Frugal Friday Pt 5

Lately, I’ve been thinking about a piece by Andrew Tobias, in which he discusses the rate of return on tuna fish. In later retakes of the idea, he uses wine instead, a bit more elegant, I guess. Here’s the idea; when looking at sales, consider the return on your money when deciding how much to buy. In Andrew’s wine example, he keeps the math simple, suggesting that if the wine seller offered a 10% discount on a case (of 12) and you drank one bottle per month, that your rate of return was about 23%/yr tax free. How’s that? Start with paying 90% of an item’s original cost. That 10% discount, when you achieve the full value upon consumption, is worth the full 100% and 100/90 is 11.1, call it 11%. Now, in this example, the wine isn’t all consumed at year end but evenly over time, on average in six months. 11% in 6 months compounds to a 23% annualized return. This concept should give you an idea about how to approach items that don’t go on sale very often. If you combine the supermarket cycle (6 weeks from what I observe) with this math, you’ll find your return even higher. Once you get in the habit of buying the sale items in larger quantity, you’ll find you’re making fewer emergency trip to the supermarket, saving time as well as gas. No running out of TP, soap, toothpaste, etc.
Joe