Previous: What Broadway Really Pays: Starring In Hamilton, Being In A Union, & More
Next: I Tried The 5AM “Billionaire Morning Routine”



View count:168,022
Last sync:2024-05-28 19:30
Open up a Wealthfront investment account through my link
and get your first $5,000 managed for free. Thanks to Wealthfront for sponsoring this video!

In this episode, Chelsea talks about certain things that are worth spending more for, vs. where you can always be cheap.

The Financial Diet receives cash compensation from Wealthfront Advisers LLC (“Wealthfront
Advisers”) for sponsored advertising materials. The Financial Diet a client and this is a paid
testimonial. The Financial Diet and Wealthfront Advisers are not associated with one another
and have no formal relationship outside of this arrangement. Nothing in this communication
should be construed as a solicitation, offer, or recommendation, to buy or sell any security. Any
links provided by The Financial Diet are not intended to imply that Wealthfront Advisers or its
affiliates endorses, sponsors, promotes and/or is affiliated with the owners of or participants in
those sites, or endorses any information contained on those sites, unless expressly stated
otherwise. Investment management and advisory services are provided by Wealthfront, an SEC
registered investment adviser. All investing involves risk, including the possible loss of money
you invest, and past performance does not guarantee future performance.


Join this channel to get access to perks:

The Financial Diet site:

Hey, guys.

It's Chelsea from The Financial Diet. And this week's video is sponsored by Wealthfront.

As we all know here at TFD, the longer you wait to start investing, the less time your money has to make money. We're now one month into 2022. But there's still plenty of time to start putting your money to work this year.

And if you're looking for one of the easiest ways to start investing, you should check out Wealthfront. Designed by financial experts, Wealthfront is a robo advisor that first assesses your risk tolerance and then builds you a personalized, totally automated portfolio. All you have to do is deposit money into your account.

You're also protected from unnecessary risk because your portfolio is diversified across asset classes. You can invest for the long term with an automated Wealthfront portfolio of diversified, low cost ETFs. You just need a few minutes and $500 to open an account.

And you can even see your net worth and all of your accounts in one beautiful, easy to use app. Click the link in our description to get and exclusive bonus when you set up your account with Wealthfront. And this week, we are talking about one of my favorite things to talk about when it comes to money and spending choices, which is where to invest versus where you can afford to be a little cheap.

Often, the discourse around spending choices on the internet tends to fall into two camps, those who are frugal about just about everything, and those who beat the drum of investing up front to save more in the long term. But as with most things when there's any kind of hotly contested debate or two schools of thought, both can be wrong. And both can be right.

In general, as we've stated before on TFD, the best way to think of things is in terms of cost per use, i.e., the overall cost divided by how many times you actually use that item. You could spend $1,000 on a winter coat. But if you live in a place that requires heavy duty outerwear and it takes you comfortably through 20 winters in a row, that is going to end up being in the long term, a very cheap coat when compared to one you might have to replace more often.

So when it comes to deciding where to spend and where to save, and when you can't necessarily predict cost per use from the outset, it's good to figure out where you should invest versus where you can be cheap. The first thing to invest in is staple wardrobe items and upkeep. And by staple wardrobe items, I mean things that you can wear for years on end.

This includes things like the aforementioned warm coats, winter boots, good jeans, or even classic items like a little black dress or black pants. Let's do the math. You can get a good pair of Sorel boots for about $200.

And let's say you wear them three times a week during the winter. Good boots can last a long time. And if you wear your Sorels for five years, your cost per use is less than $1.00.

And since you're not buying a new pair every year, you're not adding a new pair to the landfill every year. About 10% of our annual carbon emissions and 20% of our waste water come from the fashion industry. Buying better quality clothes and keeping them for a long time is simply good for the environment.

And I would add to this to say that a great place to invest is in the fit, which ultimately often means in the tailoring. As I've gotten older, I've gotten much more proactive about buying pieces that work long term and are very versatile. And often when I find the right item, I will buy several of that same item in different colors, or even sometimes the same color.

And in some specific cases, like with a pair of jeans. I've gotten into the habit of pretty much understanding that in order for a pair to last for years to fit me the way I want it to, to go with everything, I'm likely going to have to get it lightly tailored. Similarly, I've gotten used to bringing good staple pairs of shoes to the cobbler every few years rather than replacing them or things like getting the lining in a high quality wool coat replaced every so often rather than just getting a new coat.

Conversely, you should be cheap about anything that's of the moment. On the flip side, if you're looking at buying something that is either highly of the moment or anything that could be described as it, like an it bag or it shoes, you are generally way better off seeing if you can find a bargain doing things like buying secondhand or buying less expensive alternatives. And yes.

Of course, that can mean the expensive designer belts that everyone is wearing this year. But it can also mean things like cuts, and shapes, and motifs that are extremely noticeable for being very specific to a time. For example, we all remember 2017 and the scourge that was the weird sleeve year.

Now pretty much any top from that year looks like you are stepping out of a time machine from 2017. And these days, fashion trends have a shorter shelf life than ever. The internet can spread the word on trends much faster than even an army of fashion magazines.

And e-commerce can get trendy items directly into our hands without a trip to the mall. And social media has only accelerated this cycle. According to Lithium Magazine, fashion trends used to last three to five years.

Now in the age of TikTok, a trend can die out in a matter of months or even weeks. And when it comes to dupes, rather than going the fast fashion route, and especially a lot of these online retailers who essentially are able to turn around drop ship clothes within a matter of days to simulate trends, try buying second hand. According to celebrity stylist Samantha Brown, trends operate on a 20 year cycle, which is why we're currently seeing Ed Hardy and Von Dutch trucker hats make a shocking comeback.

Did we not suffer enough? The point is what's popular now was likely to have been popular at some point in the past. So there is a good chance that you'll be able to find an experimental piece at your local Goodwill or an online thrift store like ThredUp.

Number three, and this one comes from very recent experience, is you should invest in movers. Moving is one of the most stressful events that humans will regularly go through in their lives. And the act of moving isn't just about physically bringing your items from one space to another.

It's also the packing, the organizing, the cleaning, and the playing of Tetris in the back of whatever car or van you're using. And if you're moving to and from an apartment, there may also be things like freight elevators or stairs involved, which can make the move in process itself quite risky if you don't know what you're doing. It can be very difficult, tedious, and in many cases, time consuming work.

And many of us don't get time off of work to do it. Hiring movers who can do really as much or as little as you need them to can be an incredible time and stress saver. And additionally, movers have the equipment and the training to safely lift furniture and big boxes.

There are even OSHA procedures in development for moving heavy objects. Hiring movers can protect you from the risk of throwing out your back or hurting yourself in some other way. There are over 7,000 moving companies in the US.

And nearly half of them are small businesses with fewer than five employees. So it's pretty easy to find a small business if you prefer to avoid a national brand. And be sure to get quotes from a few different companies so that you're getting a good price.

But don't be afraid to pony up. Because movers are almost always worth it. And I personally found in our last moving experience, compared to the prior three moving experiences that we've had since moving to New York City, that paying for full service movers was only incrementally more expensive and definitely saved us a lot in other auxiliary costs, and of course our time.

In New York City, it's pretty much unavoidable to have to use movers for some part of the process. New Yorkers as a rule generally don't have cars, and certainly not cars big enough to actually handle moves. We often have to navigate big bulky furniture up and down, walk up only apartments.

And the timing limitations in most apartment buildings around when you're actually allowed to move means that even your window of time during the day itself can be quite limited, too much so for one or two people to handle alone. In prior instances, we've hired movers that only did the middle part of things. Meaning, they took your boxed up items, loaded them onto the truck, moved them down the street or across to another borough, or wherever you were going, and unloaded them, dropping them in your apartment.

Between tax, tip, and other fees, this part of the process alone usually ended up costing us in total somewhere around $3,000. For around $5,000, which is a lot, but compared to $3,000 is a somewhat incremental difference, we had movers who arrived at 8:00 in the morning, packed up every single item in our home within a few hours, transported them all and unpacked most of our boxes. It was all done in the course of an under 10 hour day, even with time to enjoy a lunch break.

It was done to the highest quality standards and made it so that neither my husband or I, my husband who was additionally in a state of immigration flux at the time, have to take even a day off of work to handle it. I actually must shout out the company that we used this last time. It's White Glove Movers.

They were effing amazing. Highly recommend them. But knowing that we were moving into our home for what is likely the last time in quite some time as we bought [BLEEP],, it was easy for us to justify that enhanced experience.

And if you can afford it, because any good TFD viewer knows that your time is often just as valuable as your money, not to mention all the things like boxes, and tape, and packing supplies, and stuff that you wouldn't have to buy, this was very much worth it for us and might be worth it for you. But at minimum, when it comes to any type of move, stop relying on friends, who really do not need to be doing that, either with their time, or their poor backs. And hire professionals.

That being said, if you are DIYing part of your move, where you can be cheap is in moving supplies. We live in the age of cardboard boxes. So paying for new ones is simply foolish.

All you have to do is ask around on Facebook or NextDoor. Nearly 10% of the population moves every year. So the odds are good that someone will have a pile of boxes that they're looking to get rid of.

Be sure to check around at work too. If your office gets a lot of big shipments, you can probably ask a building manager if you can take a few of those boxes home. They'll probably be happy that you saved them from yet another trip to the recycling bin.

Another option, which is more costly but can be really convenient, is to rent larger plastic boxes for the move. There are services which will drop these boxes off at your house and pick them up at the new one when you're done. And it usually won't cost you more than a few hundred dollars depending on how many things you have.

Bottom line is that if the moving supplies themselves are going to be a cost that you absorb, do your research to make sure that you're not doing it in a way that is unnecessarily wasteful or expensive. Number five is invest in quality meat and dairy products. Interestingly enough, one of the changes that we've been making in 2022 is to be as stringent as we can about the quality of the meat that we're buying as well as the other animal products like cheeses, milk, eggs, et cetera.

We try to source the majority of it from the local farmer's market that's in our park every Saturday. And even when it comes to store bought brands, I've gotten much better about reading the behind the scenes details on what actually goes on behind the scenes at some of these companies that have a more superficially ethical reputation. For example, when it comes to organic dairy products, you've probably seen a lot of Horizon and a lot of Organic Valley.

As it turns out, Organic Valley's standards are much higher than Horizon's. And yet they have the same shine. It's not fair.

And at this point, most of us know what goes on behind the curtains at factory farming outlets. And it is very difficult if you're going to consume any of these products to be able to do so in a totally ethical fashion. But there are a lot of ways to do it better.

And if you're someone who plans on consuming animal products for the foreseeable future and cares about that being done in as humane a way as possible, you have every interest to support the places that are actually doing it. For example, when you buy steaks or cheese from local farmers, you're directly supporting small businesses as well as your local economy. One study showed that for every dollar you spend at a big chain store, only $0.43 actually stay in the city.

But for every dollar spent at a local business, $0.68 from that dollar stay local. When you buy local meat and dairy, you are literally investing in your community. And another good reason to pay for quality meat are the health benefits.

The Cambridge Journal of Region's Economy and Society showed that counties with a higher volume of local businesses had a lower rate of health issues like diabetes. In other words, small local businesses really do make us healthier. And of course, these products are usually more delicious and have never been easier to find, between farmer's markets, and CFAs, and online organizations where you can order directly from farmers to be delivered frozen to your door.

There are tons of options. And while I'm not totally perfect about every product we buy in this category being up to the standards I would ideally like it, it has on even a cursory level made me a lot more familiar with what these things should really cost if they're being done right. For example, the nights that my husband and I just have a nice cut of meat with some sort of sides are pretty rare to begin with.

But all the more so now because I exclusively buy those pieces of meat from the farmer's market, where, for example, a pork chop for one person will be somewhere between $20 and $25 a chop. That's without any preparation. But they're from a local farm where the animals are treated humanely, the workers are paid fairly, and the farm is operated sustainably.

Getting OK with having less of something so you can have better of something is a very good way to approach this. That being said, you should feel more free to be cheap about pantry staples. Because at the end of the day, you don't have to shop local for everything in your pantry.

In fact, you can buy many of your groceries without the same guilt. For pantry staples for example, you can go straight to generic brands. There's no shame in buying cheaper canned beans and veggies at the store.

And if you're worried about quality, don't be. According to a study by the National Bureau of Economic Research, professional chefs buy the store brand up to 80% of the time. And while the standards of production of these items may not be as impeccable as they would be if you were to buy them completely locally, which can often be difficult to do depending on the item, the perception that the brand name product is inherently better than store brand or off label is not true to the extent that there are many times the exact same products made in the exact same way, and sometimes at the exact same factories with different labels on them.

And if you really want to take your bargain shopping to the next level, you can pick up your rice and lentils at your local Asian market. And be sure to pick up things like your spices and tahini there as well. The prices are unbeatable, the quality is excellent, and you often are getting to support a local business instead of a big box chain.

Lastly on this note, a way to save a ton of money and reduce the amount of unnecessary packaging you're using is to get in the habit of buying bulk for as many items as you can. And when I say bulk, I don't mean going to Costco. I mean going to your store and buying these things in the little dispensers like your coffee beans, your nuts, your rice, your lentils, your spices, your peppercorns, basically everything that's available for you to buy by the pound without having to have it preportioned and packaged.

Selling these items in that way represent a ton of savings for the producer because they don't have to spend all that money portioning and packaging, as well as the store, which takes up way less space for the same amount of product. And those savings and environmental benefits are passed off to you. Number seven is to invest in hobbies that make you a happier person.

One fun thing that you should give yourself total permission to invest in if you can is hobbies that directly impact your happiness. Studies have shown that our brains release dopamine when we partake in hobbies which make us happy. Some experts are exploring the possibility that hobbies can reduce or even prevent depression in some.

And Psychology Today adds that regularly enjoying a hobby can strengthen your social connections and help you cope with stress. In other words, hobbies are great for mental health. And this is always worth investing in.

So if you are truly dedicated to a hobby, meaning that you've demonstrated that you actually keep up with it on an ongoing basis, it's OK to spend some extra money on it. Because it's likely that you will enjoy it even more when you have the proper supplies. And you might even consider paying for a class or workshop to help you get even better at your hobby.

Because this confidence can spread to other areas of your life. One study in the Journal of Vocational Behavior showed that spending time on your hobbies can make you more confident at work, even if your hobby is totally different from your actual job. In other words, being good at beekeeping can make you a better accountant.

We often think of mental health spending almost exclusively in terms of things like therapy or medications. But similarly to eating well and moving around a little bit, the best medicine is often preventative. And few things are more beneficial for mental health in an ongoing way than investing in the non monetized aspects of our life that bring us joy.

That being said, and this is coming to you live from my tap shoes in my closet, which I used one time, do not invest in hobbies that you're just starting. If you've never painted before and discover that you don't actually like it, you will wish that you hadn't bought that nice watercolor set. And if you're the type of person who's constantly trying new hobbies, that can add up very quickly, especially if you're dabbling in hobbies which are inherently expensive, like sailing, or horseback riding.

Though something tells me you guys aren't doing that. That being said, there are a ton of expensive hobbies out there. Basically, it's good for you to set up some kind of a litmus test with yourself where you're only allowed to invest in a hobby, or activity, or area of interest, if you've already demonstrated a certain level of commitment to it.

Maybe using a habit tracker to see that you're doing it on a consistent basis for, let's say, three months in a row will give you the encouragement you need to know that it's worth investing a little bit in to continue. But don't be like Chelsea and her tap shoes. I really should give them away.

Number nine is investing in important car parts. A lot of people hate spending money on cars. As someone who hasn't driven in 10 years, I can't relate to this but I know that it's real.

And I remember when I felt that way. But your car is really one of the few areas where investing in the right items is crucial and can be extremely dangerous not to do. The most obvious example here is tires.

It's hard to imagine a less sexy product. But tires are one of the most highly engineered consumer products on the market. Up to 50 different raw materials go into the production of one single tire.

And the tire industry spends billions of every year on research and development. And there is a reason for that. When you're driving a car, the only part of the car that actually connects to the road is the tire.

Everything from the rubber compound to the design of the tread pattern is engineered to keep you on the road and keep you safe. If you opt for cheap tires, or God forbid, used tires, and then don't bother taking care of them, you're putting your own safety at risk. And even with car insurance, car accidents can be incredibly expensive to recover from, both in terms of time and money.

And if you end up with an injury or a car issue that keeps you from getting to work, you may even lose income. But you can and should be cheap about a new car. We have all heard the maxim that a car loses half its value the minute you drive off the lot.

And that may be an extreme and somewhat hyperbolic way of putting it. But cars do depreciate extremely quickly. If you buy a car that is only one year old instead, you can save up to $5,000 depending on the make and model.

If you buy a car that's three years old, your savings could be up to $15,000. And you may argue that a new car is going to have fewer problems. But that's not always true.

In fact, a number of automotive manufacturers build their entire brand around reliability. And the quality control standards of good certified pre-owned cars are often negligibly different from those of brand new cars. They even have this weird cologne that they can put in the car to make it smell like a new car again.

I have to say, I don't say this about a lot of things, but only fools buy totally new off the lot cars. It's such a waste. Number 11 is to invest in professional services.

With Google and YouTube right here at our fingertips, it can be very tempting to think that almost everything we need to do in life we can do ourselves. And of course, we here at TFD are generally quite big proponents of the DIY phenomenon. So that is true for a lot of things.

But there are certain things that, to put it quite frankly, you really shouldn't be [BLEEP] with. Let's use accounting as an example. 28% of small businesses have been audited or gotten a notice from the IRS. And on top of that, 41% of inaccurate numbers found in reports are the result of human error.

And the bigger your business is, the more expensive these mistakes can be. In 2014 for example, Hertz discovered $43.6 million worth of errors that went undetected for three years. And of course, a small business is unlikely to make a $46.3 million mistake.

And a company as big as Hertz has the resources to recover from a blunder like that. But if you're a small business or have multiple streams of income, or are freelance, or have otherwise unusual taxes, small mistakes can be devastating. I would say that similarly, a good place to invest is a lawyer.

Doing things like setting up a small business, or a self-employed structure, creating contracts for your business relationships, or generally navigating any area of your life where you're making a big decision, such as buying a home, getting actual legal advice can be incredibly valuable. TFD over the years has probably spent a total of maybe $100,000 on our lawyer. And after seven plus years in operation, that's actually not that much money.

But I can tell you without a shadow of a doubt that we have gotten back way more than that in time, avoided mistakes, and sometimes scaring people into paying us when they owe us money. That said, you can be cheap about things that are actually safe to DIY. Now I'm not crazy.

I'm not saying you should start cutting your own hair. But there are times where it becomes somewhat unjustifiable to keep paying for certain services. For example, there are multiple apps out there which charge fees to help you find unused subscriptions or recurring costs that you could otherwise be saving on.

And I'm sorry, but if you've watched one TFD video, you can do that your damn self. We are all perfectly capable of reviewing our credit card statements and don't need to be paying some tech bro $100 a year to do it. There is nothing inherently wrong with paying for a service.

And sometimes, like with the movers, it is valuable enough to have a professional step in and to reclaim that time to be put toward other more productive things. But something that is very important is to be really judicious about where you're outsourcing, and be very aware of what that actual cost represents when accumulated over time. Starting each year, and I know we're February, but whatever.

It's the top of the year. By doing a little audit of the things that you're paying for, and might not have to, or the things that you think are out of your reach to do but you could probably learn, like making basic home repairs, is a good way to ensure that you're outsourcing where it's valuable, like with legal stuff, and keeping it in house where you should, like putting together basic IKEA furniture. And if one thing you're looking to get started with is investing, I highly recommend you check out Wealthfront at the link in our description.

And as always, guys, thank you for watching. And don't forget to hit the Subscribe button and to come back every Monday, Tuesday, and Thursday for new and awesome videos. Goodbye.