When you are being forced into paying many times more than the value of the item, you’ll wonder if it’s better for you to just walk away from the deal, but then you won’t get the goods or services that you may so desperately need.
Fortunately, there are ways and means to avoid overpaying and here are some ways to keep your bank account much healthier.
Here’s where you might be overpaying
When you take your weekly visit to the movies, did you know that the owners of the theatre only make money on selling you popcorn and soda? They don’t gain profits from ticket sales. After the government taxes have been taken off the value of the ticket, the theatre and the producers of the movie split the rest of the ticket sales 50-50.
It costs the theatre all of that money to run the theatre, pay their employees and cover all of their expenses. Where they make their money is by selling you popcorn with a mark-up of around 1000%. The soda they sell you costs them just a few cents for each cup, which they manage to half fill with ice.
When you see how much popcorn you can buy at your local store for one or two dollars, and everyone in the chain has made a profit before it reaches you, you’ll wonder if you need the food and drink during a 90 min movie, or should you eat before you reach the theatre?
Diamonds might be a girl’s best friend, but with mark-ups over 200% from wholesale cost, you wonder how friendly they are. It might be worth your while to wait until you or family are visiting overseas to secure the diamonds with a better deal.
If you’re in the market for a new set of eyeglasses, a quick check and a few clicks across the internet will show you that you can buy frames online for much less than your local retail store, who will be pleased to mark-up your frames by up to 1000%.
For most women, and a few male actors, cosmetics are a daily requirement. With mark-ups around 80%, it’s worth taking your calculator to the stores to see if it’s worth buying bigger tubes so that your cost per ounce is vastly reduced. This might hit your savings now, but it will cost you less over the long-term. You can apply this logic to most pharmacy and food purchases.
Tips to help you pay less
When you know that you’re going to have some sizeable expenses during the year – perhaps you know you’ll need to update your bike, your cell phone or your dishwasher – start saving early so that you can pay by cash. This will save you having to pay interest on a credit card repayment or a bank overdraft and also means that you’ll be able to purchase the item when it’s being offered as part of a special deal. As an alternative, you should look out for the opportunities to buy those goods either as slightly marked, but new or as relatively new in the second-hand market.
Sometimes it pays to get together with a few friends and family and buy goods directly from the wholesalers to cut out the extra margins added by the retailers. You might, for example, be able to purchase 200 toilet paper rolls at half their usual cost, if they’re to be divided amongst 10 or 15 of your friends.
There are many ways you can save yourself from overpaying the ridiculous mark-ups that some companies are able to get away with. Looking for the best deals and combining with friends and family can often save you more than you would have thought possible.
As with every set of goods or services offered to you, ask yourself if you really need overpriced popcorn at the movies or could you save that money and spend it more effectively elsewhere?
The writer, Samuel Rosenberg, is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to [email protected]