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Saturday, April 5, 2008

Which spending model is better? - JIT vs Bargain Stocking

I have been debating which is a better model to manage expenses. The following are two which I have been trying:
  1. JIT - Just in Time purchasing. Which means only purchase items only when we need it.
  2. BH - Bargain Stocking/Hunting. Which is to stock up items when they are on sale.
To help better explain the model, let us go through some scenarios:

Junk Food

For those with children, one of the things we usually buy are ice cream and candies. In the case of JIT, you will only buy the individual ice cream cone or bar when they request. So you will go to places like 7-Eleven, McDonalds etc. Same with lolly pop and candies.

In the case of BH, you will purchase the tub of ice cream or even the multi pack from the supermarket. In the case of lolly pop and candies, you will buy party packs.

Pro for JIT: From experience this actually reduces the consumption of the ice cream and candies since they will only request when the urge strikes or when they see other consuming it. The candy and ice cream will be fresher.

Cons for JIT: The cost of the candies is more expensive then the party packs. A tub of ice cream is only RM 6/- vs individual cone from McDonald's is RM 1.05 each.

Pro for BH: The party packs are a lot cheaper (possible as much as 40% cheaper.

Cons for BH: This tends to increase consumption or waste. With the ice cream readily available in the fridge, then the children will ask for it more frequently. When purchasing party pack, we may choose the wrong flavor so may actually result in waste (thrown away so it may be more expensive).

Health Food

When I was trying to achieve my ideal weight, I was trying to increase my metabolic rate buying eating more frequently. I was also looking into ways to reduce calorie intake so I purchased Essence of Chicken which had very little calorie (40 calories for 70 gms) but lots of protein. I bought one case (6 bottles) and only intended to practice JIT. However, my family, wife and mother saw that I was consuming this and started buying more cases when the Essence of Chicken were on sale.

After a while, we had too many cases and end up some of them expired before I could consume it.

In this particular case, we could save up to 20% in price but end up we may throw more away.

Foot Massager
When the foot massager first came out, it was promoted everywhere. I looked at some and found the more expensive one and then there are the imitations.

In order, to save money, I bought one of the imitations. After using it for a while, I found it totally ineffective. I ended up giving it away and then buying the more expensive unit. The imitation was RM 60/- vs the expensive one was RM 1,300/-.

I am still using the expensive unit. So in this case, BH actually cost more.

Emergency
A couple of years back, my daughter had a little "accident" and as a result her pants were soiled. I was unable to contact anyone in my family and I did not have a spare change for her. Also, we were late for a show.

As a result, I had to go to the nearest shop to buy her new pants. The pants cost me RM 99/-. I could have gotten a similar pants for RM 20/- else where. In this case, JIT clearly was more expensive. Incidentally, she grew out of the pants in less than a year.

Dry Fit Shirt
I like running with dry fit shirt so I went shopping to purchase more. However, in trying to get one I bought one for RM59/- which at first I thought was a bargain - it was on sale. However, after speaking to a colleague, I found that it was too expensive. He recommended a few places where they usually had sale.

Later, I bought another one on sale for only RM 29.50 which of a higher quality (but from a lesser known brand). In this, case patience and bargain hunting pays off.

Additional Notes

I have found in a lot of cases, where I forcefully try to exercise JIT, I was able to avoid purchases of things that turn out to be unnecessary. Even though, the cost of purchases where higher but the savings from purchases useless junk significantly offset the extra cost.

In the cases of Bargain Stocking, we end up with a full refrigerator and also cupboard. As a result, sometimes, we don't know we already have the item already and will buy some more. Also because some of the items may end up towards the back of the cupboard, we do not use it before the expiration date.

In the case of JIT, we sometimes, may end up not being able to find the item when we need it - store may be out of stock or it may be inconvenient, we need the item early in the morning or late at night when the shops are closed. Also, we may spend more money on gas for trips to the store.
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