Better Budgeting: Saving Money with The Informal Economy

Saving Money with The Informal Economy

Black Belt Shopper (featured column)
by Larry Wiener

Buying from private parties and other informal outlets involves a certain amount of risk, but if you use the informal economy regularly and one in ten transactions turns out to be a dud, you’re usually still ahead.

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I was cooking dinner the other night and poof! My built-in electric cooktop blew. Time to shop for a new one.

I went over to my local home improvement store and found that I could get a ceramic one for $600 or an old-fashioned coil type for $300. Gas was not an option.

On the way home, I decided I would try the Recycler, a free-ad newspaper popular here in Southern California before buying from a store. There, I found a one-year old ceramic cooktop for $100. The person selling it was a home remodeler and one of his customers had used it for a year and didn’t like the color of the border. She was about to throw it away, but he took it to sell. For an extra $50 he put it in and did such a good and careful job that I’m keeping his name for when I put a new floor and countertops in the kitchen. Big win.

I discussed this with a cousin of mine and she was aghast. “What if it doesn’t work out? You’ll be out $100!”

Another time we got to talking about getting cars serviced. She had just gotten the 30,000 mile service and I the 60,000 mile service. Hers cost $600 and mine $200. Why? She insisted that no one would ever touch her car other than a dealer.

Then there’s the alteration lady who does my pants at home for $5 a pair rather than the much higher fee a dry cleaner or department store would charge.

Then there was the portable heater I just bought on ebay. I got it for $11 and it was brand new. A similar heater would probably cost $60 in the store. "How can I do that?," she asked.

After talking with her for awhile, I realized that my cousin and I have completely different ideas on how to buy goods and services. I use the informal economy whenever I can to get quality goods and services at a good price—a term I use to mean private parties, smaller providers, self-employed service providers and other lesser known ways of getting goods and services. She prefers to totally avoid risk even if she has to pay top dollar for goods and services.

It is true that buying from private parties and other outlets of the informal economy involves a certain amount of risk. You usually can’t return an item and there always is the possibility that you will be disappointed down the road. It happens to me from time to time. But if you use the informal economy regularly and one in ten transactions turns out to be a dud, you’re usually still ahead. Just don’t use the informal economy when a dud will cost you mightily and you have no recourse.

So how do you negotiate your way around the informal economy? How do you give yourself the best chance of getting a good deal?

Here are some ideas:

Interview prospective providers thoroughly.

Get references when possible. In my condo complex everyone goes to Jeff for their car service. When I heard that, I figured there was a good chance that he would work for me.

Start with low risk items. If you’re just starting to explore the informal economy, start with low-risk items. You may want to buy books and movies on Half.com. I have been doing this for years and have rarely if ever been disappointed. If you are not used to dealing with private parties, you may want to wait a while before you buy a used car from a private party.

Know your merchandise. People in the informal economy may not be as knowledgeable as authorized dealers and other more mainstream providers of goods and services.

Ask your friends for good providers. A neighbor of mine is the one who told me about Bertha, the alteration lady. Many of the best providers in the informal economy don’t advertise because they don’t have to. The man I bought the cooktop from said that if he advertised, he’d have to turn away business. The informal economy has proven to be a boon for me. It has been so useful to me, along with closeout stores, consignment stores, and other non-mainstream providers that I almost never buy anything in a mall anymore.

Contrary to what some believe, you can get very high quality goods and services from the informal economy and not just castoffs that are of no use. The man who installed my cooktop said that he knows someone who never returns merchandise to a store because it is too much trouble. He then takes that and sells it at good prices.

The informal economy is an important component of the new economy.

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Copyright © 2005 by Larry Wiener. All rights reserved.

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