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1/22/2007

Managing Your Finances Part III

Management Tip #3: Buy Stuff When It's A Good Deal; or, Buy Below Ebay

I admit it: I am a consumer at heart. I like to buy stuff. My acquisition gene is dominant (if that makes sense, to you geneticists out there). Fortunately, my areas of acquisition are generally limited. I buy what I like. These interests are currently:

  • Computer stuff
  • Video games
  • Audio stuff (including musical instruments)
  • Books
Because I have a high degree of interest in these areas, I know very well what a "good price" is for most of these things. I keep up with the latest news, check out stuff on eBay, and generally know the price of most things that I want to buy. I also plan things ahead and keep an eye out for good deals. One of the best ways to save money as a consumer is not to be in a hurry to buy. This will net you savings on many, many things.

I have many goals in my life (probably too many) and just within the past year have achieved the financial wherewithal to get started on some of them. The nice thing about this kind of goal is that you can take your time. For example, I want to play the guitar, piano, and violin. (I took piano and guitar when I was young, but abandoned them.) So I scoured Craigslist for listings and visited music stores that sold used items on consignment. I ended up buying a used guitar and amp for $100; fair value was probably $150. I bought a Yamaha P90 digital piano for $600, while the same model in worse condition goes for $700+ on eBay. I picked up the violin for $115 -- a violin that retailed for over $600! The nice thing about all of these instruments is that (unless I damage them) I could still turn around and sell them for at least what I paid for them.

One of the common threads here is that these were all used items. The "huge depreciation as you drive it off the lot" phenomenon is not just limited to cars! Especially on big purchases, you can save substantially by buying used or refurbished items. Looking for a pool table? An engagement ring? A leather sofa? Just find some poor sap who's got a practically new one and is selling it for half what he paid for it. It's not hard.

I do the same thing with books. I am a regular visitor to my local used bookstores. I never feel bad spending $100 on books there because I know I would spend $200 or more at Barnes & Noble for the same books. Even at Barnes & Noble, most of my purchases come from the bargain racks (and I also have the membership card to get an additional 10% off!). Maybe 1 out of every 20 books that I buy is a new, full-priced book.

I shop for clothes in the same way. I get gift certificates to the Gap from my AmEx card. Even with a $100 gift certificate I will head straight to the clearance racks, where most things are 50% off or more. For that $100, I can 2 or 3 pairs of jeans, a number of shirts, maybe a sweater or a jacket... and still have money left over! I also visit my favorite upscale department store, which has clearance sales 4 times a year. There I buy very nice Polo and Tommy Hilfiger dress shirts for under $25. Yes, many times I don't find "exactly" what I want in the clearance section. Bad colors, wrong sizes. But you know what? I don't mind, because I don't really need this stuff right now -- which is the key to getting a good deal. This is my "stocking up."

As a general rule in my mind, I compare things to eBay prices. eBay is the biggest marketplace in the world, and most kinds of goods are sold there. For many things it's not a good market (IMO buying RAM or a CPU on eBay is stupid) but it's the best we've got for most market segments. If you decide on something that you want (or even just *might* want), check the prices on eBay. Next time you're in the store, you can compare the price to the eBay going price. If it's *much* less (say 40% or more) you can know to buy it, if only to sell it on eBay. If it's less, you can know that it's a good deal. Buying locally also usually has the benefit of some sort of a return period. Target, Sam's Club, and Costco have very liberal return policies.

Of course, it's hard to always be prepared for every situation. Sometimes I'll be in a store and see something that I've never really thought about, but it's on sale for what seems to be a good price. So I'll go ahead and buy it, and then check eBay prices right when I get home. If it would be a break-even deal on eBay, I'll usually return it right away. Seriously. I've done this probably 5 times within the past 6 months on items varying from $45 to $200 in price.

This is already getting pretty long, but I have one final point to mention: By knowing this price information, I can control my spending easier. In my areas where I'm most likely to splurge, I have a very good idea of what I should be paying for any given item. Simply knowing and telling myself "This is not a good deal" is enough to generate the self-restraint needed to keep from overspending.

3 comments:

Anonymous said...

Thanks. This is good advice.

How do you best compare prices on Ebay? How much do prices vary from day to day as new auctions are created and old ones expire?

Gaming the Credit System said...

SM,

This is a good point. eBay is not particularly helpful, as they delete auctions within a couple of months of when they end. Basically my tactic is first to just search the current listings. Make note of the current prices for the ones that are ending soonest. Also make note of the "Buy It Now" prices. Usually these are somewhat inflated, but people wouldn't be listing at those prices if others weren't buying at those prices. Then I click the "Completed Listings" box and search those. I look for "Buy It Now" items that were actually sold, as well as auctions, both sold and unsold (for reserve price auctions).

Sometimes there is an aggravating and persistent price discrepancy. Prices can seem to bounce all over the place for the same item. This can be due to several factors if you look into the auctions. 1) Feedback rating. People with low feedback aren't going to get the highest bids. 2) Odd shipping or payment terms. If they only accept money orders, or they will only accept local buyers, that will also keep the bids down. 3) Timing factors. Auctions that end in the evening go for higher prices than ones that end in the morning or middle of the night. 4) The actual condition of the item can change fairly substantially. One laptop might be sold with a new battery, while the battery on another might be practically useless. Or maybe it's missing an important accessory. Sometimes you have to dig deep into the descriptions to figure some of this out. 5) Complete randomness. Sometimes there's no explaining the result.

When there's a wide variation, I often just go for the 50% to 75% range. E.g., if auction ending prices range from $500 to $600, then I would call my "eBay price" $550 or $575 (because this probably represents the items in good condition from reputable sellers).

Anonymous said...

I like the eBay tip, but like you I'm not always actively looking for certain items.

One thing I've made a part of my routine is to check deal sites first thing every morning (generally slickdeals.net, spoofee.com, and woot.com). I rarely buy any of the deals, but it gives me an idea of what a "good" price on certain items will be.