Learn How Real Cheapskates Think

Jeff Yeager, author of The Cheapskate Next Door and blogger at Wise Bread, shares in an interview the unifying traits of people who are better at spending less than you. One such trait: buying appreciation and letting others pay depreciation.

In an interview with Daily Finance, Yeager shares some insights he obtained while interviewing more than 300 self-professed cheapskates for his book. Along with learning what drives their motivation to spend less and get more use from their goods, Yeager shares a thought process not often seen in a buy-and-toss culture.

Of course, there's also a tremendous economic advantage to, as one cheapskate told me, "letting the other guy pay for depreciation," which is what you're doing, at least to some degree, when you buy used. Most of the cheapskates I interviewed we're also very tuned into the issue of "appreciation," always looking for items that might actually increase in value over time rather than lose value. That's why the Amish, for example, often buy antique furniture. Cheapskates think about appreciation when buying a wide range of consumer products ... cars, furniture, even clothing. Let's face it, most consumers only stop to think about appreciation when they buy a house, and even then, they're often not very smart about it.

What kind of goods do you buy used to avoid depreciation, and what have you bought with an idea of earning more value over time?

The Cheapskate Next Door: Author Jeff Yeager Shares Secrets of Happiness [DailyFinance via The Consumerist]


Comments

    Those cheapskates buying old cars that appreciate in value look like geniuses, until their car is wrapped around a tree with their smart brains hanging out of their skull because they didn't embrace modern safety features.

    Some things you shouldn't cheap out on.

    Personally, I am not a cheapskate, I am a value buyer. I always look for getting more stuff for less money. For example, I am buying a new $40k car with traction control, stability control, 5-star safety, air bags out the kazoo, slowwwww depreciation (due to the brand name) and *very* good fuel economy and I negotiated $5000 off the RRP.

    I save money on depreciation, fuel and initial discount off my purchase (I am forced to get new as this model can't be purchased second hand).

    Something else you shouldn't cheap out on -> a good bed!

    Find something awesomely good, then find a way to get it really cheap :)

      Uh-huh, and if you sold that car a week after you bought it, how much would you get for it? 35k? 37? Even 39k is $1000 depreciation.

      I think you missed the point.

      Neglecting the appreciation aspect (which I acknowledge was the original point of this article), a 5 year old 2nd-hand vehicle will be far cheaper and quite safe compared to a new model. My 2004 model is worth 55% of its original value and has a 5 star safety rating. As soon as a new car leaves the dealership, it depreciates ... a lot.

      Also, the presumption that you will wrap your car around a tree scares me. A few minutes of research just now satisfied my idea that the risk of a collision and subsequent injury, relative to other dangers, is low.

      So, taking all that into account, the price premium of a brand new car isn't justified to me on safety features alone.

        A common argument... but how many people REALLY try to sell a car a week after they've just bought it?

        @Ollie: The time you own the new car for has nothing to do with the depreciation. If you only have the car for a week, then it's just a week's worth of depreciation. If you have the car for 2 years, then it's 2 years worth of depreciation. What we're talking about is the amount of return you can get back once you no longer want/need the car.

        For a hypothetical situation:
        A new car could cost you $20K, and a week later the depreciation on it means that you can only sell it for $15K - That's a $5000 depreciation. But, let's say you kept it instead for a year, and the depreciation means you can sell it for $10K. Further, if you kept it for 2 years, you could sell it for $8K. That's $12K over 2 years, which clearly means that you are better off keeping it for longer since $12K over 2 years is much better than $5K over a week, right?

        But, what if I were to buy it after you had owned it from new for only a year? I would buy it at $10K based on our example. Then, a year later I could sell that on for $8K. $2K depreciation over a year. Now that sounds much better than $5K over a week, doesn't it?

        Now that I've realized that, why would I _ever_ buy a car new when I can be just 1 year behind and get hit with only $38.46 depreciation a week instead of $5000!?

        That's the argument: not the arbitrary choice of 'after a week', or 'after a year' of depreciation, but instead the fact that it will depreciate most for the person who bought new.

    My favourite topic! I love cheapskate living!

    I buy everything aside from socks and underwear second-hand, and occasionally a new pair of runners. I haven't bought any new clothes since December 2008 (I grew up in a very crafty house, sewing all my own clothes). I also get a lot of good stuff off the side of the road for council pick up without even looking very hard. If you live in the inner city or a well off area there are people chucking out good stuff all the time, some of which I have sold on (admittedly not for a whole lot of money-but it's going to good use instead of landfill and only needed a bit of glue or a tidy up). TAFE bins are also a gold mine-they sometimes throw out equipment that can be easily repaired or re-used immediately; my drafting table, my screen printing clamps and turntables, my two easels and my computer table all came free of charge courtesy of tafe skips, and they are all far better quality than what I could afford.

    As I have had to retrieve and fix/make so many items in my home I am more likely to maintain them; because I take the time to haul/mend/fix/make my stuff I cherish it and really appreciate it.

    As for buying appreciation, I have had some luck with musical instruments. You need to have specialised knowledge in a lot of cases to get a good deal, and it takes a lot of time and effort, but it can pay off big time.

    And if somebody asks you to help them move you should suck it up and do it; there is often a chuck out pile that you can raid, and they usually buy you a beer afterwards. :)

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