The Upgrade and Save Strategy

In 1962, Sam Glucksberg performed a study in which he gave subjects a box of matches, a box of thumbtacks, and a candle.

They were instructed to figure out how to affix the candle to the wall and then light it such that the wax wouldn’t drip on the table below.

It’s the famous candle problem and a surprising percentage of subjects had trouble solving it.

He discovered that when the thumbtacks were placed outside of the box, more subjects were able to solve the problem.

Human beings are… kind of terrible at thinking outside of the box. šŸ™‚

Another lesson from the study was that those who were incentivized with higher rewards (win more money if they perform the task faster) performed worse than those who were incentivized with lower rewards.

In summary, we’ve learned that not only are we terrible at thinking outside of the box, it’s worse when when the stakes are high!

This happens in a lot of areas of our lives and the stakes are always high when money is involved.

If you were to ask someone to cut out $50 from their monthly budget, what do you think they would do? They’d look to all their expenses and see what they could live without. They’d see what substitutions they could make or what purchases they could defer. We think “cut from your budget” and we look for things to remove.

That’s inside the box thinking.

What if I told you it’s often far better to “invest in your budget?” That you should be looking for ways to spend more today so that you spend less in the future? Reframing the question opens up a whole world of opportunities.

Enter: The Upgrade and Save Strategy

The Upgrade and Save Strategy is simple. I make a list of every expense I pay for on a regular basis. It can be little things like a cup of coffee in the morning to the heating system of our house. If you use it more than once a month, it’s a candidate.

Next, is there a way I can spend money up front, upgrade it, and have it save me money over the long run? The answer is often yes.

And as a double bonus, by upgrading I’m able to get a better level of service or enjoyment while saving money at the same time. I’m not cutting back and starving myself of something, I’m adding to it and gaining more enjoyment.

Here are a few examples of patterns from my own life:

Example 1. The “Rental” Pattern

This is the most obvious of the Upgrade and Save patterns.

Years ago, when I was using Comcast for internet service, I was paying something like $5-$10 per month to rent their cable modem. And their cable modem was terrible.

So I bought my own! I had to come up with the initial investment of $70 but I made that back within the first year from the rental fees!

I upgraded my cable modem to a unit that was better and I saved money, all for an up-front investment. So simple, so easy to do, and in this case the up front investment isn’t prohibitive.

Example 2. The “Frequent Purchase” Pattern

Let’s take the often maligned morning cup of coffee. It’ll illustrate a powerful point about how an upgrade can change behavior (even if you don’t drink coffee).

We all know the Latte Factor (gist is that if you cut out spending $4 a day on coffee, you would save a thousand dollars, duh we’re all good enough at math) but quitting cold turkey is impossible. IMPOSSIBLE.

Most experts will say that the counter to this is to get an automatic drip coffee maker. You save all this money with drip coffee. That’s all good except it’s easier to go to Starbucks. With Starbucks, you don’t have to get coffee, get filters, fill water, clean the pot, … you get the idea.

The first time you forget might be the last time you use it. (just look at treadmills on Craigslist… plenty of those)


Get an on-demand, high quality coffee machine.

That could be a Keurig for ~$100 and pods for fifty cents or step it up to a higher-end Nespresso machine for $350 and pods for $0.70-$1.00. (there are Nespresso machines that are around $100 too) With the Keurig, you’d save $790 over Starbucks. With the pricier Nespresso, you still save $430. Either way, you save. And you get coffee that’s convenient, fast (30 seconds), and pretty good.

These machines are all more expensive than the $30 drip coffeemaker. That’s OK.

They are less expensive on a per cup basis than Starbucks and it’s more convenient. You don’t have to drive to a Starbucks and wait for your coffee. You get it immediately.

There’s no filter to buy. There’s no timer to set. No pot to clean.

The only thing you need to do is remember to order coffee pods and wash out the cup.

And, if things fail catastrophically, you can always sell these units.

Perfect is the enemy of the good. We’re not looking for financially optimal solutions, we’re looking for solutions that work and that you’ll stick with. The imperfect plan you use is better than the perfect plan you don’t.

Example 3. The “Upgrade the Lifespan” Pattern

We’ve covered two cases, buying the rental and the frequent purchase, the last examples I want to share is simple. If you can pay more to get something that’ll last longer and be replaced less frequently, I almost always go for it.

Do you own a car? What kind of oil do you put into it? If it’s conventional oil, switch to synthetic motor oil. It’s more expensive but you get a ton of benefits, including more miles between oil changes. Toyota recommends I change the oil in my Venza every 5,000 miles if I use conventional oil and every 10,000 miles when I use synthetic oil. As long as the cost of a synthetic oil change is less than twice the cost of a conventional one, I win.

In our house, we’ve also replaced every incandescent light bulb with CFL or LED bulbs. They’re a lot more expensive than incandescent bulbs but they use less electricity and I have to change them less frequently. They’re supposed to last 9 years, which means I won’t have to get my ladder out to replace burned out bulbs until our kids start complaining about how we don’t understand what they’re going through.

Example 4. The “Makes Your Life Better” Pattern

Sometimes, you just need to pay for quality because it improves the quality of your life.

Do you know how incredible it feels to wake up after a good night’s sleep? There are a lot of things people will tell you are game changers, but waking up after a night of restful sleep truly will change your day. You’ll be more productive, more motivated, and have way more energy than you’ll know what to do with. You’ll tackle those challenging problems, you’ll exercise, and you’ll have more willpower to make better decisions.

While getting a good night’s sleep has to do with a lot of factors, none is more important than your bed.

If you sleep just 6 hours a day, you spend 2,190 hours in bed in a single year. You’ll have your mattress for an average of 10 years. That’s 21,900 hours.

If you were to spend $5,000 on the best mattress and bedding ever (like the Westin Heavenly Bed and Bedding set, which is amazing), that’s 23 cents an hour. $1.37 a night.


Even the most frugal of you out there will agree, that’s a heck of a bargain.

Upgrade your bed and save yourself, there’s no better deal out there.

There is one downside… you hate sleeping in a bed that isn’t yours. But hey, that’s a cost I’m willing to pay. šŸ™‚

Snowball Your Savings

Many of the things you’ll upgrade and save will require an up front investment. Start with something small and roll the savings over to bigger and bigger investments.

Your first step might be to switch your car over to synthetic, thus saving yourself an oil change. Take that money to buy CFL bulbs or towards a new coffee machine. As these savings snowball, you’ll be able to upgrade many aspects of your spending so you’ll have higher quality and be saving money.

As Syed points out in the comments below (the beauty of comments!), and I paraphrase: If you know you’re going to upgrade something in a few months, now’s the time to look for sales and coupons to get an even better deal.

As I was writing this post, my brain was constantly noticing deals on Keurigs and Nespressos.

Sometimes you have to spend money to save money!

Have you done this in your life? Am I missing a pattern you know about? Let me know in the comments!

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Gregorio says

    Yes Jim! I am using my french press cafetiere at work and instead of spending 2.8Ā£ 5 times a week I spend 3Ā£ every 3-4 weeks to buy a pack of coffee.. šŸ™‚
    …that’s a saving of roughly 700Ā£ at year
    Small gestures every day make a big impact on a longer term!

    • Jim Wang says

      You have to make a small investment in the french press but you get better coffee AND you save money. šŸ™‚

      There’s also something to be said on the ritual of making your own coffee, rituals make us appreciate things more!

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