Friday, 25 December 2009

Beware of Christmas Discounts

Many people spend a lot during Christmas. A friend at work told me that she was now broke because she had spent all her money while shopping. She said that in order to save money her strategy is to never buy anything at full price for the next four months. This I think is a horrible idea. What matters is not how discounted a product is. What matter is how much you save. Suppose person A purchased a widget for $100,000 and person B purchased two widgets, each for $80,000. Person B paid less than person A and received a 20% discount, but person A is better off because he spent only $100,000 in total while person B spend $160,000. I think many people are so focused on the discount that they are forget just how much they are spending in total.

I must admit I am guilty of this myself. Last Christmas I wanted to buy a suit. I went shopping with my mom and purchased a suit for $500 because it was 30% off. But what I didn't realize is that I overspent because, after checking on eBay, I learned that there are many suits out there for only about $200. The discount then is completely irrelevant. What you need to focus on is spending as little as possible.

No comments: