Have you ever pondered if the premium cleaning solution is worth the extra money? Is it truly THAT much better than the generic or store brand versions? On the opposite end of the spectrum, is the premium couch THAT much more durable than the cheaper versions? In this article, my goal is to explain why I’m convinced that spending more money on the right low frequency, high cost purchases and less money on the right high frequency, low cost purchases is the best overall strategy for achieving financial success. As always, there are exceptions to every rule, but I live by this philosophy, and it’s served me well in the long run.
Low Frequency, High Cost
In the spectrum of purchases, these types of items should ideally be purchased a few times in a lifetime (or that’s the way it should be if you follow the guidance herein). The best personal example that jumps to mind is rain gear. In 2005, I purchased a set of premium rain gear; it included a rain jacket and rain pants. Yes, you read that correctly—my rain jacket is 15 years old and looks just as good as the day I bought it! I’ll refrain from getting into brand specifics, but suffice it to say the brand is somewhere between the middle- to high-end range. It probably wouldn’t survive a year-long expedition in the Amazon rainforest but would be more than adequate 10 times out of 10 to get you from the house to the car in a spontaneous thunderstorm.
Now that the context has been established, allow me to elaborate on a few of the ways this rain jacket has thrived in the face of challenges:
- 3-day tent camping trip: It rained every single day. And when I say rained, I mean it was a consistent, torrential downpour. I made it a point to spend as many daylight hours outside the tent as possible, exploring an area I’d never visited before. At the end of each day, I was covered in sand and grime, in addition to water, but underneath the rain jacket I was completely dry.
- Several all-night fishing trips: Back when I had a bass boat, I’d occasionally get a wild hair and want to fish at night. It’s dangerous if you don’t know the body of water but also has so many benefits—less traffic on the water, no wait at the boat ramp, and fish are active (if you know where to go). Anyhow, several of these nights it rained; usually, it was a slow steady rain and not a downpour but would rain for 3 to 4 hours straight. The rain jacket (and pants) would keep me as dry as if I’d been under shelter the whole time.
- Mountain biking in the rain: For these outings, not only did the jacket need to keep me dry, but it needed to be pliable and durable enough to endure constant twisting, stretching, and bending. And it exceeded every expectation that I had in this arena.
In summary, my proposal is to be willing to spend extra when you need an item that will last a lifetime (or close to it). The set of rain gear was over $200, but it will undoubtedly last 10 times as long as buying a cheap raincoat or rain paints that would need to be replaced multiple times. The goal with these types of purchases is to prioritize utility and functionality over price (within reason). Don’t go out and take a home equity loan to buy an expedition-worthy raincoat, but don’t shy away from sets that are moderately expensive. The reason is that the cost per unit (in this case the ability to protect you from the elements divided by the total days you own the coat) will far exceed the cheaper competition.
High Frequency, Low Cost
In the spectrum of purchases, these are the opposite of the above-mentioned purchases. They are made on a regular basis—many hundreds, if not thousands, of times at a relatively low price point. You might think of these as necessities, although that’s not always the case. There are plenty of examples: most food items, most toiletries, most household/cleaning goods, etc. It’s tempting to overlook these items with the assumption they’re insignificant or unimportant from a price perspective, and on a stand-alone basis that is correct. However, since these are recurring purchases, they can and will add up over time. Especially if you’re paying a relative premium for an equivalent or even inferior product.
One of my favorite examples of this is baby wipes. Now, I know there is some fierce brand loyalty from parents when it comes to what kind of wipe hits their baby’s rear end. Some insist on the high-end, all-natural, cruelty-free, free-trade, organic, etc., etc., etc. And I get that—if you are concerned about being environmentally conscious or your child has extra-sensitive skin and needs a certain formulation of wipe, then splurge for what fits your needs or your child’s needs.
But outside of that, wipes are largely a commodity good. There are thousands of nearly-equal substitutes in different sizes, counts, formulations, scents, packaging, and so on. Plus, the manufacturers and retailers make it difficult to compare prices because of all the variation in the offerings. At the end of the day, what matters most is that they effectively clean what they’re supposed to clean, they don’t irritate what they’re not supposed to irritate, and that’s about it.
Wipes may seem like an irrelevant example, but with two children under the age of three, we’ve learned that a pack of wipes is our best friend. We have them strategically placed throughout the house in bathrooms, kitchen, bedrooms, closets—just about anywhere you could reasonably conceive you might need one. And they’ve evolved from wiping bottoms to cleaning just about anything.
We’ve tried the more expensive wipes and concluded that the price just isn’t worth it. They are no better, and, in some cases, we actually prefer the cheaper wipes. Again—don’t fall into the total price trap because that’s how they trick you. There are plenty of sites that rank the cost on a per-wipe basis and even have user reviews and ratings to help you decide if you think the premium wipes are worth it. And if you think the cost of wipes can’t add up over time, think again. We’ve likely gone through multiple thousands, possibly tens of thousands, of wipes over time. And if you’re saving a half a penny or more per wipe, that can make a difference when it comes to your financial prowess. If you’re interested in learning more about the cost-per-unit principle, feel free to read another one of my posts covering that topic (https://sowadime.com/2020/08/25/cost-per-unit-the-universal-benchmark/).
As with most of the advice and commentary on this site, the analysis is yours to do. Please understand it’s not one-size-fits-all. You’ll need to decide which of the low frequency, high cost goods are worth paying a premium; likewise, you’ll need to choose with high frequency, low cost goods are not worth the premium. Once you start analyzing this for a few things you and your family purchase, you’ll be surprised how easy it becomes to crunch the numbers and set yourself on better long-term financial path.