Spending season is fast approaching. Black Friday, Thanksgiving, Hanukkah, Christmas, Boxing Day, are just a few looming opportunities to challenge your resistance to spending funds you don’t have to buy things you don’t need. Sophisticated neuromarketing techniques, seductive advertising, enticing financing will make you buy things because… well, others were buying them too. Remember the pet rock phenomenon of the ’70s? A fart stone? invisible dog? E-pets? Go figure!
How are you preparing for the attack? Are you? Or have you unknowingly been brainwashed into looking for deals at these upcoming sales events? Maybe on Black Friday plan to be in line early to buy a big-screen TV, Blu-ray DVD player, iPhone, iPad, or other adult toy. They’ll remind me quickly, they’ll get great deals, so it’s worth spending to buy these items; straight?
What is a deal?
What is a deal? A participant in one of my seminars said that a settlement is a crazy act that increases debt. I added: it leaves you depressed, empty, anxious and alone! Have you noticed what happens after you spend to buy things impulsively, come home and then reflect? The euphoria wears off, reality sets in and you don’t feel so good; Right?
Merchants use two hooks for you to spend: offers and sales. And you think that you win in these transactions. You do? In my seminars and coaching sessions, I spend a lot of time convincing people that they don’t save on sales. Oh yeah, I understand your reaction: “I don’t know about you, but I save when I shop on sale!” Let me repeat, you don’t save on a sale! If I understood this, I would stop wasting funds on good but useless things.
Do you think you save when you spend?
Friends, you save when you deposit funds risk-free for 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 on a sale, or buy stocks, bonds, mutual funds, or other investment instruments whose values could fluctuate. You would deposit it in a reputable bank, credit union, government savings bond, or similar low-interest instrument. Because your principal is secure, interest rates on savings accounts are low. In contrast, stocks and bonds carry the hope of high returns, some higher than others, so invested capital is not as safe as if it were placed in savings accounts.
When you buy an item, regardless of the price, you spend, not save. If you pay less than you thought you would pay, you don’t save the difference, you spend less. And spending less is not saving! When your friendly merchant tells you that an item is 70% off, you don’t save when you buy that item; you spend 30% of the original price. It’s that easy. Is this reduced price a good value proposition? Sometimes we know, other times we don’t. Perhaps the real value is 30% of the listed price. But that is irrelevant! You spent 30% of the original price; that’s your cost.
It gets worse. You think you’ll save on a sale, so you buy on credit, don’t pay your credit card balance in full, and incur high, recurring interest costs. Not only did you not save, but you bought an item with funds you didn’t have and you’re stuck paying interest on a loan.
If you want to save when you spend on a sale, you must set aside the discount of the list price, 70%, in a vehicle savings similar to the ones I described above. If you’re not convinced and you think you save when you buy items on sale, where are those funds you saved from previous sales?
Copyright (c) Michel A. Bell