Guest Post Author Bio: Mike runs a site for credit card reviews and talk, CreditCardForum.com. Although he does advertise things like credit card bonus offers on his site, he stresses the importance of thinking them through in advance. He would rather have you learn the credit card default consequences by reading about them, not experiencing firsthand!
An estimated $600 billion (yes, with a “b”) is spent globally on advertising every year, convincing us to buy things we probably don’t need. With all that marketing static, how are we supposed to make rational decisions with our money?
Not too long ago, my roommate’s cousin from Germany was in town. He crashed our living room for a few days and during that time, I learned quite a bit. “In America you are all about the deal” said Mathias. He went on to explain how out of every country he’s been too, America is by far the most obsessed with deals, discounts, and bonus offers.
This got me thinking – Is this a good thing, as in, we Americans love to save money? Or is this a bad thing, because we only think we’re saving money… when we’re really just falling prey to Madison Avenue? I would say the truth lies somewhere in the middle.
Without a doubt, we all fall for “deals” which are anything but. A sale on an inflated price is no bargain. Nor is buying food we don’t need that just gets thrown away. Signing up for credit card bonus offers is stupid if it leads to excess spending. There are a thousand examples to list, but instead of listing them all, let’s take a look at 5 questions you can ask yourself to figure out if a deal is really worth it.
Question #1: Do I need it?
This is a simple question but one all of us (myself included) have a hard time answer sometimes. Instead of getting caught up in the moment of a sale at your favorite clothing store, it’s important to come back down to reality for a moment and truthfully ask “Do I really need this?” Probably 99% of the time the answer will be no – which doesn’t necessarily mean you can’t buy it – but at least it puts you in a more rational mindset by acknowledging that truth.
Question #2: Can I afford it?
Again, this is another question that we Americans have difficulty answering. And contrary to popular belief, being able to afford the monthly payment or credit card minimum payment does NOT mean you can afford the purchase. All of us need to have a sane, real-world view of our financial situation before we go shopping, so we don’t misjudge during the heat of the moment.
Question #3: Is it really the best price?
Anyone selling something will do their best to convince you it’s the best price, but is it really? For example, I’m always amused when grocery and drugstores list something on sale, yet the price is still higher than what you would pay at Target. The bottom line is that we live in a society so over-saturated with sales and deals but the vast majority of the time, they are nothing but an illusion.
Question #4: How much will I use it?
I get this catalog in the mail from a company called Heartland America, which primarily sells close-out items and such. Once in a while I come across something that truly is a great price, but does that matter if I’m only going to use it a few times? Or if it’s a gadget that will soon be outdated? Whenever you buy a product, try and calculate its lifespan and how often you will actually use it. Even if something really is 90% off MSRP, if you’re not going to use it, even paying one dollar for it would be wasting money.
Question #5: What will it cost me in the long run?
At one time or another we’ve all seen our dream car in the classifieds at a price that seems to be a steal. The question is, how much will it cost in the long run? Will there be higher insurance premiums, lower gas mileage, and more expensive repair bills? With every purchase, instead of just considering the upfront costs, you need to take into account how much it will cost you over time.
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Do you think one of the reasons for this American problem is there is so much competition and hence there needs an additional incentive to lure you in? We are a consumer nation with more here than other places.
@ Krant cents. Possibly. I think the problem in North America is that we are too focused on competing in general. That is why we all want the latest gadget, the nicest car, and the biggest house. I just came back on Saturday from a month in Asia and it is amazing how different the focus is of everyday people there. It is the real things that matter like family and friends. They could care less about the other stuff.
I was also talking to a friend from the UK who only says that when they shop for a car they won’t even look at one that has less than 50 mpg. In North America, I know tons of people that wouldn’t dream of driving anything other than their fancy SUV or stylin truck that might get 20 mpg if you’re lucky.
I think that the values we are raised with play a big role in this issue and until we shift our focus, this will constantly be a problem. Competition will continue to reign.
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