A colleague whom I respect a great deal talked with me at the end of last week. He has a way of breaking complex things down into very simple, but profound, terms.
He was explaining how a particular process works, and he appealed to my science background. He talked about the concepts of ground, and by extension, ground truth, and baselines.
How do you know how good that bargain is?
A baseline is simply a reference measurement for something you want to see how it changes.
How do you baseline something? Easy:
- Define what it is you're measuring.
- Measure it.
- Write the value of the measurement down in as much detail as you need to track later.
Here's an example: I'll baseline my weight.
- I'm going to measure my weight in pounds with my bathroom scale right before I go to bed.
- I step on the scale tonight and see the value displayed.
- I write down the value, and date it.
From now on, I can see how much my weight has deviated from this baseline by repeating the measurement, and looking at the difference.
The same exact method can be used to see if a deal is worth it or not:
- Discounted gift cards. We've been getting powdered milk through Walmart.com because it's cheaper than buying it in the store. We use discounted gift cards to knock a few percent off of that. I know, as a baseline, that these cards go for about 2% off face value. So, when I see them go for 3.5% or even 4.5% off of face value, I know it's a deal. (I have to act fast, though!)
- Rewards credit cards. As a baseline, I know I can get 1% off of any purchase (and more for certain kinds of purchases) simply by using by Chase Sapphire card. Any other card will need to beat that card in the long run for it to be worth getting. So when Amazon came out with a rewards card that gave us 3% off of Amazon purchases, we took that, and use that card only for Amazon purchases.
- Tried-and-true price book. That's just a giant baseline, isn't it? Write down either a typical or a best price for anything you want to get on a regular basis, and when a “special” comes up in the store, you know whether it's a deal or not simply by comparing it to your baseline: your price book!
Always try to find a baseline reference for what constitutes a good deal. You'll be shopping blind — or perhaps getting extra things that add no value — without it!
What other ways do you use baselines when you're shopping?
I like your strategy on the Amazon card versus your usually 1% cash back card. I’ve thought about going for deals like that, but I’m always a little nervous about having too many cards. Where do you think you need to draw the line on that sort of specialized strategy?