Plutus' Normative.

My name is RAE. I'm going to become financially independent and wealthy.

This is a simple, no nonsense account of my journey.

A Memo On Buying Hot Sauce, and Good Decision Making

A Memo On Buying Hot Sauce, and Good Decision Making

A housemate during my university years introduced me to the best hot sauce I've ever had. He left a big bottle of it in the fridge, kindly offering it as a general condiment for everyone to use. It didn't even last a week. I even used it with my daily morning (savory) oats. Needless to say, I love spicy food.

You could only ever buy it in his hometown, at a local restaurant that made it in house for their own menu. He was nice enough to get me some every time he visited home.

Years later, I was reminded of it at an outing at a farmer's market stall selling homemade hot sauces. As delicious as they were, I still remembered the one my housemate had brought from his hometown as superior.

I found out that you could now buy it online after googling it later that night. Shipping costs for ordering one bottle were onerous, a little over 78% of the cost of the the one bottle of hot sauce itself.

However, we live in a world where economies of scale exists as a phenomenon. Buying more of something reduces the cost per unit of that something. But it doesn't reduce it to zero. The chart below explains it visually.

If you look at shipping cost as percentage of the total cost of buying and shipping hot sauce, it levels off at a little over 31%. What this means is once the shipping costs equal about a third of the total costs of obtaining this hot sauce, you aren't better off by buying more.

I ended up deciding that 4 bottles were enough, for a shipping cost of around 35% of the total.

Part of the mission of this blog is to emphasize and encourage frugality. Paying a hefty $14.95 for a bottle of hot sauce certainly isn't particularly frugal, especially seeing that there are alternatives on most grocery shelves for less than half that. To pay an extra 35% premium for shipping on top of an already extravagant non-essential purchase is just plain silly. Plus tax.

Little things matter, and little things such as these can add up over time. If your mission is to pursue financial freedom, these little purchases are what matter in the long run in keeping your expenses/costs down. These little things add to the overall inflation of your lifestyle, and can seem so insignificant at the time that they can go by unnoticed.

This is one of the reasons keeping a budget and reviewing all transactions on a bi-weekly basis is a healthy habit to culture. In fact, I consider it to be the foundation of a financially healthy individual/family.

"Grant me the serenity to accept the things I cannot change, and the courage to change things I can, and the wisdom to know the difference." -  Reinhold Niebuhr

But let's say I really love this hot sauce. Let's say the joy I get out of throwing a dash of it in my daily morning (savory) oats is the difference maker between just a breakfast and a great breakfast. Let's say it gets my brain working at the right wavelengths for a great start to everyday. Let's say those great starts are important to my daily motivation to work towards my goals. And let's say that I know from personal experience that these little mental pick-me-ups can matter over time. After all, you have to believe achieving a goal is possible, that achieving it is under your control, before actually going out and doing all the things required to achieve them.

I believe in good decision making, and empowering people to make good decisions for themselves. Such decisions are context driven, but cannot be made without some sort of an analytical mindset. 

It helps to know the optimal way make a purchase, and by framing it within your own lifestyle, preferences and budgets you can decide whether it's worthwhile or not.

I've chosen to share how I made this particular decision, and hopefully it can help you analyze your own next extravagant purchase. This purchase increased my (family's) food related expenses by less than 1.9%, and I was able to neutralize the impact it by cutting an expense elsewhere.

The Mindset of a Successful Investor - Part 1 : Intro

The Mindset of a Successful Investor - Part 1 : Intro