Take advantage of the market’s shortsighted view to buy your luxuries. You can get the high-end version rather than the entry-level version, often for much less.
There’s a common refrain in the financial independence movement that we should all move towards a minimalist life. We should be happy with bare-bones items and derive our joy from the things that really matter in life like relationships, freedom, and nature.
I subscribe completely to this philosophy, and yet I also understand that luxury goods have a place in many people’s ideal lives. Luxury and financial independence don’t have to be mutually exclusive.
Said another way: you don’t have to give up all material luxuries to achieve your financial goals.
Perhaps it really does matter to you that you have a great car, or that you have a fancy tablet/laptop/supercomputer. What do you do then?
There’s a strategy just for you.
Live on the trailing edge of luxury.
How To Buy Luxury Goods Cheap
Years ago, I was reading an article by Mr. Money Mustache about this topic. He described it as living on the trailing edge of luxury, and that phrasing has stuck with me ever since.
The general premise is this: we are all obsessed with buying things new. We are focused on the latest and greatest. But have you stopped to consider the fact that the pace of technological innovation is so rapid that even 2nd generation products are pretty mind-bogglingly great?
Buy your big ticket items either 1) used or 2) brand new but one or two generations old.
Used Luxury vs New Entry-Level: A Price and Value Comparison
Let’s try an experiment.
You see two cars cruising down the road in front of your house.
No copyright infringement intended
Which driver would you think is the more moneyed of the two?
The first car is a 2018 Honda Accord. MSRP for the entry-level model is about $24k. You get a 1.5 liter 4 cylinder engine, front-wheel drive only, and cloth seats for that price. If you want leather seats, the cheapest trim package which includes leather has an MSRP of $30k.
The second car is a 2014 Mercedes Benz CLA 240 4Matic. There is a listing in my area from a dealership selling this car – it has 60,000 miles on it, and they are asking for $17k. You get a 2.0 liter 4-cylinder engine, all-wheel drive, and leather seats for that price.
There are, of course, other factors in the purchasing decision.
You’ll want to compare fuel efficiency (30mpg city/38mpg highway for the Accord and 24mpg city/32mpg highway for the CLA 250) as well as maintenance costs. However, even with the fact that cars with more mileage require more maintenance, the Mercedes looks like a pretty sweet deal.
A common complaint I hear in the FIRE circles is that people in certain professions need to maintain a certain “appearance” and “status” for their job. Beyond the better quality (seat fabric, horsepower, etc.), buying the used Mercedes allows them to pursue their high savings rate goal while meeting whatever perceived status need is required for their job.
Here’s another example.
An iphone X with 64 GB of memory will cost you $999. A used iphone 6 with 64 GB of memory restored to factory settings will cost you $170. You can purchase this from Apple itself, which means it will come with a one year limited warranty.
Would you say the iPhone 6 is at least ⅕ as good as the iphone X?
Would the quality of the camera and screen of the iphone 6 meet all your needs?
I will tell you that I had an iPhone 5S and the thing was already way more powerful than I could make use of. Its camera quality is better than most low-end brand new phones selling their latest generation for the same price today.
Buy One Generation Old
If you’re squeamish for some reason about buying a used item, consider buying a brand new version that’s one or two generations old.
Electronics, cars, and many other big ticket items come out with a new version every year. When all the masses stampede towards the shiny new thing, you can swoop in and scoop up a nice deal on technology that is almost as good being offloaded quietly at clearance prices.
Let’s take the iPhone example again. You can buy a brand new iPhone 7 with 32 GB of data (they don’t have a 64 GB option) directly in Apple’s online store for $549.
Is the latest iPhone worth $450 more?
You could basically buy two brand new iPhone 7’s for the price of one iPhone X.
Buying a generation old has several distinct advantages.
Since the product has been out for a year or two, there will be plenty of reviews from others you can read about the product’s performance.
Additionally, coming in several months after launch means the company will have worked out many of the kinks, and recalled anything dangerous (anyone remember the Samsung Galaxy Note 7 exploding all over the place)?
By buying only one or two generations old, you can know that there are thousands of other devices/cars/whatever out there, which usually means there will still be developer support and aftermarket options for whatever the product might be.
Nobody Cares Where You Bought It
Buy online whenever you can.
Because of the transparency of pricing and the proliferation of price comparison tools, most large vendors have automatic rules to lower their prices to match the lowest advertised price found anywhere else on the web.
Intriguingly enough, I’ve found that online prices beat the prices in my local Target store. Each can of baby formula cost $3 more in the store than it did online, because of competition from Amazon and others. I now basically purchase everything online for pick-up at the store, and I save about 10% on many items because the online price is better than the brick and mortar.
How To Buy New Goods
I like two tools in particular for online shopping.
The first is Ebates. For the truly lazy (me), they have a toolbar that follows you around as you surf the web and lets you know when you can get cash back.
If you’re on a retailer that doesn’t offer cash back, they’ll even suggest similar retailers who might have the item you want and list what your cash back percentage would be with those retailers.
They monetize by getting referral fees from vendors, and then turning around and splitting that cash with you. It’s a very passive tool I use that usually nets me about $300 in extra cash per year, doing what I already do and buying what I already buy.
Of note, you get a ton of value especially when you are booking travel. Since those are big ticket purchases, the 3-5% cash back you can get can easily equal a couple hundred dollars right there.
I particularly like Hotels.com because not only will they price match any competing offer with their ‘Price Guarantee’, but they also offer a loyalty program where the 10th night you book is free. That’s equivalent to a 10% discount. Stack that with your Ebates reward (currently 4% for Hotels.com) and you get vacations up to 14% off!
Camel Camel Camel
The second tool I like is Camel Camel Camel. No, that isn’t a typo – just Camel three times in a row.
This site is free and has a database of prices on every product sold on Amazon. If you’re thinking of buying something anywhere online, you can check the product data on Camel Camel Camel to determine whether you are getting a good deal, or whether waiting a month or two historically has brought the price significantly lower. It was through Camel Camel Camel that I learned Black Friday deals aren’t actually all that good.
How To Buy Used Goods
I’m a pretty big fan of Facebook Marketplace. At least in my area, there are fantastic deals to be had, and something about being able to see the person’s profile and history, as well as seeing what area they’re located in has led to my transactions all going very smoothly. I much prefer it over the randomness I’ve experienced on Craigslist.
Breaking out of the standard paradigm to buy new, cheap stuff constantly will save you money and also provide you higher quality goods with which to fill your life. Purchasing your items used or brand new but one or two generations old maximizes value; since all the demand revolves around the latest and greatest, you will be one of the only ones scooping up the mad deals on the other awesome options out there.
Have you had experiences buying luxury goods new or one generation old? How has it worked out for you?