Don't shop me now

[j4]

Today was Buy Nothing Day, a kind of general holiday from consumerism. I was going to say that I didn't "succeed" in spending nothing, but to say that makes it sound like a test of "willpower" rather than a choice; as if it was physically impossible to prevent me picking my own pocket, lifting my wallet out and handing over cash in return for something I'd deliberately picked up in a shop and taken to the counter.

To be fair, I did refrain from acquiring any more stuff, and at the moment I'm more concerned about reducing the amount of things kicking around than not spending money. So, in the interests of full disclosure, today I paid money for: several cups of herbal tea; a spicy muffin; a stilton and mushroom bagel, and a waffle with ice cream (the latter two were our evening meal, at G&Ds); and a concert by the Cherwell Singers of Catholic music from Latin America (which, incidentally, was very good. I had reserved the tickets for the concert before realising it was Buy Nothing Day, but had to pay on the door, so there was no getting around that one; the rest of my expenditure was just the result of trying to make the best use of the time between things. I had a choir rehearsal from 2:00-4:15pm, and then had to be back in more or less the same place (20 minutes' bike ride from home) for 7:30, and didn't want to spend 20% of the time between the two cycling to and fro in the cold. And if you want to find somewhere to sit and write in central Oxford in winter (in warmer weather I'd've been happy to sit on a park bench somewhere with my bottle of water) then you pretty much have to pay for it. I could have gone into work (and did, briefly, to pick up some stuff) but I knew that if I was in the office then I'd've got distracted by the internet.

I've found it's surprising how much I can get written if I don't have an internet connection there to hoover up all my concentration. To be honest, it doesn't seem unreasonable to me to pay £1.50 or so (the approximate cost of a cup of herbal tea) for a convenient, warm place to sit for an hour and for the distance-from-distractions necessary to get things done. I know that reasonableness or otherwise of expenditure isn't the point of Buy Nothing Day; I'm just making an observation on the usefulness or otherwise of spending money in cafés.

Cafés always seem to be one of the first targets selected in the ubiquitous "how to save money" articles. There's always something along the lines of "cut out that coffee-and-croissant on the way into work, you'll be surprised how much money you save!" -- which is infuriating if you already don't do that, in much the same way that the Motley Fool's endless maundering about how to save money by driving more carefully, driving a slightly smaller car, driving an extra 50 miles to get the cheaper petrol, etc. is infuriating to those of us who don't own a car and would like suggestions on how to save more money. (I did actually write to them suggesting that they write an article about how much money you'd save by not owning a car at all, but they ignored my email.) While we're on the subject of irritating money-saving tips... a survey I filled in recently (prize draw, natch) about the Cr*d*t Cr*nch included the following question: "Will you be doing any of the following to save money on alcohol purposes for drinking at home this Christmas?" with possible multiple-choice answers including "Having sparkling wine instead of champagne" (because obviously normally everybody buys champagne at Christmas), "Going to a hypermarket in Europe to buy my alcohol" (because as we know, flights don't cost anything except the continued existence of the human race) and "Making my own home-brew" (as if making your own wine was actually cheaper than buying a £2.99 bottle of Bulgarian cabernet sauvignon from Tesco ... though admittedly you've got more choice of flavours if you brew your own).

Saving money is a curious thing, though. verbal_tea recently mentioned a conversation on the Money Saving Expert forum where apparently

The posters have reacted to the news that Woolworths is in trouble by sharing tips as to how they can continue to buy from Woolworths, circumventing the stock problems in the shops and the website’s usability failures.

and says

Bear in mind that this conversation is taking place on a money-saving forum where people are supposed to be helping each other buy less unnecessary crap.

Unfortunately the Money Saving Expert site is, as far as I can tell (I didn't get much beyond the first eye-watering page) -- like most other money-saving tips sites, articles and books -- absolutely nothing to do with buying less stuff: quite the reverse! They're all about buying as much stuff as you possibly can for as little money as possible. And it's all about competition: beating the banks, beating the shops, beating the other shoppers, getting something for nothing. If you get nothing for nothing, how can you prove you've won? Compare these two anecdotes: "I went to M&S and I bought this fantastic skirt for £9.99, reduced from £40!" versus "I went to M&S, looked around a bit, and I decided I didn't really need another skirt." How can you tell how much money you've "saved" unless the shop tells you that you got that amount "off"? How can you tell the difference between not buying a £9.99 skirt and not buying a £59.99 skirt? I didn't buy the amazing metallic balldress I saw in the window of Karen Millen; did I "save" the hundreds of pounds it probably cost (I didn't dare look at the price-tag)?

This sort of "saving by spending" makes sense (kind of) if it's something you were going to buy anyway; if you'd already decided to buy that thing no matter what, and there's a special offer today where you get 10p off that particular thing, then hey, yeah, you saved 10p. But if you're only buying it because of the "saving", then it's not a saving, it's a spending. The problem is that without any concrete commitment to buy it's easy to delude yourself that you were going to buy something anyway -- whether to convince yourself that you're saving money by buying it ("I'd've had to buy one eventually so if I buy it now when the special offer is on, I'll have saved money") or that you're saving money by not buying it ("I really wanted it and I didn't buy it, so I've saved the amount that I would have spent on it"). The latter, of course, is fine until you use it as the basis for convincing yourself "therefore I'm richer by that amount than I would have been otherwise, so I can spend that amount now without guilt".

The logical conclusion of all this self-delusion is that only way you can be sure you've made a saving without buying things is by putting money in a separate account or otherwise earmarking it as "savings": by putting a value on your non-spending. "I saved 150 pounds this month [by putting it in my savings account]" is somehow much more convincing than "I didn't buy loads of stuff this month" (after all, how can you tell what you might have bought if you'd been feeling irresponsible?). Fortunately, despite being the logical extension of illogical thoughts, it's a fairly sensible approach to the problem of saving: I certainly find it helps a lot to set up a regular payment into a savings account. And, in the interests of cutting down on the amount of stuff in my life, it takes up less space in an ISA than it would in a box under the bed.

Comments

[the-elyan.livejournal.com]

You are ansolutely right - people are obsessed with "keeping score" in these things, not least because money is the biggest scorecard ever invented. And the assumption that you always have to buy stuff rather than not buy stuff is a corrosive one.

I have a terrible habit of using the big things I don't buy as an excuse for the small things I do, which is a head-trick, and utterly useless.

All I can say in defence of my intermittent profligacy is that it usually involves cheap things (eg individual CD's or books), and tyou can buy a lot of those for one big electronic Shiny.

[beingjdc.livejournal.com]

http://www.moneysavingexpert.com/protect/stop-spending-budgeting-tool ?

It's just there's not that much to say about saving by not buying stuff. I mean, that's it really.

http://consumerist.com/consumer/clips/snl-skit-dont-buy-stuff-you-cant-afford-252491.php

[j4.livejournal.com]

It's just there's not that much to say about saving by not buying stuff. I mean, that's it really

Well yes. Sorry for spinning such a boring truth out into a blog post longer than that one line.

[beingjdc.livejournal.com]

Yes but your section on it was about how there isn't really any helpful advice, whereas my comment was that there's not a great deal you can say that is helpful advice, so I think there's room for us both to be right here...

[monkeyhands.livejournal.com]

I think her post was really about the dishonesty of articles, books, etc that claim to be giving helpful money-saving advice when really they're about either spending more or at the very least buying into deeply unhelpful patterns of thinking. And about the lies we tell ourselves.

And about the lies that other people tell us, to sell us things. If you can use someone's feminism or insecurities or emotional problems or broken family or desire for social justice to manipulate them into buying more, why on earth wouldn't you try using their desire to spend less to manipulate them into buying more? Particularly since it works almost every time you try it!

[juggzy.livejournal.com]

I've just read all the Sunday Newspaper Magazines - well, the Telegrah, the Times and I had a look at the Observer online. All of them are full of ways to cut the cost of Christmas by spending or handy tips for Credit Crunch presents that are still more than I can ever afford, or think it worth affording, anyway.

It's not so much the lies that we tell ourselves, it's more about the lies that the relatively very rich tell themselves about what it's like to have no money. Not that I'm poor, but, you know.

Anyway. I agree that most media are being terribly dishonest about this. Motley Fool used to be full of good advice years ago, but when I took a look at it a couple of months back I was shocked with the way that it had become the mouthpiece for parsimony-as-fashion.

Bring back the eighties, I say.

[beingjdc.livejournal.com]

Yes - I think that's an entirely fair point, all I'm saying is that I think Martin Lewis is pretty much one of the good guys, and that "The best way to save money is to buy less stuff, not just cheaper stuff" is worth a blog post, maybe a chapter in a book on moneysaving, but I don't think that you could make a whole site out of it...

[monkeyhands.livejournal.com]

The Demotivator doesn't work on me. I did it once when I had a cushy freelance job in publishing, to work out if I should give up buying lunch in the canteen in favour of making my own. It turned out that if I carried on in the job for a year, I would be spending £60 on canteen lunches. That was a lot less than I thought, and it seemed well worth it for the privilege of joining my new friends/colleagues for a lunchtime chat, having a tasty hot meal, helping to keep the canteen afloat and not getting up at 6am to make a packed lunch.

[beingjdc.livejournal.com]

I suppose it depends what's on offer. When I was buying food at lunchtimes rather than making it, I was paying around £5 a day, so that made a serious dent. At £60 a year, I'd go for the canteen too.

[juggzy.livejournal.com]

Mmmm. About few ago I discovered a cleanser that certainly helped clear up my flakey skin. It's expensive - thirty five quid a bottle - although it lasts a long time. When I was really up against the wall a year and a half ago, moneywise, I still spent money on this cleanser because, because, because it made me happier.

One of the media lies is not to distinguish between spending money on stuff that makes us happier because it makes a solid, physical difference (Your lunch money would come under this category) and spending money on stuff that is just stuff.

[monkeyhands.livejournal.com]

One of the media lies is not to distinguish between spending money on stuff that makes us happier because it makes a solid, physical difference [...] and spending money on stuff that is just stuff.

Precisely. I too have recently splashed out on skincare. Buying a cleanser, toner and moisturiser set from Liz Earle is nearly £40 when you add postage on. But my last lot lasted me from July through to November and my skin's never looked so good.

[truecatachresis.livejournal.com]

IAWTC

[truecatachresis.livejournal.com]

I am genuinely intending to save money by spending money, while simultaneously DEPLETING my savings, and INCREASING my credit card debt and gaining nothing. Am I crazy?

Given the drop in interest rates and the rise in inflation, I am currently earning less money on my ISA than my student loan (of which I still have several years left...) is costing me. So, on Monday, I'm paying off my student loan on my credit card, and then paying off the credit card bill at the end of the month with money taken out of my ISA.

I bought some food on buy nothing day. I don't feel guilty.

[lnr]

Do you get cashback on the credit card?

The only disadvantage of this approach is that the limits on how much tax free investment you can have each year mean that you've got a much smaller pot of tax efficient savings in future if and when rates go back up, so you've got to try and take that into account somehow. But it sounds like you probably don't have many year's worth of full allowance saved up already, unless your student loan is several times bigger than mine, so not so much of a consideration.

I bought food. And curtains online :-)

[gareth-rees.livejournal.com]

the limits on how much tax free investment you can have each year mean that you've got a much smaller pot of tax efficient savings in future

Luckily this effect makes no difference to your decision whether to pay down debt or to save—even if you are in the special position of being able to max out your ISA this year but knowing that you will be unable to do so some year in the near future. (In this position you might be considering saving the sum in a non-ISA account until the time comes when you have some spare ISA allowance.)

Suppose you owe x at an interest rate of d, and you have a sum of x to invest, and you are deciding between these options:

1. Pay off the debt;
2. Save it in an ISA with an interest rate of s for n years;
3. Save it in an ordinary savings account with an (after-tax) interest rate of t for m years, then transfer it to an ISA as in (2) for the remaining n−m years.

Then (considering only the effect of this one transaction; obviously in real life there would be many other transactions but it's legitimate to consider the net effect of each one separately) after n years you will have, respectively:

1. Nothing
2. x(1+s)ⁿ − x(1+d)ⁿ
3. x(1+t)^m(1+s)^(n−m) − x(1+d)ⁿ

Since t<s, clearly (2) is better than (3), and equally clearly (1) is better than (2) unless d<s which is almost certainly not the case since interest rates on debt are almost always greater than interest rates on savings.

So the moral is that you don’t need to worry about the complications due to the ISA allowance. Just pay off the debt!

[beingjdc.livejournal.com]

I think I disagree. It's a long time since I was any good at algebra but - when I had a mortgage, I overpaid and treated it as a tax-free savings account.

When I sold up, it left me with a lump of cash that I couldn't put in a tax-free account, it being too large. Whereas if I'd paid interest-only or a little more on my mortgage, and put my overpayments into an ISA during those years, I'd have lost the 0.5% difference for three years (so about £60), due to mortgage interest rate being higher than savings rates, but I would have gained in each subsequent year the benefit of £9000 of investment interest being untaxed rather than taxed, so around £100 a year.

[gareth-rees.livejournal.com]

That's a very good point. It's the windfall (the lucky acquisition of £9,000) that makes the difference, because it means that we're considering a different question.

The new question is this. Suppose you owe x at an interest rate of d, and you have a sum of x to invest now, and you confidently expect a windfall of x in w years time, and you are deciding between these options:

1. Pay off the debt now with the initial sum and invest the windfall in an ordinary savings account with an interest rate of t for n−w years;
2. Save the initial sum in an ISA with an interest rate of s for n years and pay off the debt with the windfall as soon as you get it.

Then after n years you will have, respectively:

1. x(1+t)^n−w
2. x(1+s)ⁿ − x(1+d)ⁿ + x(1+d)^n−w

So you are better off paying off the debt now if

(1+t)^n−w > (1+s)ⁿ − (1+d)ⁿ + (1+d)^n−w

and to a first approximation (since s, t and d are small) this is the case when

tn − tw > sn − dw.

Take a typical example like yours where the debt is a mortgage at 6%, the tax-free savings rate is 5%, the after-tax savings rate is 4%, the windfall comes after 5 years, and we are looking at the outcome in 20 years time, then tn − tw = 0.6 and sn − dw = 0.7 so waiting is better. But with other rates and other durations the decision would have gone the other way (for example if the mortgage had been 8% instead of 6%, or if the windfall had arived after 10 years instead of 5). There’s unfortunately no substitute for doing the maths!

So the moral is: if you expect a windfall of money in the future that will exceed your tax-free allowance, you have to think a bit harder. We should all be so lucky!

[beingjdc.livejournal.com]

The real flaw here is the Government's failure to notice that mortgages are now easily used as a tax-free savings vehicle, and adjust the tax-free savings allowance for non-homeowners accordingly. I have made this point to the Housing Minister :) Well, the previous Housing Minister. I think it was a little lost on her, sadly.

[gareth-rees.livejournal.com]

I think it was a little lost on her

It's lost on me, too! Can you explain?

[beingjdc.livejournal.com]

Say I have £10,000 a year to divide between my housing costs and my savings.

If I rent for £400 a month, I am left with £5,200, on which I can only earn tax-free interest on £3,600. However If I pay a mortgage at interest of £400 a month, I can bung the remainder into overpayments, which will reduce my mortgage interest by the full amount that I would gain from tax-free savings.

[gareth-rees.livejournal.com]

I understand your example, but there is an obvious objection to this being an injustice: namely, that your example assumes that £400 rent gets you an equivalent amount of house to a mortgage costing £400 interest. This certainly isn't the case at the moment: houses are priced high relative to rents. Even in a non-bubble market, you'd expect the tax advantage of paying off a mortgage to be priced into the cost of houses.

[beingjdc.livejournal.com]

They were priced high relative to rents until the Bank of England's latest insanity. Now, our rent is equivalent to a purchase price (at 5% which is available with a decent deposit - existing tracker customers paying less) of £296,000 - on a flat whose twin fetched only £285k last year.

[gareth-rees.livejournal.com]

But ... student loans are a special case since the interest rate is so very low. You're better off investing in an ISA at, say, 4.75%, than you are paying off a student loan at 3.8%.

[j4.livejournal.com]

Oh god. I wish I hadn't read this. I don't know how much my ISA is earning, and I don't know how much the student loan is costing me except that the interest on it makes it grow at such a rate that I will probably die before I pay it off. And I can't pay anything off on my credit card because I've lost it ('lost' somewhere in the house, not properly-lost) and can't bear spending six hours on hold to a call centre in Elbonia to try to order a new card, so I'm just waiting until they send me a new one anyway, but I don't know when that is because the expiry date is on the card, obv.

[(Anonymous)]

The student loan interest rate is currently 3.8% (http://www.direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/FinanceForNewStudents/DG_069896).

There are many mini cash ISAs that offer a higher rate than this (http://www.moneysupermarket.com/isa/).

In addition, inflation is currently falling meaning a student loan will be a cheap source of credit in future. Not paying off the student loan early and instead putting it in an ISA with a decent rate is basically free money.

[jiggery-pokery.livejournal.com]

I could be wrong, I'm too lazy to check and I love offering people the chance to take great joy in correcting me, so here goes.

If I remember correctly, the last time I looked at this, the UK has had at least two student loans schemes. I have no doubt that your assertion is correct for the scheme currently in place, but I do doubt that students of a certain vintage, such as j4 and myself, are enrolled on that scheme - with our scheme possibly (or possibly not!) having loans charged at a different rate.

For instance, the current version of the student loan scheme offers students the chance to pay back a proportion of their income over some fixed sum, whereas I (possibly inaccurately?) recall that the old scheme had repayments that kicked in at a flat rate upon income reaching some level. Thus the old scheme artificially imposed a poverty trap where you were worse off in the short term (though, admittedly, paying off a long-term debt) if your income raised from just below the level in question to just above the level. I am glad that the new scheme avoids this trap.

[(Anonymous)]

Isn't the interest rate the same for both though? (ie approximately inflation).

[crazyscot.livejournal.com]

People are stupid. The idea of saving money by spending works, when applied to Joe Public, and don't the marketers know it.

[bopeepsheep.livejournal.com]

Taking a flight to a European hypermarket to buy alcohol doesn't seem terribly practical even without the environmental cost, given the restrictions on luggage. ITYM ferry, and I'm not sure what the impact of their crossings are but I suspect it's significantly less than flights, even with the added petrol usage of the cars on board.

(But yes, it's hardly 'saving'.)

[shermarama]

It'll mean by ferry, aye. In which case we can decry that tip for its London-centrism, since it's easy and cheap and a bit of a laugh to take you and your mates and a car to the hypermarkets of Calais if you're in the south east, and pointlessly expensive and long-distance if you're from almost anywhere else in the UK.

[hatmandu.livejournal.com]

Good points about MoneySavingExpert (including the abysmal design) - I have haunted it every now and then but am gradually giving up - thus saving time as well as money. The saving by spending stuff is rather like the doomed Richard Carstone in Bleak House, culture fans.

[monkeyhands.livejournal.com]

Thank you for this post, which pretty much says it all about the lies we tell ourselves and the lies the media tells us.

What especially cracked me up about the conversation on the Money Saving Expert forum was the guy who said that he wasn't sorry because Woolworths are shite and shopping there was a miserable experience anyway. He then ends his comment with the words: "Looks like argos are getting my money this year". Yeah! You tell 'em! Who said consumers don't have power?

[classytart.livejournal.com]

Yesterday I finished my xmas shopping, got a few snacks, and my train ticket home for xmas. Not much reckless consumerism, and because we don't have Thanksgiving, thus Black Friday, I think it applies less here anyway.

In the evening I looked at the balances in my bank accounts various. I wish I hadn't. Doing the sums for the things I have left to pay for this pay month - new year party ticket, food, work xmas night out spending money, etc, I think I need about £140. I have about £130. Crap. May have to raid the savings account.

I'm always annoyed by the money savings tips, too. I don't buy a Starbucks coffee on the way to work because I know fine well that's about £300 a year I needn't spend (especially as I don't like coffee). And I don't own a car. But money does fly through my fingers. I am bad with money. The only way I can save money is by moving it directly into a savings account before I even see it, and I will be increasing the amount next year.

That said, I don't actually think savings are the moral good they are made out to be. They'll help if you have a lot of them and suddenly find yourself without job, but essentially it's dead money. Saving up for something is good, though.

I was too busy wondering what black friday is to notice buy nothing day

[cleanskies.livejournal.com]

So I bought a tasty pie and some chinese food. But I did fail to get served in two pubs and one cafe, so someone was doing their bit for buy nothing day.

I also drank some wine I'd bought about a month ago, but I think that counts as stash-busting.

[jiggery-pokery.livejournal.com]

Another very fine post.

But if you're only buying it because of the "saving", then it's not a saving, it's a spending. The problem is that without any concrete commitment to buy it's easy to delude yourself that you were going to buy something anyway -- whether to convince yourself that you're saving money by buying it ("I'd've had to buy one eventually so if I buy it now when the special offer is on, I'll have saved money")

I would distinguish another case, at which you hint with you were going to buy something anyway; if something is temporarily reduced, it may become wise to purchase it as a substitute for what you were planning to buy, if you knew you were going to buy something. So, essentially, it's what you said, but distinguishing the case of something as a variable from the case of something as a constant.

Fortunately, despite being the logical extension of illogical thoughts, it's a fairly sensible approach to the problem of saving: I certainly find it helps a lot to set up a regular payment into a savings account.

We're great at this. We also look forward to the month where we do not have to clear out every single savings account we've set up in order to avoid exceeding our overdraft. This month, hopefully...

[arnhem.livejournal.com]

The main restriction on my desire to be a consumer is my unwillingness to dispose of stuff badly (or indeed, for many things, at all), and my awareness of the cost to me of being cluttered.

[arnhem.livejournal.com]

God that sounds holier-than-thou. I should probably point out that my difficulties surrounding disposal of things verge on the pathological. The brake it puts on my consumerism is probably the only positive spin I can put on it 8-)