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Money 104: How To Have The Mind Of A Millionaire
The most important money management skill is separating wants and needs
Needs and wants sit on a spectrum, from life-threatening to opulence
Some everyday wants are confused as needs
- Cable TV
- College
- Eating out
- Electronics, gadgets, appliances, entertainment
- Houses
- Name-brand products
- Private schooling
- Vacations
- Anything connected to a hobby
If you want and don’t need anything, use a sinking fund approach instead of buying it on credit
- Put a fixed amount aside for the item every month
- Save up until you have enough to buy what you want
- Pay in cash
A falsely perceived need is often a real need with more quantity or quality added to it
- A need for rest or relaxation might feel like a need to pay for recreation
- You may need a car, but not a new car
- You might need to reward your child, but not with ice cream
As your lifestyle scales up, the expenses that scale up most with it are housing and transportation costs
As the buyer, you need to say “no”, but companies work tirelessly to get your money
Caveat Emptor (Buyer Beware) – you are entirely responsible for any purchase you make
Used items rarely make as much of a profit for companies as new ones
Don’t buy what you don’t understand, especially features and add-ons
Track your spending closely to hold yourself accountable
- The easiest way to ruin a budget is through impulse buying
- Manage your finances on your mobile device to always have them available
- Only use sales and promotions to shop for what you need
Be wary of marketing tactics designed to make you overspend
Personal selling through building rapport
Companies know that 4 out of 5 people who leave to think about their purchase do not come back
Phone solicitations are often unsuccessful, but it sometimes works to build a reputation with a potential buyer
Financing and convenient payment plans
Store loyalty and rewards cards
Store debit and credit cards
Mobile and advance payment options
Endless and repetitive advertising to create conditioned responses
TV, radio, magazines, internet
Product positioning
- Brand recognition
- If you’ve heard the name somewhere in an ad, part of your money is going to their advertising budget and not the quality of the product
- Color/artwork
- Bright colors and flashy images stand out and draw your attention, so look for plain-looking items to see the more affordable brands
- Shelf position and packaging
- Eye-level items give the most significant 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
- Subscribe with a depleted gift card to avoid having to cancel the membership later
- A free night’s stay at a hotel or entertainment tickets with a 2-hour mandatory presentation (popular with timeshares)
- Free shipping at an amount that requires purchasing an additional item
- Buy-one-get-one-free/50%-off/for-$1 sales, where the product may cost more than twice what you’d find 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 your desired purchase
A fantastic deal will often be under-stocked or inconveniently located
Ignore other attention-seeking promotions that aren’t worth your time or money
Opt out of online advertisement tracking from retailers
- Quickly opt out with Digital Advertising Alliance
Music selection and affiliate marketing
- Upbeat, catchy pop music inspires identifying the music with the purchase
- If your favorite celebrity endorses a product, it means they were paid to recommend a product, not that they necessarily believe in or even use it
Find workarounds to paying full-price for daily expenses
NOTE: do not do any of these unless you are confident it’s worth the time taken to save the money
- Calculate the hours it would take to save the money you expect to save
- You’re miserly when you’re saving less money than the earnings from a low-wage job for the time
- However, if you enjoy the experience, treat it as strictly a hobby
Look at your gift card balances before using cash
Gift cards are frequently unused, and vendors are aware of this
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
If you don’t particularly care for a company, buy a different company’s gift card in their store to improve your selection of choices
Buy in bulk for non-perishable items when they are 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 for perishable items, since you might pay more for what you haven’t thrown away
ALSO NOTE: Many vendors have become aware of this practice and often charge more per unit for their larger containers!
Never shop without a purpose behind it
The more time you’re in a store, the more you will spend
Avoid staying loyal to a particular brand, especially if it’s a perishable item
Use cash instead of plastic to “feel” the money more
Take your time if it’s not an emergency
Don’t shop in a rush
- Rushing buys things in haste
- Rushing doesn’t save money through comparison shopping
- Extra stress from rushing creates needless spending
Research everything you spend money on
- Find or ask for free samples
- Never buy discount on certain things
- Tools, since shoddy tools multiply your work
- Paint, since you’ll need to reapply the cheapest brands every 1-2 years
- Shoes, since this will affect your comfort, happiness and back muscles
Learn The Best Times To Buy Anything
Whenever possible, buy used instead of new
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 what you can fix from web research and the Fix-It Club
Learn ways to keep things operating for longer
- Refill old printer toner cartridges (fill them at Costco for $10)
- Look for replacement parts before looking for a new product
Use the last bit of everything
- 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
- Aim for a simpler life and avoid the vices of excess or opulence
Borrow when you first need it, rent when you know you need it, buy it when it’s cheaper than renting
- Cooking appliances
- Jewelry and clothing
- Heavy equipment and power tools
Save money on non-routine purchases
1. Wait on it
Carefully consider your motives for buying
- Physical items never give contentment and fulfillment
- 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 your money’s opportunity cost
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 you’re still spending money for something 75% off
3a. Wait a week for smaller purchases ($100-300)
Financial wellness comes from telling ourselves “no, not today”
3b. Wait 30 days if it’s a significant purchase (over $300)
Our bodies go through physiological changes when making a significant purchase
- We all behave like immature children that impatiently want the item now
Seek others’ advice
- Ask your significant other
- Discuss with your friends
- Pray on the decision
4. Research what you’re buying and what the marketplace looks like
- Buy ahead or behind the season when the item usually sells instead of when you need or want it (The Best Times To Buy Anything)
- Only read the 3-star reviews when looking online, since they are most likely to give the pros and cons of the item
When you’re ready to buy a non-routine item
1. Hunt around
Comparison shop with multiple places that have the same or similar product
- Use shopping and wish list management software like List Ease or Giftster
- Direct importers or distributors may offer the same product at vendor prices
- Look at off-brand or non-brand versions of the same item
- Visit and revisit some places for what you want, since some products may take some searching to find
Buying used will always be more affordable and almost always worth it
- Mistyped or misspelled word may sell for less online
- eBay has numerous opportunities for typographical error deals
- Use FatFingers to automate the searches
- Use classified ads like Craigslist
- Use specific keywords to find better deals: divorce, wife, husband, new baby, pcs/pieces, health, surgery, moving
- Search online auctions like eBay
- Use vendor inspectors like WeGoLook in online auctions
- Look for niche sites when you want specific items
- Travel Around
- Meet with the individual sellers on classified ads
- Visit consignment sales
- Attend conventions
- Go to garage/yard sales and estate sales
- Try local flea markets and swap meets
- Pawn shops (sometimes)
- Try public auctions or police auctions
- Repo lots and tow yards
2. Look for discounts or promotions
Web search “promo code” for your item
Do a quick web search for “[item] coupon” or “[item] sale”
Use an online price tracker like TrackIf, PriceZombie, or camelcamelcamel
Look into online rewards programs like Ebates, Mr. Rebates or your workplace’s sponsored points system
Try promotion services like Groupon or LivingSocial
Use coupon trackers like SnipSnap, RetailMeNot, Coupon Sherpa, Honey or LOZO
Use 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 at that location
If you are in a store, ask for a discount before committing to buying it
Most retail locations, especially large companies, price match another company’s price
- Walmart or Target will price match Amazon, which is convenient if you don’t want to wait or pay for shipping
If you start the checkout process on a website but don’t press the “purchase” button, many online stores will send coupon codes to close the sale
Pay attention to company guarantees as well, since it may save money 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, they will give you the difference if you email them
- 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 you’ve found the best place to buy it, ethically and boldly barter and negotiate
Always tell the truth
Use the power of the cash they want
Understand and use the power of walking away
Master the art of silence
Don’t be afraid to say “That’s not good enough!”
- Even expensive items like jewelry or cars have room for negotiation
Be aware of the “good guy, bad guy” routine with seasoned sales staff
- “I’d love to, but my boss won’t budge from the price, let me see if I can go talk to him”
- “He won’t move from that price, and told me it’s as low as it can go”
- “I’ll tell you what, I’ll make you a special deal, how does this offer sound…”
Master the “If I Take Away…” technique
- Make an offer on the item, with all of the features
- Remove the features you don’t want to get the price progressively lower
You can sometimes sweeten your offer with alternatives to money
- Many thrift stores accept consignment items and will give you store credit
- You can exchange your skilled services with many contractors and individuals
Everything can be negotiated, even unconventional things
- 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
You can even barter on the internet
- With individual sellers, use a second unrelated email to offer the seller a ridiculously low amount and then send a reasonable discounted amount with your standard email
- With larger companies, if you leave an item in the shopping cart after setting up a login, they will often send promotional discounts
- Apple will give a 15-20% off coupon after 7-10 days
- When you want to buy things, make a registry of everything you wish, then receive a promotional coupon after the registry period is over
