Barbara O’Neill, Ph.D., CFP® Extension Specialist in Financial Resource Management Rutgers Cooperative Extension
In this tough economy with high unemployment rates, flat wages, and rising prices for many household expenses, many people are looking for “deals.” Frugality is “in” and people at all income levels are seeking ways to lower their expenses so they can save more and/or repay debt. A good way to save money is to “step down” by finding ways to buy things inexpensively to get more for your money. Like the smoking cessation product where nicotine is reduced gradually, “stepping down” reduces household spending in gradual stages instead of eliminating spending on an item completely. To visualize stepping down, imagine a staircase with four steps. On the top step is the most expensive way to buy an item and on the floor below the bottom step is the least expensive purchasing method. Here’s an example of buying pancakes for breakfast. The most expensive method (top step of the staircase) would be going to a “sit-down” restaurant like IHOP, Denny’s, or Friendly’s and paying about $5, excluding a tip. The next step down would be to buy pancakes at a fast food outlet for around $3. Go down two steps on the staircase and you might pay about $1 a serving for frozen pancakes at a supermarket and maybe 25 cents for pancakes prepared with a mix. At the “floor” of the staircase would be the cheapest method still: pancakes prepared “from scratch” (i.e., dry ingredients). Bottom line: “stepping down” provides a variety of purchase options ranging from the very costly to the most frugal. “Stepping down” can also refer to the frequency or amount of a purchase as well as where it is made. For example, you may decide to eat out two or three times a month instead of five or six. You’re not completely eliminating what is obviously a pleasurable activity. You’re simply taking steps to reduce the cost. Or you might “step down” by eliminating an appetizer, drink and/or dessert when you eat out. Again, you’re still enjoying an activity (e.g., restaurant meal), but doing so for less money (and calories!). “Stepping down” works especially well with “discretionary” expenses such as clothing, shoes, gifts, home furnishings, toys, and housewares. Steps of spending, from top to bottom, might include shopping at department stores, discount stores, factory outlets, consignment stores, and thrift shops/flea markets/garage sales. Again, the more steps one goes down, the greater the realized savings. Fortunately, there are many places to practice the “step down” shopping method these days such as garage sales, flea markets, consignment stores, thrift shops, and online resale Web sites such as ebay and Etsy. According to an article, “Save and Schmooze,” in the AARP Bulletin, thrift shops are increasingly becoming community centers as well as great places to find bargains. Many thrift stores are operated by non-profit organizations as fund-raising enterprises. Donors get receipts for a tax deduction, shoppers get great bargains, and a non-profit agency gets some badly-needed cash to run its human service activities. In other words, a real “win-win-win” for all involved. Consignment stores are operated as both for-profit small businesses or as fundraisers for non-profit organizations. Consignment stores split the profit on items offered for sale with their previous owner, thus affording people an opportunity to both make money on unneeded items and find great bargains. The next time you need to buy something, consider “stepping down” in your home town by visiting a thrift shop or consignment store. You’ll not only find items at very attractive prices but you’ll be helping to support a local small business or non-profit agency. Remember, one person’s “trash” is another person’s “treasure.” You never know what you might find.