To most of us, October 2006 has no material significance. For me, the date didn't matter much either. However, it was a sign that the odds were against me.
When was in my basement this week, I happened to notice a pool of water coating the floor in one of the unfinished rooms. Naturally, my mind raced to uncover the cause. Was it rain water? The prior day brought a a few storms after all. However, it had rained many times in my 4 years of living in the house with no issues. Not to mention that the water was fairly contained.
The next probable cause: the water heater had met it's inevitable demise.
Written on the side of the tank was the installation date: October 2006. Ever since I bought the house, I had known that the water heater was on its last legs. Many decisions in life are based on probabilities. We go to college because there's a very good chance we'll get a job. We watch Squid Game because there's a very good chance we'll be entertained. Similarly, I held off on proactively changing my water heater because I was placing a bet that it would keep on trucking along. That, and I didn't want to shell out the money earlier than necessary. What if lasted another 10 years? So year after year, I continued to roll the dice. This week I lost to the tune of $1,5001.
In any other scenario, I'd shop around for water heaters and plumbers. But when 10% of your basement is being overrun by water slowly leaking out of a 40-gallon water heater, you don't have much time to be waiting around for quotes. And of course the supply chain issues have managed to snake their way into the water heater market where prices have spiked 20-25%. The entire debacle reminded me of a theme that I've often held to be true: the worst time to buy something is when you need it most.
The entire debacle reminded me of a theme that I've often held to be true: the worst time to buy something is when you need it most.
It may sound silly. After all, if you need something, that's often best time to buy because, well, you need it. Why would you buy something before it's needed? Whatever money you could use can be invested, spent elsewhere, etc. However, by waiting until desperation strikes, we often pay higher prices, hurting ourselves financially. Going back to my example, the life expectancy of my water heater brand is about 10 years. Given that it was 11 years old when I bought the house, the odds were telling me that the tank would need to be replaced soon. In light of the odds, I probably should have been more proactive; I could have shopped around for a tank and waited until there was a sale or some sort of deal. (Never mind the very valid fact that I'd have to store the massive hunk of metal somewhere in my basement, which would make a preventative purchase more annoying.) Moreover, I could have shopped around for plumbers beforehand to get a feel for pricing, availability, and reliability.
While the water tank scenario is a bit uncommon and nuanced, think about other instances in which untimely purchases may hurt you financially:
- In October, the price of Halloween costumes jump. The Aladdin costume I was eyeing up went from
$34 in September to $ 55 in October. (See image below.) - In the week leading up to Christmas, holiday sales disappear. Not to mention you'll have to pay for shipping.
- In the fall and winter time, previous deals on winter clothes melt away.
The Aladdin costume spiked 57% just days before the Halloween weekend and hit a new low when it was too late to purchase on October 26th. Source: CamelCamelCamel.
How to protect yourself
Buy when others are not
We all understand that when demand is up, prices rise. This concept should be obvious. What's surprising is how many people don't take advantage of situations when demand is way down. Prices on flights are cheaper when you fly on week days and/or nights because no one wants to fly then. Outdoor furniture goes on sale in November because people are thinking about the winter. Macy's pretty much gives away Christmas décor when the holiday has passed. I suspect the reason that people don't take advantage of this phenomenon is that they're too interested in the current season, moment, or trend. But as I'll explain next, thinking ahead and delaying instant gratification is a huge help.
Think ahead and delay instant gratification
Many times, there are things that we will need or want. However, they don't represent a current need or want. For example, when I bought my house, my water heater was a future need, not a current one. Therefore, if you can think ahead and project what goods or services you'll want or need, you buy yourself the flexibility to wait until a deal pops up. Recently, I wanted new bed sheets. While I couldn't find any sales right away, I signed up for a number of newsletters from brands in which I was interested. Once I got hit with an email announcing a sale, I pounced, saving over $40.
Better yet, if you have some extra savings, you can be a hyper-opportunist and load up on sale items that you know you'll buy at some point anyway. At the risk of sounding like a bro, Costco has crazy deals on protein powder every January or so. When that happens, I'll buy 3-4 bags that will last me the entire year. Given that I would have purchased 3-4 bags throughout the year anyway, why not buy them all at once and save $60?
Of course, sometimes life happens and we get screwed. There's nothing you can do about that except to have savings stocked away to cushion the blow and reduce the need to borrow money. However, when life doesn't hit you with negative surprises, you can give yourself a financial boost by not making purchases out of desperation.
Notes
1I got that Emergency Fund though so I'll be okay.
This post was written as part of my newsletter in November 2021.