BBC has been running a series of articles on their website about numbers, in particular how numbers are used and abused so we are made to believe they are telling us something they are not. The articles are good if you want to enhance your financial literacy. Here are some sample quotes from the articles:

• On averages: “What’s the average number of feet? No, not two. The answer is slightly less. Think about it.”
• On percentages: “A 100% increase from one in a million becomes two in a million. So what?”
• On causation: “As more economists are recruited to the Treasury, inflation rises (economists cause inflation?)”

Enjoy!

• Lesson One: Our survey says
• Lesson Two: Myth of counting
• Lesson Three: Percentages
• Lesson Four: Averages
• Lesson Five: Causation (The website shows it as being lesson four, a bit embarrasing to get it wrong considering the articles are about numbers)

Dogbert (from the Dilbert comic strip) has in the past posed as a financial adviser. In the latest Dilbert strip, Asok is going to attend a seminar on how to make a million dollars. The advice he gets is absolutely true, so if you also want to make a million dollars, click here to see the strip!

Downbranding is what you do when you buy something from a less exclusive brand at a lower price than if you had bought a more exclusive brand. There may be a better name for this, but I don’t know what it is. Google certainly doesn’t provide many links when I search for “downbranding” as a term.

Downbranding can save you lots of money! I first started really considering it while reading “The Undercover Economist” by Tim Harford. The author of that book pointed out, that selling more or less the same thing, but in different packaging and at different prices is the way any supplier gets as much money out of their customers as it possibly can. He also pointed out, that almost all products exist in at least two versions. One example he makes is his own book (and obviously almost any other book available). It is first released as a hardback, and then later as a paperback. The only difference is the packaging and the price. The content is the same.

Nowadays most supermarkets have products from the known brands as well as selling own-branded products. Tesco, the leading supermarket chain here in the UK usually has three different “versions” of their products, the well-known brand (Kellogg’s or Nestle for example), the “Tesco” brand and the “Tesco Value” brand. The latter brand is usually packaged in really ugly packaging, but is also very in-expensive.

Other examples I can think of are cars. The Volkswagen group manufactures the Audi A3, the VW Golf and the Skoda Octavia. I’m not an expert on cars, but my understanding is that the basic technology of the cars is the same, but the price certainly isn’t. I know, there ARE differences between the three mentioned cars (the design is different, the interior is different, the engine tuning and suspension are probably different), and there are differences between the well-known brand, the own-brand and the value brand. And some times the more exclusive brand is worth the additional money. I have for several years bought shirts from a well known and semi-exclusive company; occasionally I have bought shirts from other companies, but let me tell you, the more expensive shirts are simply impossible to wear out. They are definitely worth the additional money they cost. The little logo doesn’t look bad either, but it is primarily for their quality I buy them. I’m quite happy to admit, that I occasionally buy a particular brand for the life-style implication it delivers, and that gives me a value that isn’t downright measurable in product quality, but in how I feel about myself, and that is ok too. Occasionally, for example, I prefer to have the hardback version of a book, it looks much better in the bookshelf than the paperback version. I would definitely go for the organic deluxe chicken instead of the value chicken if I had to choose between those two options. But I don’t really care if the sparkling water in my squash came from the value brand bottle rather than from some other more expensive brand.

What my family and I have done, is experiment a bit more with the different products especially with regards to groceries. In some cases we have always bought a particular brand for no other reason than that is what we always did. Now we occasionally question ourselves: Why are we buying that particular product? On several occasions we have bought the value brand on a trial basis instead. On some occasions we found that it was good enough, on some occasions it wasn’t, but the own-branded (but not value-branded) version was. And on some very few occasions, the well-known brand has ended up back on our shopping list. But our monthly shopping expenditure has decreased measurably as we have downbranded.

Here are some product examples from Tesco.com today, showing a branded product, an own-brand and a value-brand substitution with the percentage saving you get over the branded product:

As can be seen from these randomly chosen product examples, buying the value brand saves anything between 57% - 90%. If you enjoy seeing the branded products in your cupboard, this is not for you. If on the other hand you are a bit like me, you will enjoy looking at that ugly value brand package and thinking about the money you saved!

TV, radio and newspapers have lately mentioned gas and electricity companies in the UK that either already have raised their prices or are likely to do so imminently. Now might be a good time to check whether you are getting a good deal on your gas and electricity prices or not and the internet is making this easier than ever.

I have only been in the UK for 1½ years (this time around) so the various price comparison websites where new to me. I wanted to be certain I really was getting the best deal around (with a family of 6 and lots of gadgets around the house, our gas and electricity usage is quite high). So I entered our address and usage details on several comparison websites at the same time. I needn’t have bothered as they all came up with the exact same results. When I was recently involved in an IT project at an insurance comparison website, I discovered that this one company had several differently named comparison websites, each looking different from the others. I don’t have the exact numbers, but there are way fewer companies involved in this business than the comparison websites out there seem to suggest. So it is almost definitely don’t bother trying to find the comparison website that finds the absolutely cheapest deal, just use the one that appeals the most to you because of the colour scheme, the logo or whatever takes your fancy.

I personally prefer Moneysupermarket.com as I find it slightly easier to use than others. I would also recommend that you visit whichever one you fancy using regularly. When I once used one of the comparison websites it showed a particular product as being cheaper than the one I was on even though both where from the same gas and electricity supplier. I went online at my supplier and tried switching plans there, but couldn’t find the product that had come up at the comparison website. I called customer support who told me that it wasn’t available for another week, but they would switch me over automatically. Excellent I thought, so 6 months later when the comparison website showed a new product from my supplier even cheaper again I thought I would be switched over automatically again. Silly me, why would the supplier do something as simple as that just to keep me happy? So a couple of months later I called customer support and asked why I had not been switched over this time when they had done it the previous time? Well, I’ve learnt my lesson, and I now check at least once a quarter whether I am on the cheapest plan.

I have also tried switching from one supplier to another, and it really is completely painless. It does however take some time, so if you find that you are on an uncompetitive plan compared to other plans; make the switch as quickly as you can. Having not been in the UK for longer than I have, I can’t say for certain what I have saved, but several of the comparison websites claim that you can save up to £ 325, but apparently an average of £140 is more likely. That is not bad for maybe 1 hours work, and remember thats after you have paid taxes on it!

Below is a list of some of the comparison websites, and yes, I get some money if you use one of them to switch plans with, but even then it is still a good idea to use them.

Scott Adams has turned Dogbert into a Financial Planner in his “Dilbert” comic strip from yesterday and today. Worth a laugh, unless the message in the first strip is too close to the truth