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3 Ways To Save More On Every Purchase

The quickest easiest way to have more money is to spend less.  The quickest easiest way to get ahead is to get more value for every dollar you spend.  Usually, when working with people a typical person can save 10%-20% of what they make over what they are saving already just through some simple strategies.

Today we’re going to go through the master toolset for increasing value for your money.  It is the universal that if you master it you can apply to absolutely any expense in any field.  You can save yourself and businesses thousands or millions of dollars each year and you can imagine what that’s worth.

It also has the advantage of helping you to identify hidden opportunities in the assets you’ve already got to increase your income and help those around you.

It’s what we call the 3 dimensions of value.

When you make any purchase of any kind there are three components that go into that purchase determining how much value you got:

  1. What you paid for it – bigger discount or bargain = better value, in other words you’re spending more for the same thing. This is what most people are used to focusing on and by paying close attention you can usually create some savings here.

 

  1. How much output it provides – this is a measure of quality in other words higher quality for the same price = better value. People are pretty aware of this but often forget to measure it and definitely have opportunities where they can get ahead by getting better quality for their money.

 

  1. How much you use it – this is the most overlooked aspect of value…utilization. Increase the utilization of anything you purchase = increase the value for the money.  In most cases this offers the largest opportunity for improvement.

 

First Step = Measure Everything You Spend

Most people tend not to measure all their expenses accurately.  Either they think they spend less than they do or they are missing expenses especially non-recurring expenses like annual renewals or purchases you make every few years.  For example, a budget for a new car if you’re paying cash, a budget for furniture, a budget for clothing, etc.  The fact is this money has to come from somewhere and you’re spending it so…

Non-recurring expenses tend to be what kills people’s sense of what they’re really spending.

Bottom line before you get started on anything else make a very thorough list of everything you’re spending and review your spending on a monthly basis if not more frequently.  Know what expenses are coming up and budget for them on a monthly basis even though the money isn’t actually going out.

 

Getting Bargains

The first dimension of value is bargain, the larger the bargain the greater the value.  Your goal should be to always buy everything for substantially below retail.  Think about it this way.  If you and a friend make an identical amount and live identical lifestyles the one who spends less will end up ahead.  The same is true for a business.  The business that spends less to achieve the same result is going to have more profit.  This in turn means they can cut their prices and get more business and the competitors can’t compete so will eventually die out creating a compounding effect on growth.

How do you get bargains?

  • Shop on sale – being able to plan your purchases for when things are on sale will help you
  • Buy used – buying used allows you to avoid tax and to find things cheaper than they should be
  • Buy wholesale – when possible this will allow you to get lower prices
  • Negotiate on EVERYTHING – even when you think you can’t you can often save
  • Collect points – just by using credit cards I average a 2% saving across the board

One of the best things you can do is understand where the costs are that drive the price and buy in ways that eliminate the costs so the seller can offer you a better price.  A good example of this is marketing costs businesses have but are lower when selling wholesale or buying from private individuals.

For every expense you’ve listed go through and see how you can apply each of those 5 strategies.

 

Buy Quality

You can radically increase your value by paying attention to a quality metric rather than just the price.  For example, say you’re buying food.  The metric might be nutritional value.  In other words, one item of food might cost more or the same in pure dollar terms but be much better value on a per nutritional content basis.

Virtually anything you buy you’re buying for a specific reason and if you understand that reason you can often get that same value for less money.  For example, say you’re buying a luxury car and your objective is to get prestige.  You could buy a new Mercedes for $40k, on for $120k or a used Bentley for $60k.  Which has the best and worst value?  Arguably dollars per prestige the Bentley will give you better value because even though it’s a used vehicle people just see “Bentley” and don’t worry much about the rest.

Likewise, the prestige value of an expensive Lamborghini vs an inexpensive one is minimal in most cases unless you’re appealing to car enthusiasts who have a lot of similar cars in which case a classic might offer better value for the money.

You also might find something that’s better quality retains its value better (sometimes and you should verify each time).  For example, an expensive Chanel purse might cost $8000 but you might be able to sell it for close to that 5 years later vs an inexpensive purse you might not be able to sell at all after 5 years.  When examining your expenses consider how well the things you’re buying will retain their value.

When you’re hiring staff for your business if you pay attention to output you’ll find an employee who costs less per hour might not be nearly as cost effective due to the quality of work.  This is especially true for revenue producing roles such as sales or marketing but could also apply for project managers, programmers, engineers, web designers, etc.

Generally speaking in any case where you can get a lot of upside the quality you’re getting is far more important than the price you’re paying.

Go through the list of all your expenses and determine a quality metric and find ways to improve the quality you’re getting per dollar.

 

Increase Utilization

Say you buy food in bulk then half of it goes bad and you have to throw it out.  This was poor utilization.  Or you’ve got a big car or truck with a lot of seats but it’s mostly being driven around empty, this is poor utilization.  Short term rentals vs purchase or a longer term lease is often a poor use of money.  Consider that if you were going to rent a car for a month you might be better able to buy something for a good deal, drive it for the month then sell it…maybe.

The point is anytime you under utilize something you’ve got an opportunity either to potentially split the utilization with someone else to drive down your cost per utilization.

Utilization ties in closely with quality because something quality tends to allow for higher utilization.  For example, I might buy a shirt for $20 that lasts me 2 washes vs a shirt for $50 that lasts 20 washes, which was cheaper?  The $50 shirt was cheaper on a per utilization basis ($2.50/wash vs $10/wash for the supposedly cheaper shirt).

You might also wear something more or use something more because the experience is better.  For example, I might buy a nice shirt and get compliments on it so wear it regularly whereas another shirt that might not fit as well, etc. goes unused and therefore drives up the cost per utilization.

In business I might be better off to utilize an external contractor rather than hiring someone internal if I won’t use them much.  Or maybe I can split an employee with another business in order to avoid the higher contractor rates.

You could also find ways of splitting marketing costs or joint venture with another company to gain extra leverage out of each client.

The ways to increase utilization or decrease wasted utilization are nearly endless.

Go through your list and for each expense determine whether you’ve got excess capacity or perhaps the ability to drive down your costs based on higher utilization.

 

How Much Can You Save?

Based on applying these three dimensions to each of your listed expenses in the year how much are you able to save?  How much additional value are you able to extract?  It’s very normal for an individual to save $5000/yr. or more.  Businesses are obviously much larger numbers because the spending is higher.

 

Want Assistance?

Our team is happy to coach you through the process of reducing your expenses and increasing the value per dollar spent.  Usually the simple process will save you thousands without even counting what you might save on taxes.

Or alternatively can recommend someone for you to hire to do it for you.

Contact us today.

  • that was a great article! 🙂

  • what is your business model? I’ve signed up for your newsletter, and looked through the website. 🙂

    • Business model is to provide amazing education and training, to grow relationships with entrepreneurs and ultimately partner with them on investing and growing business. Yours?