When we buy an item we are not paying for just the item itself. We are paying the people who make the item, the people who transport it, the people who sell it, and countless other things from the space the store takes up to their phone bill. If we were only paying for the value of the item itself, items would be much cheaper. Therefore, it is important to know what else goes into the price. While you may not be able to get the store to tell you how much the crystal chandelier cost or how much they pay the piano player, you can make educated guesses on which stores spend more on things that ultimately the consumer is paying for. Stores that don’t spend as much on overhead can often offer their items for cheaper. For example, I found the same pair of shoes at both Bloomingdales and Carson Pirie Scott. At Bloomingdales they cost $78 dollars; at Carson’s they were $75. While the $3 may not indicate a huge difference in prices, if I had bought six items at Bloomingdales and each were $3 cheaper at Carson’s then I would have spent eighteen more dollars than I needed to. Of course, Carson’s doesn’t sell everything that Bloomingdales does and not everything that they sell the same is cheaper. However, it does bring up an important point, that you aren’t paying for the just the item. The actual value of the shoes is most likely less than half of their cost.
While some department stores can be more expensive than others, it is also important to realize that some “discount” stores may be more expensive. Last week I wrote about how some generic brands may actually be more expensive because they count on people assuming they are cheaper and buying them without actually checking the price. The same goes for some discount stores. If you walk into one and assume that everything they have must be cheaper than at any store in a mall you will ultimately pay more than you have to. Instead you should know your prices. This doesn’t mean that you should drive all over the place and compare, but rather always keep your eyes open. If you are running a quick errand at one store because you know they have the type of popcorn that you like, you may want to see how much they charge for other food items that you buy regularly such as bread or milk. You don’t have to look for every item but pick one or two and compare their price to what you are paying elsewhere. This will allow you to see prices at other stores without having to actually drive all over the place to do so.
Last, the most important thing to break down the cost of is any service you might be paying for. This can be anything from having a lawn service to paying for a catered meal. When I asked for a breakdown of the per person cost for my wedding to Ben Clark next summer I was surprised to learn that $24 per person was being charged for alcohol. In total $2880 of our wedding would be used to pay for alcohol. After doing a mental run through of all of the people who don’t drink I found that this would be incredible wasteful. Therefore, we were able to reallocate the money and instead have a much nicer entrée. Having the price broken down for you can be extremely useful in other situations as well. With a lawn service you might find that you are paying for them to use a leaf blower to scatter grass clippings. However, if you live in a windy neighborhood this may not be something that you need. Since most services are package deals we often pay for things that we actually may not need. By breaking the prices down we not only learn exactly what we are paying for but also what we don’t need.