Personal Finance Expert on the Fiscal Cliff, How to Shop Smart

Liz Doupnik

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With all the financial talk that’s been making headlines these days (you’ve probably been hearing the phrase “fiscal cliff” more times than you’d care to count), it’s understandable that many folks would be feeling a little confused. Tax increases, middle class, paychecks … What does it all mean for us?!

Just as importantly, what does it all mean for folks who typically spend regularly on things like clothes, accessories, and other fashion essentials? We don’t overspend, mind you, but some of us rarely think twice about popping into stores like H&M or Zara and emerging with a few new items, or browsing our favorite online stores for small stuff we don’t really need—all safe in the knowledge that a few new things won’t put a major dent in our bank accounts.

To break down how the new financial world of 2013 will affect the average fashion consumer, we enlisted personal financial expert, author, and TV personality Farnoosh Torabi to offer tips on how to get the most bang for your buck without giving up your beloved—and frequent—bouts of retail therapy.

StyleCaster: Let’s start with the basics: How is the new “fiscal cliff” bill actually going to affect people’s paychecks?

Farnoosh Torabi: So, we know that for many middle-income Americans [households making between $40,000 and $75,000 yearly] paychecks will be shrinking by about $1,000 due to the Social Security payroll tax cut.

In your opinion, how much should a middle-income American reasonably spend on clothing ?

I recommend capping spending at 5% of your take-home pay, assuming you have many other bills like rent, car payments, food, gas and utilities. So, if you make $50k, that’s $2,500 per year, max.

For people who fall into that bracket and chose to spend the 5%—or more—of their take-home pay on retail, what’s a smart way to save?

Sign up for a free personal “discount” shopper. At sites like ShopItToMe, you can select designers, stores, sizes, and styles you prefer, and you’ll be alerted when those items go on sale online. Through its new “Threads” feature, you can even type in the max price you’re willing to pay for an item, and you’ll only be alerted about sales that fall within that price range. For example, if you’re in the market for a Tory Burch bag but don’t want to pay more than $100, the site will shop the web and try to meet your budget.

Also, hit up off-price retailers like TJ Maxx and Loehmann’s often. Their inventory changes regularly and you can find items currently on the rack at upscale department stores for up to 80% less.

Is there an optimal time to shop sales?

Timing does matter when seeking sales. Clothing discounts, according to research, are better in the second half of January—specifically January 15 and 16, which are among the top 20 days of the year for depth of discount.

What’s the best way to capitalize on pieces we’ve purged from our closet?

I think consigning is a smart way to unload [higher-end] clothes and make some money, though most shops prefer that you bring in-season items, which will sell faster. Online, there are free resources to help you sell your clothing like Storenvy and an iPhone app called Poshmark.

If you’re on a budget but going to splurge, what sort of pieces are worth the indulgence?

It’s smartest to spend a little more for better-quality basics that you’ll wear often: a pencil skirt, a black blazer, a wrap dress, a trench coat. Save money on all the other add-ons and accessories.