Money 201: Wise Spending Concepts

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Money 104: How To Have The Mind Of A Millionaire

The number one skill in money handling is in drawing the line between wants and needs

  • Needs and wants sit on a spectrum, from life-threatening to opulence
    • Some examples of things that are confused as needs
      • Anything connected to a hobby
      • Cable TV
      • College
      • Eating out
      • Electronics, gadgets, appliances, entertainment
      • Houses
      • Name-brand products
      • Private schooling
      • Vacations
  • When it is a want, use a sinking fund approach instead of buying it on credit
    1. Put a fixed amount aside for the item every month
    2. Buy the item in cash once you’ve saved up
  • Many times a “need” is really just a “want” with more quantity added to it
    • The need for rest or relaxation can seem to be a need to go to a movie
  • Generally, the biggest increases in expenses as your lifestyle scales up are in housing and transportation costs

As the buyer, you are the one in power to say no, but companies do everything possible to get your money

  • Caveat Emptor (Buyer Beware) – your power comes with the responsibility of bearing the burden of the purchase
  • Don’t buy what you don’t understand, especially regarding features
  • Track your spending closely if you want to be reluctant to spend money
    • This is especially easy if you manage your finances on your phone
    • Impulse buying is the easiest way to ruin a budget
    • Sales and promotions should only be an incentive to shop for what you need
  • Most companies don’t make as much money off of selling used items as they do for new ones

Be wary of various marketing tactics to make you more likely to overspend

  • Personal selling through building rapport
    • 4 out of 5 people who leave to think about the purchase do not come back, and companies know this
    • Phone soliciting
  • Financing and convenient payment plans
    • Store loyalty and rewards cards
    • Store debit and credit cards
    • Mobile and advance payment options
  • Advertising endlessly and repetitively to create conditioned responses
    • TV
    • Radio
    • Magazines
    • Internet
    • Product positioning
      • Brand recognition
        • If you have heard the name somewhere in an advertisement, it’s safe to say that their advertising budget is part of what your money goes to
      • Color/artwork
        • Bright colors and flashy images are meant to stand out and draw your attention, so look for plain-looking items
      • Shelf position and packaging
        • Eye level items give their biggest profit margin, and the lowest margin items are at the top and bottom shelves
    • Coupons
      • Many marketers can create cost-ineffective promotions
        • Free trials that automatically renew
        • Free night’s stay at a hotel or entertainment tickets with a 2-hour mandatory timeshare presentation
        • Free shipping at a certain dollar amount, requiring an additional item
        • Buy one and get another one sales, which may cost more than twice the value of the item elsewhere
      • Many brand-name coupons will bring down their products’ prices to store-brand alternatives
      • If you are tempted too much from various promotions, simplify your digital life by unsubscribing to email lists or “unliking” social media pages
    • In-store additions to what you wanted to buy
      • Many times there will be an amazing deal, but it will either be under-stocked or inconveniently placed
      • Ignore the other attention-seeking promotions that are not worth your time or money
    • Opt out of online advertisement tracking from retailers
    • Music selection marketing

Find ways around paying full-price for day-to-day expenses

  • NOTE: do not do any of these unless you know that the money saved is worth the time you’re taking to save it
    • Calculate the hours it would take to save the money you expect to save
    • However, if you enjoy a time-ineffective money saving method, there’s nothing wrong with a hobby
    • When you’re saving money that would take less time than working a low-wage job, you’re being cheap
  • Look at your gift card balances before using cash
    • Most gift cards are never used
      • Stores are legally required to give you the cash balance of any card under $10
    • Fold the latest sales receipt around the card to keep the balance handy
    • Buy gift cards you want over other gift cards to get more of what you want
  • Buy in bulk if it is non-perishable and cheaper per individual unit
    • Alcohol
    • Beans/pasta
    • Canned goods
    • Cereal
    • Diapers
    • Hygiene products
    • Office supplies
    • Paper products
    • Soaps & scents
    • Vitamins
    • NOTE: Do the math carefully if the item is perishable, you may be paying more for the part that isn’t thrown away
  • Avoid being loyal to a particular brand, especially if the item is perishable
  • Never shop without a purpose behind it, the more time you’re shopping the more you will spend
  • Use cash instead of plastic to “feel” the money more
  • Wait if it’s not absolutely necessary
    • Don’t shop in a rush
      • You’ll buy things in haste
      • You won’t comparison shop to save money
      • You will de-stress with needless spending
    • Research about literally everything you spend money on
      • Find or ask for free samples
      • Never buy discount on certain things
        • Tools, since your work will be multiplied from bad tools
        • Paint, since you’ll be reapplying it every year or twodes
        • Shoes, since this will affect your comfort, happiness and back
    • Learn The Best Times To Buy Anything
    • Learn the farmer’s mantra: fix it up, wear it out, make it do, or do without
      • Repair things instead of buying replacement ones
      • Learn ways to keep things operating for longer
        • Refill old printer toner cartridges
          • They can be filled at Costco for $10
      • Use everything in something you own
        • Empty out the last of your toothpaste from its tube
        • Leave a shampoo bottle upside down when it’s nearly out to get the last bit
        • Add water into hair conditioner, salad dressing, laundry soap and anything else you want to get the last bit out from
      • Learn minimalism
    • Borrow from someone when you first need it, rent it when you know you need it, buy it when it’s cheaper than renting
      • Cooking appliances
      • Jewelry and clothing
      • Heavy equipment and power tools
    • Buy things used whenever possible

Learn to also save money on non-routine purchases

  1. Wait on it
    • Carefully consider your motives for buying
      • Contentment and fulfillment cannot come from physical items
      • Money can’t buy happiness, but it can buy fun
      • Ask how you will feel about buying it in a week or a month
  2. Think about its opportunity cost (its ability to be used elsewhere)
    • By spending money in one place, it costs the opportunity to spend elsewhere
    • Calculate the number of hours you need to work at your job to get that particular item
      • Stop and ask if you can afford it, and then if you want to sacrifice the money for it
      • Think of the item in one hand and that amount of cash in the other, then decide which of those two you want
    • Don’t calculate the savings, since a purchase is still a purchase even if it was 75% off
  3. Wait 7 days for smaller purchases ($100-300)
    • To ensure financial wellness, we have to learn to tell ourselves “no, not today”
  4. Wait 30 days if it’s a significant purchase (over $300)
    • Our bodies go through physiological changes when making a significant purchase
    • We all become immature children who want that item now
  5. Seek others’ advice
    • Significant other
    • Friends
    • Pray on it
  6. Research about what you’re buying and what the marketplace looks like
    • Buy ahead or behind the item’s selling season than when you actually need it (The Best Times To Buy Anything)
    • When buying online, only read the 3-star reviews, since they are most likely to give the pros and cons of the item
  7. Finally, when you know you want to buy it
    1. Hunt around
      • Comparison shop with multiple places that have the same or similar product
        • Use shopping list and wish list management software (e.g. List Ease, Giftster)
        • Direct importers or distributors may offer the same product at vendor prices
        • Look at off-brand or non-brand versions of the exact same item
        • Visit and revisit some places for what you want, since some items may take time to find
        • Buying used will always be less expensive and almost always worth it
          • Online
            • Find deals with specific keywords: divorce, wife, husband, new baby, pcs/pieces, health, surgery, moving
            • Mistyped or misspelled word may sell for less
              • This is especially true for eBay
              • Use FatFingers to automate the searches
            • Classified ads like Craigslist
            • Online auctions like eBay
              • Use vendor inspectors for online auctions (e.g. WeGoLook)
            • Niche sites for specific items
          • Travel Around
            • Individuals on classified ads
            • Consignment sales
            • Conventions
            • Estate sales
            • Flea markets and swap meets
            • Pawn shops
            • Public auctions
            • Repo lots and tow yards
            • Yard sales and garage sales
    2. Look for discounts or promotions
      • Web search “promo code” about the object you want
      • Use an online price tracker (e.g. TrackIf, PriceZombie, camelcamelcamel)
      • Look into online rewards programs like Ebates, Mr. Rebates or your workplace’s sponsored points system
      • Promotion services (e.g. Groupon, LivingSocial)
      • Coupon trackers (e.g. SnipSnap, RetailMeNot, Coupon Sherpa, Honey, LOZO)
      • In-store coupons and promotional mailers
        • Wrap the coupons around the store card to never forget them on a shopping trip
        • Walmart honors the promo code “walmartwalmartwalmart” online for 10% off
      • Don’t be afraid to ask about student, military or AAA discounts even when it wouldn’t make sense to
      • Before purchasing, do a quick Google search for “[item] coupon” or “[item] sale”, especially if it’s an online purchase
      • If you are in a store, ask for a discount before committing to buying it
      • Most retail places will price match with another company’s sales, especially bigger companies with bigger companies
        • Walmart or Target will price match Amazon
        • This is convenient if you don’t want to wait for shipping
      • If you start the checkout process on a website but don’t hit the “place order” button, many online stores will send coupon codes to encourage a sale
      • Pay attention to the guarantees connected to the product as well, since it may save headache later
        • Duracell will replace anything damaged by one of their batteries if you ship the item to them
        • If a product on Amazon goes down in sale value within 30 days of your purchase, email them and they will give you the difference
        • Payless will replace any of their shoes you’ve purchased from them if they fall apart or break, no matter how long you’ve had them or put them through
    3. After ascertaining the best place to buy it, boldly barter and negotiate within the following guidelines
      • Always tell the truth
      • Use the power of the cash that they want
      • Understand and use the power of walking away
      • Master the art of silence
      • Be unafraid of saying “That’s not good enough!”
        • Even on expensive items like jewelry or cars, the seller has room to negotiate
      • Be aware of the “good guy, bad guy” routine that seasoned sales staff will pull
        1. “I’d love to, but my boss won’t budge from the price, let me see if I can go talk to him”
        2. “He won’t move from that price, and told me it’s as low as it can go”
        3. “Tell you what, I’ll make you a deal, how does this offer sound…”
      • Master the “If I Take Away…” technique
        • Make an offer on the item, with all of the standard features
        • Remove the features you don’t want and get the price progressively lower
      • Sometimes, you can offer alternatives to money to sweeten the offer you’re making
        • Many thrift stores accept consignment items and will give you store credit
        • With many contractors and individuals you can exchange your own skilled services
      • Literally everything can be negotiated, including
        • Interest rates on credit cards
        • Monthly rent
        • Coupon values and discounts
        • Damaged goods or open box items
        • Medical bills
        • College tuition
        • Job perks and benefits
      • Even on the Internet you can barter
        • With an individual person selling, use a second unrelated email to offer the seller a ridiculously low amount, then use your normal email to offer them a reasonable discounted amount
        • With larger companies, if you leave an item in the online shopping cart after setting up a login, they will often send promotional discounts
          • Apple will send a 15-20% off coupon after 7-10 days
        • When you want to buy things, set up a registry with all the items you want to receive a promotional coupon after the registry period is over
Next: Money 202: Tricks To Shave Down Costs