the first two years. Meaning you could have bought this same car for around $14,450 2 years pre-owned. Suddenly our saving schedule becomes even easier:

Saving for a pre-owned car:
$145 * 48 months = $6960 + $7,540 (value of the car after 6 years) = $14,500

How far can you take it?

If you wanted to save even more money on your vehicles, all you need to do is hold on to them longer. The longer you wait to buy your next car, the less you need to save each month:

2 year old Pre-owned car over 6 years:
$125 * 72 months = $9050 + $5,450 (value of the car after 8 years) = $14,500

Categories: Advice, Debt

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Top 10 Tips to Protect Your Privacy Online

by CreditScore.net Staff Writer on January 27, 2012

We lock our doors and close our curtains in order to protect our privacy. Unfortunately, however, when we sit down at the computer, we often expose ourselves to those who want to invade our privacy. Our activities online are easily monitored at work and at home, and if we are not careful, we can give away our credit card numbers, identities and much more to the undesirable elements of society when we surf the Internet. Yet protecting our privacy online is not that difficult, especially when we follow these ten easy steps:

1. Create a Separate Email Address for Public Postings

Some people fear the canned meat called Spam, but there is one type of spam that is far more dangerous. Spam emails sent from unknown addresses or containing unwelcome advertisements can make us targets of identity thieves, computer viruses and more. The best way to avoid such emails is to direct them all to one address with a special email that is used only for public posting on message boards, social-networking sites and much more. The Electronic Frontier Foundation recommends that we sign up for a special email address that we hand out to unknown people and other groups about whom we know little. This keeps too much spam from invading our personal email inboxes.

2. Understand Workplace Monitoring Practices

Many employers monitor everything their employees do online. Employers and IT departments can “look over our shoulders” electronically to see the websites we visit and so forth. Thus, if our Internet activities are monitored at work, co-workers are likely able to invade our privacy. This extends even to email. Those of us who need to write an email that they do not want the boss to read would be better off to write it at home than at work.

3. Use a Firewall at Home

A home computer with an always-on DSL or cable connection is to computer hackers what a wide open front door is to thieves. Fortunately, we can close this door when we install a firewall and/or turn off our computers when they are not in use.

4. Consider Getting a Temporary Credit Card Number

If we are afraid that our spouses will take our credit cards and spend us into oblivion, we should also be afraid that someone outside our families might do the same. Every year, hackers break into businesses’ databases and steal the credit card numbers and identities of the businesses’ customers. One of the best ways to keep ourselves from becoming victims of such identity theft, says CNET, is to use temporary credit card numbers when we shop online. Such numbers can often be obtained from our existing credit card companies, and their predetermined spending limits can keep a thief from destroying our credit scores.

5. Take Care with Social Media

Social-networking sites are an increasingly popular way to keep up with friends and family. Unfortunately, much of what we put on social media can be used against us. A full birth date with month, day and year can make us easy targets for identity theft, so it is best to leave the year off the birthdate when composing a social-networking profile. It is also important to be careful about posting pictures online. That keg party might have been a lot of fun, but potential employers or parents might see it if it is posted on a social-networking profile.

6. Vary Usernames and Passwords

The Daily Beast recommends that we not use the same username and password combination across several different websites. Those who follow this rule can be sure that they have not given thieves access to all of their accounts if said criminals somehow figure out the username and password to one of these accounts.

7. Make Passwords Hard to Guess

Varying usernames and passwords across all the sites we join is not enough. We should also make our passwords hard to guess. It is important never to use the names of family members, birthdays or other facts that others might know. Also, we should include a variety of letters, numbers and special characters when we establish each new password. The more unusual a password, the more difficult it will be for someone else to guess said password and invade our privacy.

8. Understand a Website’s Terms of Service

Most e-commerce sites, social-networking sites and other sites that require registration have a terms of service agreement that must be signed. These agreements explain what these sites will do with personal information and whether it can be sold to others. Those of us who are very concerned about our online privacy, should never sign an agreement that makes it easy for a site to make personal information available to other people.

9. Keep Social Security Numbers Private

Our parents always taught us to keep our hands to ourselves, but in this day and age, it is even more important to keep our Social Security numbers (SSNs) to ourselves. The Christian Science Monitor recommends that individuals never give a SSN to a website unless they are absolutely sure of the site and its security. Unless we happen to apply to a college or sign up for a financial product such as a bank account, a site should probably not be asking for a SSN anyway.

10. Make Use of a Browser’s Privacy Features

There are a lot of security software programs, pop-up blockers, and so on that we can download and install in order to help safeguard our privacy online. However, many privacy tools are likely found in the browsers we are already using. Top-of-the-line browsers will allow us to block and manage cookies, prevent certain advertisers from putting ads on the pages we visit, keep others from viewing our web surfing history and so on. Those who become conversant with their browser’s security features will protect themselves better when they go online.

Categories: Uncategorized

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