How You Can Live Better Than a Millionaire on $20,000 a Year (Really)

My PsychologyToday.com article today is the latest iteration of my article on how one can live well on $20,000 a year. 

In this version, I'm more audacious: I assert that one might be happier on $20,000 a year than are many millionaires because living on less gives you the freedom to choose a career you might enjoy much more--for example, helping people versus being a bond trader. HERE is the link.

My Nine Favorite Purchases

My PsychologyToday.com article today describes my nine favorite purchases and invited readers to list theirs.

I wrote that article not just to turn readers on to some wonderful products but because looking at one's list of favorite purchases can be revealing of who you are. HERE is the link.

Shopping Wisely in the Web 2.0 Era

The tougher the economy, the more wisely we must shop. Fortunately, today's Internet makes it easy to do so.

Step 1. Ask yourself, "Is buying this thing my wisest use of those dollars?" Sure, that new car, furniture, big-screen TV, "real" jewelry, yet another pair of shoes, or first-class vacation would be nice, but what's the opportunity cost? Would the money more wisely be saved? Spent on something else?

Think three times before buying a non-essential on credit.

Assuming you decide you should buy it, this sort of approach to shopping wisely on the Net will work well for many items:

Step 2: Resist advertisements. Disproportionately, a company advertises when its product fares poorly in online reviews and word-of-mouth.

So, for example, Toyota spent little on advertising the Prius because it knew that reviews and word-of-mouth would do the trick. In contrast, carmakers that provide poor value advertise heavily: GM, Chrysler, Mercedes, BMW, Infiniti, etc. For example, Consumer Reports finds that Mercedes in addition to its gulp-inducing price, breaks down more often and requires more expensive and frequent maintenance than most cars.

Other examples: Pfizer advertises Lipitor heavily because much cheaper generic statins are available. Safeway advertises more than Wal-Mart because it often charges much more for the same items. For example, I just bought an eight-ounce bottle of Gulden's Spicy Brown Mustard at Wal-Mart for $1.18. At Safeway, it's $3.65--more than 300 percent as expensive!

President Obama urged us to spend more to goose the economy--He even offered "Cash for Clunkers," to make predominantly modest-income people dump their running cars into landfills so those poor folks can go deeply in debt to buy a new car. I don't believe we--individually or as a society--live the life well-led when we buy what we don't need, especially on credit.

Step 3. Pick your model by googling the product and the word "reviews," for example, "big-screen TV" reviews. (Note I put big-screen TV in quotes so Google recognizes it as a phrase.) Also see if your product is reviewed on www.consumersearch.com, which summarizes reviews from a number of sources, usually including Consumer Reports and Amazon.com.

If my product is not reviewed on consumersearch.com, I visit Amazon.com--it has user reviews of an enormous range of products. I generally value user reviews over expert ones--experts' evaluations are too weighted by bells, whistles, and technical specifications that are trivial in benefit.

Another reason I prefer user reviews is that many more are available, notably on amazon.com. I believe in the wisdom of crowds.

If I need a service, for example, a plumber, I consult sites such as yelp.com, angieslist.com, servicemagic.com, and/or a local gem, Berkeley Parents Network. I don't necessarily nix a service provider because of one bad review--sometimes, it's written by a rare unhappy customer or even by a firm trying to make its competitor look bad.

Step 4. Google the item's model number. That search usually yields Google's product search engine, which reports the price--including shipping and tax--from multiple vendors, including user ratings of the vendor's reliability.

Before deciding where to buy the item, I usually price-check it on Amazon and eBay. Amazon is great because, for each millions of products, it aggregates many vendors' prices (for the item new and used,) has the most reviews both of product and vendor, and offers one-click buying. Amazon even makes returning items easy. eBay is worth checking because its prices, which sometimes are the lowest, don't show up on a Google or Amazon search. (By the way, I predict a merger of Amazon and eBay.)

Today's Internet makes it so easy to buy the best-choice products at the lowest price, delivered effortlessly to your door. There's no schlepping in traffic to stores with no parking--and even if you can park, compared with the Internet, in a store, you're much less likely to find the most appropriate product, let alone at the best price. And returning an item requires another schlep.

Alas, the ease of Internet shopping can tempt us into overspending. Remember, the life well-led is much more about good work, a rewarding avocation, and someone to love.