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If I'm buying household items that get used up (e.g; furnace filters, soap, etc.) is it still worthwhile sometimes to buy a bunch, even if there is no volume discount, or am I wasting money?
p.s. could somebody please retag with "volume" or "volume-discount"? I can't create new tags.
If they don't spoil, you can still get some marginal benefit if buying in bulk means you avoid the need for a trip to the shops to get a replacement. If the item is a commodity that you will use eventually you are unlikely to lose out as the prices tend to remain fairly stable.
There's also the inconvenience factor, I like to have plenty of some items so I'm not caught short, consider how important your furnace is in mid winter, or the inconvenience of running out of an item right when you need it.
Let me add a counterpoint.
I don't know about you, but for some psychological reason, when I know I have an abundance of something I tend to be less frugal about the way I consume it.
For example: When there is a six pack of cokes in the fridge I feel like I am more prone to not drink them up so quickly so I have some for later on. However, if I knew I had 3 more cases in the pantry, I seem to go through a lot more of them.
As with everything else, it's a question of trade-offs.
Pros For Buying In Bulk
Cons For Buying In Bulk
Inventory cost. You need to purchase more shelving/cupboards to stock the goods. This is a real cost.
The psychological effect of having more means you are more likely to use more, thus costing you more.
Deflation of the cost of the item should occur over time in a well-functioning market economy. A $10 item today might be $9.50 in one year in real terms.
There is a real opportunity cost associated with overbuying. Granted, an extra $100 in your bank account won't be earning too much if you have to spend it one month later, but it does mean you have less financial independence for that month.
Risk of spoilage. There is a nonzero risk that your goods could be ruined by flood/fire/toddler/klutz damage.
You need to decide which of these pros and cons are more important to you. Financially, you should only buy what you need between shopping trips. In reality the convenience of holding goods in storage for when you need them may outweigh the costs.
To Rich Seller's point, we live 1/2 gallon of gas and 30 minute round trip from the supermarket.
For the items that are non-perishable, such as bathroom or facial tissue, paper towels, shampoo,soap, toothpaste, etc, there's value in never running out of it.
(@JohnFx - your point is well taken. When my daughter was a toddler, I found her covered in band-aids. One tiny scratch, 9 band-aids. My wife asked why I was concerned, we had hundreds in the pantry. I can see how some items might just encourage over-use)
I agree with Rich Seller. Avoiding a trip to the store is a benefit. Not only do you save the time and hassle, but there's real money saved if a car trip is avoided:
I maintain a spreadsheet for all of my car expenses – depreciation, maintenance, insurance, license & registration, gas, etc. Combined with starting & ending odometer readings for the year, I can see exactly what it costs me to drive one kilometre. Granted, some costs are fixed simply by virtue of having the car, but gasoline is a variable cost avoided when a trip is avoided.
It could be a sunk cost. If you buy 5 gallons of vegetable oil it costs $50. Until you use up all the vegetable oil you dollars are tied up and cannot be spent on popcorn or any other good.
So weigh if the convenience is more important than having the cash on hand for other purchases is another factor to consider
There is a trade-off. It can be worthwhile because you save those extra trips. (On the other hand, don't you need to go shopping all the time for perishable items anyway?) On the other hand, having those items on stock implies inventory costs (the space they take up might be limited, the money they represent is sleeping and cannot be put to other usage, some of them might break...).
This trade-off gives you the economic order quantity. Your stock levels over time based on that would look like a saw-blade. In addition, you might want to keep a safety stock for emergencies (if you use them faster than expected, if there is a supply shortage...).
Instead of buying in bulk, I invest the money in equity mutual funds, for an expected return of 12%, which is more than inflation. So, I make more returns. But at the cost of a slight risk, which I'm comfortable with.
