How Much Money Have You Really Saved?

How Much Money Have You Really Saved?

How Much Money Have You Really Saved?

I mentioned a while ago that I'd be making a handful of psychological posts in addition to deals/bargains. This is my first.

When determining how much money you've saved, going by how much you're told you've saved is the wrong way to look at it. I've actually touched on this a handful of times in some of my posts.

What this means is next time you go and buy a product from Coles and it says "Normally $4, now $2", you haven't necessarily saved $2.

A better example is probably the following.

At the time of writing, a one-way Business Class ticket SYD-MEL on Jan 25 (day before Australia day) costs $761 (clicking through will show you live prices)

SYD-MEL,J,25Jan.PNG

Here's a question... if you purchase a ticket on Virgin Australia at $761 (as pictured), have you just saved $150 by choosing a $761 flight instead of one of the $911 flight? I would say no. Because:

  • You've picked the $761 one because it's $761. This means you were never willing to pay $911.
  • To actually elaborate and twist this a little bit, I'd argue that you may still have overpaid. Would you actually pay $761 for a short SYD-MEL hop when you could get away with paying ~$150 in Economy Class? Is Business Class worth ~$600 for an hour of comfort + lounge access?
SYD-MEL,Y,25Jan.PNG

You can apply this question to pretty much every single thing you purchase.

  • Buying a Toyota instead of a Mercedes = saving $30k?
  • Buying Coles bread instead of Helga's/Lawson's Bread = saving $2.50?
  • Taking the train home for $4 instead of paying for a taxi = saving $20?
  • You're being offered to go skiing for $500 instead of $1000. Saved $500? Not if you never intended on going and perceive no value in skiing.

I'm not saying these are never accurate/true, but you have to be realitsic about your own perceived value of what it is that you are paying for. If you were never going to pay the quoted price, then using that figure as a benchmark for how much you've saved is inaccurate.

I love Arsenal, and I love soccer. Despite all my frugal ways, I often pay money to partake in activities that involve one or the other. However, I absolutely acknowledge Arsenal and soccer can offer very little perceived value to others. Paying $250 for an Arsenal ticket (that usually costs $300) might mean a $50 saving for me, but is arguably overspending $250 for someone else.

Think about your hobbies - saving money on these hobbies is truly saving money because you were probably going to pay anyway.

It's for this reason why saving money on necessities is great. Food, petrol, transportation costs, phone bills, gas, electricity, housing - these are necessities. In the case of petrol and transportation costs (particularly train/bus/ferry), it's often difficult to find ways to "save" money on these. That's why when you've saved money on these costs, that's when you know that you have truly saved money.

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