Saving: Be a Latecomer not an Early Adaptor!

Don't be a donkey by spending your precious money on fashion items! (seen in Barcelona, Spain)

Don’t be a donkey by spending your precious money on fashion items! (seen in Barcelona, Spain)

Finally, a new post on money and saving.

Today we will learn how to safe 1.200 EUR per year.

Hurray!

I mean, much of this topic has been covered already, but there is one more thing people systematically seem to do wrong about consumption:

People always want to have the newest and coolest stuff.

I guess, to some degree this is understandable – man, who does not want to be cool?!

Unfortunately, being cool by buying “sexy” stuff comes at an incredibly high price, a price that is likely to severely slow down your downshifting plans.

So the real question is:

Do you really want to be cool on the price of slaving away in your job an ugly 40 hours/week, 46 weeks/year?!

Or should you try to get your coolness from something else than from new “gadgets”.

But lets look at some background first:

The principle of “inter-temporal competition” is very well-known in economic theory.
Intertemporal competition means, that besides “normal” competition (against other products/companies), each product today is competing against sales of itself in the future. That means, if you try to sell a product (lets say a smart-phone), it normally will get cheaper in the future. As people know that, some tend to wait, decreasing demand today.
On the other hand, each company wants to make profit rather today than tomorrow. This especially holds true in today’s short-lived, impatient business climate, where all people and investors seem to care about is the next business quarter.

So what will companies do to fight intertemporal competition?

They will try to add value to the today purchase of the product by trying to convince you – the consumer – that a purchase today is better than a purchase tomorrow.

How do they convince you to buy at a high price today instead of waiting until tomorrow?

1) Well, one thing is ever-changing technology.
Companies will try to tell you what there offer is so ground-braking that you really have to own it today.

This is what I call the “Weisser Riese” Effect in German, as I came to realize this phenomenon 15 years ago on the example of a washing powder called “weisser Riese” (“white giant”). Advertisement for “weisser riese” went that way: This washing powder is so sophisticated that it creates the most white color for your shirts that is ever possible.
Wow, ok, fantastic, you guys convinced me, I’ll have to buy it !! It’s more costly, but if it is that great…!
But then, one year later, there was a new version of “weisser Riese” out there, with a refined formula, and even much better results. And one year later this thing came in mega-perls, providing still much better results due to what-god-knows great progresses in chemicals. And so on.But, you see the point:If the first product was already perfect, how does it come that they can improve it every year?! Either there was no improvement, or the first product was far from good in the first place.

2) Second method it to creat a fashion.
Telling you that you will be so un-cool if you do not keep up and join in today.

Both 1) + 2) are mostly achieved by the means of advertisement.

This is one major point why you should get rid of your TV.
Because if you like it or not, there is ample evidence that advertisement will affect you on a subconscious level, even if you think you are able to ignore it.

Actually, bullet 2, fashion, is the thing that seems to work best in todays consumption driven world, and in a world where many people lack meaning in their lives, and thus tend to define themselves by appearance, status, the things they wear and own, etc.

Thus, you will see the wheel of fashion spin quicker and quicker, and expanding to product categories that where not as prone to fashion 30 years ago.
Like kitchen tools, furniture, you name it.
With this there also comes a shorter durability of products and less products available featuring an unspectacular or ageless design.

Now let’s have a look at how this affects your budget.

My claim is, that an average household in Germany (total spending on consumption 2.245 EUR per month, see here), can safe up to 1.000 EUR per year by simply switching to a “late-comer” consumption style, i.e. without buying less, but by consequently buying products that are already a bit out of fashion.

Let me show you some examples I observed over an extended period of time:

  • TV, Toshiba, flat screen, 26”, at time of market entry in March 2012: 400 EUR.One year later: 220 EUR (-40%).
  • Smartphone, Samsung, at time of market entry Feb 2012: 300 EUR.
    Today, 1,5 years later: 130 EUR (-60%).
  • Computer Game, at time of market entry: 40 EUR.
    1 year later: 25 EUR (-35%).
  • New Car, at time of market entry: 24.000 EUR.
    3 years later: New car, same edition, around 20.000 EUR (-15%).
  • Jacket, well-known brand, market entry Autumn 2012: 250 EUR.
    3 months later, winter sale Jan 2013: 150 EUR (-40%).
  • Carver Ski Set, at market entry: 250 EUR.
    1 year later: 199 EUR (-20%).
  • Computer, high-end machine, state of the art, including monitor, at market entry: 2000 EUR.
    1 year later, same specification: 1300 EUR.(-30%)
    2 years later, same specification: 1000 EUR (-50%).
  • Semi-professional Camera, body only, at market entry: 800 EUR.
    3 years later: 600 EUR (-25%).
  • Movie DVD rental, at market entry: 3,50 EUR.
    2 months later: 2,50 EUR (-30%).

And so on.

Now lets look at total average household spending:

  Av. Spending p.month Saving by Late Coming Total Saving p.year.
Cloths 106 EUR -25% 318 EUR
Household Equipment 113 EUR -20% 271 EUR
Vehicle purchase / maintenance (estimate) 150 EUR -10% 180 EUR
Electronics / Telcom 65 EUR -30% 234 EUR
Entertainment, other 200 EUR -10% 240 EUR
Total     1.243 EUR

Voila, there you go:

Potential savings of 1.243 EUR per year!

And that is without having to surrender anything, but just by running a bit behind the herd.
This is what I like: Gains by pure efficiency, without having to giving up on anything!

Plus there are some additional benefits of late coming:

  • The herd will already have found out for you if the product is of high quality or not
  • You have enough time to ponder out if you really need that product at all, or if it was an affect made you belief you need it.
  • Used items will be available by then, opening the possibility to save even more.

The only minus is:

You will not be able to boast around with your new gadget!

But hey, more than 1.200 EUR per year only for boasting?
That’s 12.000 EUR in 10 years, and 72.000 EUR in 60 years!
A small fortune!

Well, not with me…

Decide yourself!

Cheers,

Woodpecker

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4 comments on “Saving: Be a Latecomer not an Early Adaptor!

  1. AJ says:

    Nice article. This leads on to the following…

    When you decide to wait and delay gratification, you realise after a while that you didn’t need the “thing” anywhere near as much as you thought you did.

    After time, you realise that perhaps you don’t need the new “thing” AT ALL. Perhaps the old one you already have is fine. Perhaps you simply don’t have a need that “the thing” will fill.

    If you follow this through, you can potentially move from saving €1200 per year to saving thousands!

    And sometimes not having something is cooler than having a crappy old one 😛

    • mrwoodpecker says:

      Yep, you are completely right on this one!
      E.g. most of the products I observed in the list above I didn’t buy at all in the end.
      Either because the need was gone as you said or consumer reviews showed me they are not living up to what I expected initially.

  2. Martin says:

    Totally agree. WIth consumer electronics you even get a better product if you wait und buy when updates are available.

  3. Alexander says:

    Here is the “pricehistory” of my “new” Canon Powershot S110. Prediction price was 479€ (last Year). I bought it in Spring 2013 for 390€. Now it costs 318€. 🙂

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