Monday, March 22, 2010

FPU: Buyer Beware

This lesson talks about the power of marketing on your buying decisions. It exposes their techniques so you can protect yourself. Right now we live in the most marketed to culture in the history of the world. If we're going to have financial peace, you have to develop resistance to marketing. One of my favorite lines from Dave is that Americans often fall in to the trap of "Buying things we don't need with money we don't have to impress people we don't really like anyway." That is so true. This lesson starts to help you get past that point.

In 1971, the average American had 560 advertisements flashed in front of them every day. Today, research shows that the number has increased to between 3,000 and 4,000. The average American child will see over a million advertisements. Research also shows that for every hour of TV you watch, you spend on average an EXTRA $200 per year. That's not as shocking when you think about the billions spent specifically to marketing to children and their ability to pull at our heart strings. WAKE UP!

There are Four Major Sales Techniques used against us:
1. Personal Selling - People spend thousands of hours in a classroom learning how to talk to you. Salesmanship 101: You never answer a question except with another question. They not only learn the way to talk to you, but they learn your habits and practices in order to find the best way to market to you.
2. Financing - Use money and easy payments as a marketing tool. We used to get sucked in to that financing game. Same as cash does not equal same as cash. Research shows that 88% of these "same as cash deals" convert to payment usually at 24% APR. People fail to think about the fact that this money is built in to the cost of the item.
3. TV, radio, other media - They use repetition to drive home their idea or logo. We'd all like to think we're smarter than this, but if you think about it we fall victim to it too. How many of you can finish this slogan: "Melts in your mouth, ___ __ ____ _____". That's been around since 1954, we all remember it, and all know that is for M&M's. It's not even true any more. Have you ever given those to a child in the back seat of your car? But, it doesn't matter. We remember it and that's all they care about.
4. Product positioning - Uses brand recognition to position it in your mind and associated it with a certain value. They spend billions researching four major areas - brand recognition, shelf position, color, and packaging. There is no shortage of thought or investment that goes in to every product we see. It obviously works because they keep investing more and more in to that research. There are no mistakes in marketing.

Major Purchases
Did you know that when you make a significant purchase, you're body actually goes through physiological changes? You have a chemical reaction that actually "fogs" your brain. It's a very real thing. Have you ever had buyer's remorse? That's where it comes from. It's your reaction after you get past that physiological change.

Dave talks about how we all have that "little kid" inside of us that has those "grocery store fits" when we walk in to a store and see some thing we want. You know what he means - that little voice in your head that says, "I want! I want! I want!" (feet stomping and arms pounding) when you see some thing we think we just HAVE to have. That little voice is called immaturity. Children do what feels good. Adults devise a plan and live by it. Mature adults develop a power over purchase.

So, how do you prevent that from happening? Take a little time with your spouse (or accountability partner) to define what you consider to be a major purchase. It may be a certain dollar amount or based on the frequency with which you buy such items. Then, before making such a purchase go through these 5 steps:
1. Wait over night before making a purchase - so you can get over that high.
2. Carefully consider your buying motive - no amount of stuff is going to equal contentment, joy, or get rid of guilt. Is it a need or want? A "better situation" is NOT a need. It's okay to buy wants, you just need to make sure it's in the budget.
3. Never buy any thing you do not understand - especially insurance and investments!
4. Consider the "opportunity lost" of your money - think about what else could be done with that money, especially long term.
5. Seek the council of your spouse (or accountability partner) - Trust and work with the one you have become one with!

If you follow these 5 steps, you can develop that power over the purchase that reflects real financial maturity. Then you can look back later and say "That was a good purchase!" and still have financial peace. This isn't saying you can't buy things, it's just stressing that you start buying smart.

Have you ever made a purchase that you later regretted? Do you have money fights because you and your spouse don't agree on major purchases? Or worse, has your partner made a major purchase and excluded you from the process?

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