The spending season is approaching fast. Black Friday, Thanksgiving, Hanukkah, Christmas, Boxing Day, are a few looming opportunities to challenge your resistance to spend funds you don’t have to buy stuff you don’t need. Sophisticated neuromarketing techniques, seductive advertising, alluring financing, will cause you to buy stuff because…well, others were buying them, too. Do you recall the pet rock phenomenon in the 70’s? A pet rock? Invisible dog? E-pets? Go figure!
How are you preparing for the onslaught? Are you? Or, unwittingly, are you brain-washed and planning to look for deals in these up-coming sales events? Perhaps, on Black Friday you plan to be in line early to buy a big screen TV, Blu-ray DVD player, iPhone, iPad or other grown-up toy! You will remind me quickly, you will get great deals, so, it will be worth spending to buy these items; right?
What Is A Deal?
What is a deal? A participant in one of my seminars said a deal is a debt enhancing act of lunacy. I added: it leaves you depressed, empty, anxious, and lonely! Have you noticed what happens after spending to buy stuff impulsively, coming home, and then reflecting? The euphoria wears off, reality sets in, and you do not feel so great; correct?
Merchants use two hooks to get you spending: deals and sales. And you think you come out on top in these transactions. Do you? In my seminars and counseling sessions, I spend much time convincing folks they don’t save in sales. Oh, yes, I understand your reaction: “I don’t know about you, but I save when I buy in sales!” Let me repeat, you do not save in a sale! If you understood this, you would stop wasting funds on stuff nice to have but useless.
Think You Save When You Spend?
Folks, you save when you deposit funds at no risk to the principal–the amount deposited–in specific financial vehicles. So, if you have $1,000 and want to save it, you wouldn’t spend it in a sale, or buy stocks, bonds, mutual funds, or other investment instruments whose values might fluctuate. You would deposit it in a reputable bank, credit union, Government savings bonds or similar low-interest instrument. Because your principal is secure, savings accounts’ interest rates are low. Conversely, stocks and bonds carry the hope of high returns–some higher than others–that’s why the principal invested is not as secure as if placed in savings accounts.
When you buy an item, irrespective of price, you spend, you don’t save. If you pay less than you thought you would pay, you don’t save the difference, you spend less. And spending less isn’t saving! When your friendly merchant tells you an item is 70% off, you don’t save when you buy that item; you spend 30% of the original price. It is that simple. Is this reduced price a good value proposition? Sometimes we know, other times we don’t. Maybe the real value is 30% of the listed price. But that’s irrelevant! You spent 30% of the original price–that’s your cost.
It gets worse. You think you will save in a sale, so you buy on credit, don’t pay the full credit card balance, and incur high and recurring interest costs. Not only did you not save, but you bought an item with funds you didn’t have, and you are stuck paying interest on a loan.
If you want to save when you spend in a sale, you must set aside the discount from the list price, 70%, in a savings vehicle similar to those I described earlier. If you are not convinced and you think you save when you buy items on sale, where are those funds you saved from earlier sales?
Copyright (c) Michel A. Bell