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. 🙂

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)

Upgrade!

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.

THAT’S A FREAKING BARGAIN.

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. 🙂

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 thirty-something father of three 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 a farm in Illinois via AcreTrader.

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  1. Kate @ Cashville Skyline says

    Insightful post, Jim! I was just having a similar conversation with my boyfriend about our cell phones. Because of the recent changes, we might be able to save some money in the long run ($30 or so per month) by breaking our current Verizon contract and joining their new plans. Coughing up $200 to break my contract didn’t sound appealing, but the move would pay for itself in 7 months.

    • Jim says

      $200 to cough up at once does hurt but the payback period is so quick, 7 months, making it much more palatable. After a year you’ll be ahead $160… plus be out of the contract much sooner.

    • cfassler says

      If you’re a fan of Verizon’s coverage (I am), Comcast offers up Xfinity Mobile for no cost if you already have an Internet plan with them. I used to pay over $100/mo to Verizon for two mobiles. I also had a WiFi mobile HotSpot card as my primary internet until the put a data cap on it, which is why I ended up switching to Comcast for cable Internet, a Roku box for streaming, and Xfinity Mobile. You can get 20+GB/month of shared data for $45/line, or go the cheap route if you don’t use much mobile data and pay $12/GB for shared data. They periodically offer phones with $200/line gift cards, so we picked up a couple of iPhone 8+ units with a 2-year interest free phone loan. The monthly amount for both phones AND cable internet are less than what I was paying Verizon for service on two paid-up phones; and after 2 years I’m saving an additional $480/year.
      Another plus, Xfinity Mobile ties in to Comcast’s cable modems, so there are free Wi-Fi hotspots in tons of places.

      • Kathie says

        I am on a contract-free, month to month on Verizon for $40. I get 2Gigs and it beats the heck out of my daughter’s $120 iPhone Verizon bill.

  2. Jason Hull, CFP says

    I love my Aeropress from Aerobie for coffee making. $30 for French press coffee.

    Our best wallet hack in that mien was investing in a high quality over the air antenna so that we could get rid of cable. We got a Mohu Leaf for about $50, bought Netflix, paid the few dollars a month extra for the highest speed Internet (which was probably overkill), and dumped cable. We’re seriously considering Dish Sling so that we don’t go to the bar every weekend to watch soccer and college football.

    Another one would be investing in a good set of kettlebells. Having kettlebells pretty much removes the need to go to the gym, so if you have a costly gym membership, that might be a high ROI investment.

    • Jim says

      Yes! Those are two fantastic examples of upgrading and saving. The kettlebell thing is huge because it also removes the TIME it takes to get to the gym.

  3. Syed says

    This is a great idea Jim. You’re absolutely right quitting something cold turkey that you’ve been doing for years without thinking is nearly impossible. I guess that’s why the e-cigarette and nicotine gum industries will always be booming!

    I like the idea of staggering your savings opportunities. Spend on one thing to save money, then wait a few months and find something else. To make this even more effective it’s a good idea to look for sales or coupons in advance to produce an even better ROI. And since you’ll have a few months to research, I’m sure you can find something.

    • Jim says

      Those industries will but there are smoking cessation tools that will step down your nicotine to help you quit, basically small adjustments until you no longer notice. 🙂

      You make a great point! (one that I’ll add to the main post) If you know you’re upgrading something in a few months, now’s the time to price it out and look for a good deal.

  4. Jay Fleischman says

    I agree with this because you’re looking at your financial situation on a long-term basis as well as factoring in the psychological impact of giving up something you enjoy.

    Most people go on a money diet, cutting out something like coffee so they can improve their finances. Eventually the deprivation becomes too much to handle and it’s, “all Starbucks, all the time!”

    This hack allows for good, convenient coffee. Amortize the cost to the life of the unit to realize the true savings.

    • Jim says

      You get a little instant gratification, in the upgrade, with the benefits of having a long term view, in the savings.

  5. Denise says

    Great post and a philosophy I’ve lived by for years.

    This is the same issue that comes up when buying health insurance. Should you pay a higher premium upfront and pay lower out of pocket cost (deductible, coinsurance and copay) when receiving care or the reverse. Which saves more in the long run? The problem is that for too many paying more upfront is not an option. But for those who can do it–do it!

    • Jim says

      Health insurance is a much harder beast because you have to predict your needs into the future, which are notoriously hard to predict!

  6. Fred says

    If you are a young person, and even not so young, and you are a member of a club or organization, always, always, check to see if there is a lifetime membership. I am a member of two clubs, one is a location related to one of my hobbies and the other is a worldwide ‘intellectual’ organization. In both cases, over 20 years ago, the annual dues were around $79 per year for the first club and $70 / year for the second. I paid $1,000 at that time for a lifetime membership to each of these clubs, since I knew I would always be a member.
    The dues remained the same for the second club, but paying annually I would have spent over $1400 in 20 years (even looking at the time value of money, it’s still a deal). However, with the first club, dues increased substantially, and were raised to over $500 a year back in 2009, saving me many thousands of dollars (over $3,000 in just the last 6 years).

    • Jim says

      My mom joined a lifetime membership to her gym like 20 years ago and did this exact same thing… it has easily saved her thousands of dollars. It also has the added benefit of motivating you to go, when you’ve just shelled out a lot of money for a gym membership, you’ll start going. Once you start going all the time, the habit begins to cement itself and this is a great habit to cement.

      • Norma Walker says

        Members of my church bought life time membership in a gym unfortunately it was bought out. The new owners would not honor the amount.

        • Jim says

          Hmmm, depending on what happened, you may have a legal recourse. If the new owners bought the entire business, they have to honor all previous agreements. If they just bought the assets (building, equipment, etc.) then they don’t have to honor the previous lifetime memberships. It’s something to look into.

  7. Hannah says

    We were facing the need to buy a second car, and instead we bought a second house. We now have a high ROI rental house, a primary house (with a friend renting the basement), and we barely use the one car we have. Upgrade, save and invest for the win (although the house itself is a bit of a downgrade).

    • Jim says

      Ha that’s so crazy that you bought a HOUSE instead of a second car… but I suppose it was a special opportunity?

  8. Addi Ganley says

    What a great post! This makes so much sense in order to save in the long run. We have switched light bulbs as well to the more energy efficient. At first the initial purchase of the more expensive light bulb made me cringe but now I have not changed a light bulb in quite some time. I have even noticed a change in our electric bill.

    Also, the kids tend to leave lights on all over the house so it helps to have piece of mind that we made the better choice in light bulbs. 🙂

    Thank you again for the post.

    • Jim says

      Ha, good point about kids, I didn’t even think about that but it’s so true.

      That was one of our first changes because all of the lights in the house we bought two years ago were flood lights. Not only were they electricity hogs, they made the house super hot. I’m not sure why the previous owner never made the switch. We do keep the flood light bulbs around but I’m not quite sure what I’ll do with them!

  9. Andrew says

    Great point…I think sometimes people are pennywise but pound foolish. The cable modem rental is such a scam! I also bought my own modem and made up the cost in less than a year. I also buy a refurbished phone and use a cellphone plan that doesn’t require a contract and is much cheaper. As for the $5000 mattress…I dunno. While I agree that having a comfortable mattress is important, I think that mattresses in general are highly marked up and that the higher cost doesn’t necessarily mean better quality. When you breakdown the usage of something you use often, it’s easy make it seem like a bargain.

    • Jim says

      Being pennywise and pound foolish is the default because the penny is today, the pound might be tomorrow or in a year. It’s tough to see that far… and sometimes you don’t have enough to be pound wise.

      The point of the $5000 mattress was to highlight what seems exorbitant but isn’t actually that expensive when you do the break down. It IS a bargain, it doesn’t just feel like one. And it’s an even bigger bargain if you go to a Costco-type store and buy a high quality mattress for a fraction of the $5,000. Math is still math. 🙂

  10. Mel OConnell says

    This was an interesting post to read! I figured this principle out years ago with my kids’ shoes. We were buying those $14 cheapo vinyl character shoes at the big W store, and they were wearing out every 2 months. I finally got so sick of replacing them, that we went and spent $50 on a good quality pair of tennies for each of them, and they lasted all year! It seemed like a no-brainer once we figured it out – $50 a year for comfortable, good quality shoes or $84 a year for crummy ones?

    We’ve tried to do this as much as possible ever since. I do the coffee thing too – only it’s the taste/quality rather than the convenience that matters most to me, so instead of a Keurig, we bought a $350 espresso machine, and I’ve even learned to make my own flavored syrups.

    Currently, we’re looking into installing a solar system on our home so we can quit renting electricity, and sell some back instead. With tax incentives from the federal gov., we’re looking at $15,000 up front, to offset a $180 a month average electricity bill, on a system with a 25 year warranty, so a break-even period of about 8 years and then near-zero electric bill for 17 or so years after that. Granted, this option is only wise if you’re planning to stay in your home for longer than your break-even period. But it’s something to think about, anyway.

    • Jim says

      Yes! We’re only now getting to the point where our kids (oldest is 4) aren’t growing out of shoes every few months. I suspect we’ll hit this again when they’re teens… but we scour the Target clearance aisles for high quality shoes that are just marked down because they’re “last year’s style” — whatever that means for 4 year olds. 🙂

      I personally dislike Keurigs. I think the quality of the coffee (or maybe the settings of the place?) isn’t that good, so I really like the Nespresso. It’s probably not going to hold a candle to your espresso machine… but I enjoy it!

      I wish we could go with solar, we have too many trees which is a fair tradeoff I suppose. It would be nice to turn the sunlight into money!

      • mark says

        Join famous footware they send online deals all the time, i just bought clearence schetchers 50% off and the second pair 50% off the clearance price!.

  11. Steve says

    Thanks for this post, Jim! I’m thinking about cancelling my lawn care service ($50/month) when the winter season starts because I won’t need them much then and instead saving that $50/month for the next 3-4 months and buying a lawnmower and leaf blower to do it myself. Just gotta make sure I set aside the time to do it!

    • Jim says

      How much land do you have to clear off? We have probably an acre in total of land that needs to get cleared off, it takes about 45-60 minutes to mow and the perfect time to listen to a podcast. The leaf blowing… that I see more as exercise. 🙂

      • Steve says

        Not even an acre, but the front is a huge hill that’s a real pain to clean up….and (as my wife would say) I’m not very good/punctual at getting things done around the house!

        • Jim says

          Oh I know what you mean, we have a smaller hill that is trickier to navigate too. One thing I’ve learned is that if you maintain it, the actual work is much easier. Also, as you do it, you’ll learn tricks. Like blowing leaves down hill, not finding gusts of wind, etc.

  12. Debbie M says

    Doing regular maintenance might be another pattern or a part of your upgrade-the-lifespan pattern. Examples include oil changes, A/C air filter changes, knife sharpening, shoe polishing, and washing your clothes.

    Energy savings strategies also fit into your frequent-purchase pattern. I look at energy usage when buying cars and appliances and I’ve weatherized the house, unload heavy things from the car when I don’t need them there any more, etc.

    Upgrading a tool to help you do something faster or better (or at all) would be another strategy. An electric skillet lets me cook 8 pancakes at a time (instead of 3 in one skillet and 2 in another), so I cook them more often instead of eating out when I want pancakes. I found a hand-crank food processor that makes it more likely that I’ll chop onions which means I’m more likely to eat them (good for health). A needle with a big eye (or a needle threader) helps with mending. Bookshelves help me organize my books (and other things) so I can find them more easily.

    • Jim says

      Yes, maintenance is 100% part of it – I often think about how we replace things before failure in important things, like cars, and how we could probably apply this to other areas too.

      I love these Debbie, thank you!

  13. Angie unduplicated says

    My upgrade budget is simple. Everyone I know plays the lottery. I don’t, and a dollar a day goes to savings. Once a year, I have $365 for any kind of upgrade I want.
    The snowball sounds like my next economic upgrade.

  14. Corina says

    Love your ideas, will implement next the one with the lightbulbs.
    Already implemented the “skip the Starbucks” and get a Keurig.
    And guess what? My husband, who is Korean and the most frugal person I know, got me a second hand Keurig, in perfect condition, on Craig’s list, for $30! How about that!
    Thanks for your great ideas. Love all your posts.

  15. Expat Warrior says

    I did this with a car once. I got so sick and tired of paying for frequent repairs on my old used car. I’m not good at fixing cars except maybe for a few simple things.

    Between the cost of the car and all the costly repairs I had to do to it, I would have been better off if I had just bought a new car to begin with so when my car died, I just went ahead bought a brand new one.

    Looking back, I know I definitely made the right decision. It’s saved me tons of $$$.

    • Jim says

      My rule with car maintenance is that if it’s routine and I can do it in the time it would take to drive to a mechanic (15 minutes), then I learn to do it myself. It’s actually a rule I use everywhere now that I think about it. 🙂

  16. Leslie says

    I’m really confused by this sentence:

    “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. ?”

    Where does the article say you have to sleep in a bed that isn’t yours? Am I reading this wrong?

    Thanks!

    • Jim Wang says

      Ha, I guess it’s phrased oddly, I meant what you associate with your own bed… which is the bedding you have on it right now.

  17. Gregorio says

    Yes Jim! I am using my french press cafetiere at work and instead of spending 2.8£ 5 times a week I spend 3£ every 3-4 weeks to buy a pack of coffee.. 🙂
    …that’s a saving of roughly 700£ 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. 🙂

      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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