Do you think you save on a sale?
Spending season is fast approaching. Black Friday, Thanksgiving, Hanukkah, Christmas, Boxing Day, are some impending opportunities to challenge your resistance to spending funds you don’t have to buy things you don’t need. Sophisticated neuromarketing techniques, seductive advertising, attractive financing will make you buy things because… well, others were buying them too. Do you remember the pet rock phenomenon of the 70s? A fart stone? invisible dog? E-pets? Go figure!
How are you preparing for the attack? It’s you? Or have you been unknowingly brainwashed and planning to hunt for deals at these upcoming sales events? Maybe, on Black Friday, you plan to be in line early to buy a big-screen TV, Blu-ray DVD player, iPhone, iPad, or other adult toy. They will remind me quickly, they will get great deals, so it will be worth spending to buy these items; good?
What is a deal?
What is a deal? A participant in one of my seminars said that a deal is a foolish 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 on impulse, come home, and then reflect? The euphoria wears off, reality sets in and you don’t feel so good; correct?
Merchants use two hooks to get you to spend: deals and sales. And you think you win in these transactions. You? In my seminars and consulting 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 risk-free funds for 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 safe, interest rates on savings accounts are low. By contrast, stocks and bonds carry the expectation of high returns, some higher than others, so the invested capital is not as safe as if it were placed in savings accounts.
When you buy an item, regardless of price, you spend, not save. If you pay less than you thought you would, you don’t save the difference, you spend less. And spending less is not 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’s that easy. Is this reduced price a good value proposition? Sometimes we know, other times we don’t. Maybe the real value is 30% of the listing price. But that is irrelevant! You spent 30% of the original price; that is its cost.
It gets worse. You think you’ll save on a sale, so you buy on credit, don’t pay off your credit card balance, 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 rebate, you should set aside the list price discount, 70%, in a vehicle savings similar to the ones I described above. If you’re not convinced and think you save when you buy items on sale, where are those funds you saved from previous sales?
Copyright (c) Michel A. Bell