When you buy your first house, you will call it, or you likely have called it, an investment, particularly if the purchase costs more than you can handle. With the hope that house prices will rise, considering it an investment convinces others, but more importantly, convinces yourself, that the choice will pay off in the long run. Car salespeople know this, and will often use the word “invest” when they want to make a sale. There is close to no chance of financial gain when buying a car, but they will use this word because of its positive connotations.
You can lead a horse to water, but you can’t make him drink.
Free Your Mind
and Your Wallet Will
Spending vs. Saving
Please don’t confuse spending
The only true way to save is to not spend
“These boots are regular price $150 but
they’re on sale for $100. I’m saving 50
Sure that’s an Investment?
Be careful. You’ll hear the word “investment”
being thrown around when it has nothing
really to do with the true definition of the
The word “invest” is often used when people
spend more than they know they should and
want to convince others as well as
themselves that they made the right decision
from a financial standpoint.
Basically, something that will earn value or money
in the future. Requires a tradeoff for something
now to receive something in the future.
Look But Don’t Touch!
Studies show the longer a person touches an
object, the greater the value is for that item.
Meaning the longer you touch something, the
more likely you are to buy and pay even more for
it than its sticker price —irrespective of if you even
have a need for it.
Real Life Examples
Costco, Sam’s Club (free samples)
Yard/Garage Sales & Flea Markets
Pretty much any clothing store
Take the Free Sample and
Obviously, free samples are supposed to
encourage you to buy that product. But, the
chances of you buying the product increase if you
have a conversation with the vendor. Yes, that
relationship, despite how small and harmless,
from friendly chit-chatter often leaves you with a
sense of obligation to buy.
Beggars have mastered this. Notice many will try
and hold your attention for as long as possible –
sometimes offering to tell jokes or a
story/explanation of their hardship – making you
feel like you at least owe them something for your
The Fear of Missing Out
Retailers like Costco are infamous for selling an
item for a short period and then taking it away to
never be seen again. Couple that with the
assumed discount you’re getting because you’re
shopping at a warehouse club store and the
temptation might be too strong to escape.
Read Between the Signs
Be careful of loud signage that screams “low
price” or “hot deal”. It can give you the false
impression of a bargain that’s not even there.
Another tactic, “bargain” bins of a mix of stuff with
big signs and a single digit price.
Sneaky Economics 101
Remember the supply and demand curve?
When supply is up, price is down. That’s how
we tend to think so that’s why retailers like to
display a lot of one thing in big piles or stacks.
Our line of reasoning is that there is so much of
it, it must be at a bargain. Wrong. The reverse
tends to happen when we see few of one item.
We’re Already Here, We
Might as Well Shop
Warehouse Clubs don’t have many locations and
many times people will make a trip out of visiting
them. If you view the trip as longer then a normal
trip to the grocery store you might be inclined to
spend more. Plus, you’re likely to spend some
time there browsing around. Who goes to
Disneyland for two rides? Plus, the stores are so
huge you want to explore every nook and cranny.
Don’t Be a Glutton
allow you to buy
products in bulk.
when we have so
much of something
we tend to be
wasteful of it.
Dirty Little Store
Stores often jack up prices to maximize profits
An anonymous Target employee admitted if
something is selling really well at, say,
$9.99 the store will raise the price to
$13.99 (and then mark it on sale)
Think In Terms of Interest
$20 + $2.50 = $22.50
$2.50 per $20 = 12.5% APR or
150% APY (12.5% x 12 months)
An ATM will charge you on average $2.50 to
withdraw money from their machine.
Let’s assume we withdraw $20.
The real damage calculates the true cost of a
purchase using your own unique financial
situation. Unlike most debt calculators it shows
you how much you'd save if you never purchased
the item in the first place, and instead used the
money to pay down your debt.
Just because you can make the monthly
payments doesn’t mean you really can
Can you really afford the car payment once you
consider gas, insurance, repairs, maintenance,
and all other related costs?
The Big Tax Refund
Think of your tax refund as the
government borrowing your money all
through the year interest free then giving
it back to you at the end of year. If you get
a lot back that means you overpaid all
No expiration dates allowed
Cards are redeemable for cash if value is
$10.00 or less
Gift cards do not escheat to the State of
California offers a consumer gift card website
Merchant must continue to accept gift cards
while in bankruptcy
Federal CARD Act
Cards may not expire for 5 years after purchase
May only charge post-sale fees if the card has
not been used for 1 year or more, and may only
charge them once per month
All fees must be disclosed on the card or its
Card replacement fees are not allowed
Promotional gift cards are not covered under the
CARD Act and often have really short expiration
Reloadable cards that are not intended for giving
are not covered by the CARD Act
Federal CARD Act
If you are using a gift card you are likely to spend
much more than the denomination on the card
and you are less likely to care about price.
If you use a gift card you are 2.5 times more likely
to pay full price.
If the retailer goes belly up, you lose
Study of Americans’ spending
habits says each hour of
weekly television viewing
correlated to an increase in
spending of $200 annually.
HALT Method—suggests consciously
considering feelings of Hunger, Anger,
Loneliness, or Tiredness first—before
assuming you need to buy something to fill
those needs. Impulse buys can be subtle in
how they sell themselves, as in deciding you
need new work clothes to push out the
memory of a bad day at work.
Apply the $100 Rule
$100 Rule - in which any purchase price is
divided by that amount and considered for that
many days—a $300 PlayStation 3 gets re-
considered for three days, a $1,400 MacBook
is delayed for two weeks of researching, and
so forth. Used to prevent impulse buying.
☻Money Isn't the Key to Happiness, But
How You Spend It Is - (Researchers) have
found that our types of purchases, their size and
frequency, and even the timing of the spending all
affect long-term happiness. One major finding is
that spending money for an experience — concert
tickets, French lessons, sushi-rolling classes, a
hotel room in Monaco — produces longer-lasting
satisfaction than spending money on plain old
Taking Back the Power: Tip
To get something you’ve never had
before, you should try something you’ve
never done before.
☻In order to get cheaper basketball tickets, we
bought tickets in advance – they're already paid
for and printed out. But it gets to be 6PM this
evening and my dad gets tired and doesn't feel
like going. It might make sense for me to want to
push everyone to go to the basketball game. After
all, I already have the money invested in the
tickets – we wouldn't want that to go to waste.
In reality, though, it doesn't actually make any
sense to choose the less enjoyable option if
things turn out that way.
I've already paid for the tickets – there's no
refund, no matter what we choose to do. So, in
essence, all those tickets are really saying is "you
have the ability to now go to the basketball game
Believing that you must go to the game in
order to somehow recover some value is
the sunk cost fallacy – and it can be
The biggest threat to
obtaining your goals is