Sunday, July 19, 2009
Consider Ancillary Costs
Saving Money Tip #165 - Consider Ancillary Costs. I have always advised to use a budget and to do your research when making a decision to buy a relatively expensive product. For example, when you want to buy a computer, a gaming system, or a new cell phone, I suggest making sure that there is room in your budget to buy it. Then I advise to do your research to find the best product for you at the best price. But what I didn’t warn anyone about is ancillary costs. Ancillaries are the “other” costs that go along with a product. For example, when you buy a digital camera, you need to buy the battery that goes with it, a battery charger, a memory card for it, and maybe a case. Those are all ancillary costs that we may not have factored into our purchase price. But they are very important costs because they often add up pretty quickly and can sometimes exceed the cost of the original product itself.
In fact, the marketing of some products is based on selling the main item cheap and then making the money in the ancillaries. Think about computer printers. You often see ridiculously low prices on printers. But then the ink cartridges are very expensive to replace. Or think about cell phones. How many times can you get a cell phone very cheap, but then the calling plan you have to take is expensive?
Sometimes there may not be ancillaries with the product, but other related extra costs on your end. You buy a new television, but it doesn’t fit on your t.v. stand, so you have to buy a new t.v. stand. Or you buy a new comforter but the dust ruffle you own doesn’t match it so you need to buy a new dust ruffle. Or you buy a new, bigger desk for your office, so now your old bookcase doesn’t fit, therefore you have to buy a new bookcase.
When you are doing your research to buy a new product, make sure you take into consideration the ancillary costs - the cost of the games for the gaming system, the add-ons for the digital equipment, and the extra costs that you didn’t take into consideration. Then reevaluate the purchase to see if it really is a good deal at that price or if instead another product that includes the ancillaries or doesn’t require you to buy something else new because what you already own won’t work with what you are buying would be a better purchase. Make sure you are aware of all of the extra costs with your new purchase so that the whole purchase fits into your budget.
In Real Life (IRL) – I mentioned a few weeks ago that our computer crashed. My husband, who likes to get things done right away without doing proper research went the next day to a computer guy who does work for his office. The guy sold him a refurbished computer, much faster than our old one, but which allowed us to use our same memory. My husband brought it home, spent a couple of hours setting it up and loading on it what we needed. He then attempted to hook up the printer. Unfortunately, the printer cable was an older type and did not match up with the computer. So he called the computer guy who said we needed a special cable for a cost of about $50. The whole computer was only $300, so this was a significant percentage of our new purchase and one he hadn’t taken into consideration. At that point he went ahead and bought it and now the computer and printer work fine. Could he have gotten a better deal with a computer that did not require a new printer cable adapter? Perhaps. But the point is, we didn’t take into consideration the total cost of the new computer and once we got sucked into it and devoted hours of time to set it up, we were reluctant to not go ahead and pay the extra ancillary costs.
Now I am not busting on my husband. So I will give an example of some ancillary costs that I often encounter. My daughters and I all like American Girl dolls. While I realize they are expensive, I prefer this type of play over video games or more mature games. Plus we almost always buy our dolls on the secondary market. For a long time my daughter wanted a “Kit” doll. We read the stories and saw the movie. When I found one on Craigslist for $65 right before my daughter’s birthday, I bought it. My daughter loves this doll and loves to imitate Kit. So the next thing my daughter wanted was a typewriter like Kit has. Fortunately, typewriters aren’t in great demand and I was able to buy one for $10. We also like to dress Kit in period clothing (she’s from the depression-era) and with period accessories. So I have now bought Kit a vintage camera set, a depression-era work lamp, and some period clothing. So while the cost of the doll wasn’t too bad (and even new she would have been “only” $95), it’s the price of the extra clothing and accessories, where the costs really add up.
So next time you are making a purchase or comparing two items to buy, take into consideration the ancillary costs that go with the product. You might be surprised at how much you will really be spending.