Stop Thinking About True Value and Just Buy What You Need

by David@MoneyNing.com · 13 comments

Often times when we buy a product, we get confused with the purpose of the purchase. Sometimes, we buy something out of impulse, sometimes it’s based out of necessity but most of the time, it’s only because we can.

When we set out to buy, we seldom know what we are really looking for other than something general like “I need a refrigerator”. What ends up happening is something we are all familiar with. We go into the store and talk to the salesperson about fridges. Almost always, we learn some “must have” feature that now becomes the anchor of our search for our perfect refrigerator. After a while, we end up buying a nice (but way too expensive) refrigerator and we justify it by saying “This is the best value I could find”.

Confusing Necessity with True Value

The situation is even worst when I am actually somewhat familiar with the product. When I buy a computer, I end up buying a better one than I originally intended because I can understand the sales pitch about the extra features. I tell myself that “oh yeah, that faster processor is extremely important” only to forget that I was buying a laptop for my wife whom only wants to occasionally surf the web.

Expensive Doesn’t Equal Quality

More expensive equal better, or at least that’s what we think. After all, there must be a reason that it costs more, or so we though.

We think this way because we are the consumer. Let’s for a minute assume the role of the business owner. We sell a product because we want to make money. The higher the price, the more money we make because our cost is somewhat fixed. Therefore, doesn’t it make sense that we try to market the product as expensive as possible? Now think back to our perception of price and quality. Where does quality come into the price equation?

True Value is Personal

It’s not how many features you get for your dollar but how many dollars you give for the features that you need. Who cares if that iPod has a huge screen when you only wanted to listen to music?  Sure, that LCD TV has 1080p output and it’s only $150 more, but what is 1080p again?

Value is becoming a sales term and I don’t like it.  You shouldn’t either.

How to Pay Less and Be Happy

Here’s one tip that everyone should follow when they need to buy something.

Before you do any research, sit down and figure out what you specifically need the product to do and write them down first. Then, do your research and find the least expensive product that can get the job done.

Forget about the new LCD display on the side door that tells you when the ice cubes will be ready. Just say “No Thanks”.

Freeze Your Credit Cards to Ice Your Spending

by David@MoneyNing.com · 22 comments

freeze credit cards

Sometimes, obvious ways to curb our spending is seldom practiced because we feel embarrassed to try it.  We read about them, laugh that it’s probably “just for fun”, and forget about them right after.  Yesterday, my friend reminded me that while we might feel funny doing something unusual the first time, it is always the results that actually determine who laughs at the end of the day.

Friend: David, I freeze my credit card in order to stop myself from spending.
Me: You mean you call the companies to stop them?
Friend: No, I mean literally putting them in a block of ice.

[ continue reading… ]

Stop Worrying About Money – Once and For All

by David@MoneyNing.com · 14 comments

This is a guest post from Neal Frankle, CFP®.  Like many, he was affected by the financial crisis but unlike most who did nothing, he managed to turn it into a positive experience.

It’s easy to be scared to death these days. You may have lost 40% (or more) of your investment capital. To put the cherry on top, you might be making a lot less money now than you did 12 months ago too. Times are tough. Believe me, I get it.
But like no other time before in your life, now is the time for an adult assessment of where you stand financially.  The funny thing is you may find that things aren’t as bad as you think.  For example, my income took a major hit when the market started to melt down last year. I am in the money management business and as the assets I manage shrank, so did my paycheck. To make matters worse, my business expenses are fixed so my net income went down much faster than the market. Believe me, I know what financial pain is.
I got scared. I worried about my clients.  I worried about my business.  I worried about my family.  I worried about worrying.  I got out of this funk by taking an objective look at my situation.  I:

  1. looked at exactly how much we were spending and how much we could cut. There were things that “we couldn’t live without” only a few months ago but we learned to live without them anyway.
  2. took many of the steps outlined in this blog over the last several months. (editor’s comment: what a smart man)
  3. got my entire family involved in the finances and it was the first time they ever took an interest. Everyone pitched in. It was good.

It turned out that it wasn’t all that bad.

Since then, we spent more time together as a family doing things that didn’t cost money. We played cards instead of going out to movies. We sat and talked instead of going out to dinner. This was a huge positive and it’s a gift I never would have gotten had it not been for the economic downturn.

I also made changes at the office and readjusted my retirement plan.  I’ll probably have to work 5 years longer than I originally anticipated, but that’s not so bad either. I love what I do and I can’t imagine doing anything different with my time. The great thing is, the 5 extra years doesn’t take into account the possibility that things could improve. Stranger & worse things have happened.

If you are worried and have financial anxiety, assess your situation objectively. What is the worst thing that could happen?  Is it likely that you’ll starve and be homeless?  Probably not.  What is the worst-case scenario for you?

The next question is, “Can you accept your worst-case scenario?  If you have to cut your expenses or get an additional job, is it really all that bad?

The last question is, can you improve the situation? In my case, I had no control over the market but I did have control over how I communicated with my clients and how much money I spent in the office and at home.  What can you do to improve your situation?

A few months ago I never would have said this but now I have to admit that I’m grateful for this financial fiasco. I’m not happy about the damage it’s done to millions of people, but it really helped me focus on what matters and what doesn’t.

How about you? Have you benefited in any way from what’s happening in the financial world? I’d really like to know.

What Everyone Ought to Know When Applying for Free Stuff

by David@MoneyNing.com · 13 comments

If you love free stuff, life is good since the Internet made finding out about them extremely easy.  Whether it’s giveaways, coupons, or offers, a few clicks of the mouse and loads of free offers become available for the picking.

No Free Lunch with Freebies

As Milton Friedman famously reminded us though – “There’s no free lunch in this world“.  So why do these offers exist?

  1. Scams – Not to sound harsh, but some of these offers are really scams.  It’s just a way for them to get your information to do something else with it.
  2. Incentives to Get Your Business – Of course, some offers are more genuine in that they are just trying to offer something for free to get your long term business.  They believe that the ROI to offer something free upfront is worth it for the larger customer base.  Example include the free trial offer for Netflix or Redbox letting you rent a movie for free by signing up to their newsletter.
  3. Market Share – Some companies will actually give away free products to gain market share in a particular niche.  They figured that if everyone is already using their product, they can kill their competition.  Example – Linksys in the consumer router space when they were offering $0 after rebate offers.
  4. Branding – Some companies will offer free samples just so it establishes and strengthens its brand.  The free offers from Walmart is a great example because you will grow to love that company if you get enough free samples from them.
  5. Feedback – Many companies will send out a free product for testing purposes.  While it’s not really free, what’s the harm of answering a few questions to get a free appetizer or something at your favorite restaurant?
  6. Giving – Sure it doesn’t happen often (on a relative scale), but some offers are really just someone being nice.  They might be hard to find, but these offers do exist if you look for them.  Example includes donation.

What’s Your Point with All This Free Stuff Talk?

Understand that when you are applying for something free, you are giving something up.  Whether it’s your email address, your full contact information, or just your time, you are giving away something.  Before you sign up for another free offer, consider whether you are perfectly comfortable with what you are giving up.  Is it okay that my email address is giving out?  Am I okay with getting junk mail in my mailbox?  If the answer is yes, then by all means.  If not, then maybe that free movie rental isn’t worth the weekly emails that you will get.

Some Tips About What to Look For with Free Offers

So while scams are everywhere and the only 100% foolproof way to avoid them is to not sign up for anything, how can you still take advantage of free stuff?  Here are a few things to look for:

  1. Trusted Source – Obviously, an offer coming from Walmart is pretty safe while someone from Nigeria emailing you about getting free money is much more worrisome.
  2. Word of Mouth – If all your friends are taking advantage and can recommend it, there’s less of a chance that it’s a scam.
  3. More Information – The more you know about the offer and the company, the better.  For example, having an email address is probably not enough for you to know about the offer but if it’s free ice-cream from a store, you can probably figure out whether it’s a scam or not as you can actually go to the store to ask questions and check it out.

The Last Tip – Trust Your Gut

Your intuition is incredibly good.  If it sounds too good to be true, it probably is.

Hopefully no one ever gets scammed again and more people can take advantage of free offers.

The Secret of Dealing with the Financial Crisis

by David@MoneyNing.com · 24 comments

More often than not, our view of (rather than the situation itself) dictate our state of mind. Some people would still be happy even if the world came crashing down.  For others, a minor setback would spark off a downward spiral of deeper sadness.  New circumstances are thrown at us day in and day out.  We can either make the best of it or make it worst.  It is up to us.

The Danger of the Trusted News

Lately, we hear lots of stuff over the news:

  • We are in the worst economic environment in decades
  • Everyone is losing jobs.  Look at that employment number at 7.2%.
  • All banks are failing, what should we do?

The unemployment number is climbing and it’s never good when this happens, but the unemployment number was at 5.8% in 2005 (Bureau of Labor Stats).  Putting it into context, this means that less than 2 people were laid off for every 200 people we know on average.

Is it worst than it was in 2005?  Absolutely.  Is it really Armageddon?  Hardly.

Our Expectation is Sometimes Just Too High

What about our net worth that came crashing down?

more of same

Whether it’s our stock holdings, our house value or our spending power, this chart pretty much sums it all up.  I bet a few years ago when your house or stock went to crazy highs (somewhere around the red line), you were extremely happy.

The value of your asset went down rapidly the past few months.  So did mine.  In fact, if this chart illustrates the value of the asset, it went down 50% off its highs.  It hurts to see it but other than our ego, did it change things that much?  Going back to our example, isn’t it just back to the value it was a few years ago?  The exact same level when we were celebrating?

The Real Danger

standard of living

Some of us got into trouble because of how we handled our new found wealth.  As our asset value rose, we began to increase our standard of living.  Each time our stocks went up, we poured in more material to build another step.  Now that the new money has stopped, so did the ability to continue building.  For some, it has gotten so bad that their standard of living fell off a cliff as their money supply dried up.

For those that lived life just the same, what really changed?

What is Your View?

There are certainly many people who are in trouble now but they are just the minority.  Unfortunately, most of us are spooked by the reporting on those suffering.  We are afraid because of the over-exaggerated news articles; we are frighten by what could (but is unlikely) to happen and we are worried that the sky is really falling.

But is it that bad?  Do you really have to be afraid and how likely is the worst going to happen?

Answer those questions truthfully and perhaps the rest of you day will be much brighter.

Have a Great One.

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