Do you try to save money but give up after a week? This is not your fault because we live in a world of temptations. Let’s check out ten temptations that may ruin your money-saving plans and how to overcome them.
Did you know that in 2018 overall ad revenue reached 208 billion! Every day, we are immersed in sales messages on different forms of media, like the internet, television, radio, and billboards.
When you go to Facebook, they feed you with ads. When you go to other sites, Google shows you advertisements/banners that match your interest. When you check mailbox, flyers and catalogues tell you the special or bargain of the week.
Different service or products use media to tell you what they’re offering. How many times in a day are you exposed to media: 10, 20 or 30 instances? Media and the ads on media are like your shadow — follow you every day and everywhere!
The purpose of advertising through mass media is to trigger your desire. You believe you need these products, and you pay for them. Like with fashion and cosmetics, you buy products, try the products, but you never stop because you are not satisfied!
Influencers and Celebrities Marketing
Have you brought a product or service that was recommended by your favourite celebrities or influencers? Once, twice or five times in the last three months? Sometimes you not only buy what they promote directly, you also buy what they use, what they dress in, etc… This way, you can mimic the influencers or celebrities you admire.
But where are those products now? Did you use them? Probably not! Did you know that the more products celebrities and influencers endorse, the more money they make. Influencer marketing is projected to be worth $US 5 billion in 2018 and $US 10 billion by 2020!
Fear of Missing Out (FOMO)
Do you keep checking your phone for messages and for feed updates from Social Media? This is called the Fear of Missing Out (FOMO). It affects everyone and causes stress and even anxiety!
Smart marketers use FOMO to make sales. They tell you that their offers have a time limit and limited quantity! That creates a great pressure on buyers to make a purchase decision with little consideration.
You buy the product not because you want or need it but because of the deadline pressure!
Social and Peer Pressure
Have you noticed yourself choosing the brands that your friends, co-workers and neighbours use?
You dress like them; you eat like them; you speak like them; you choose the same brands/items used by them — even if the items do not fit you and you cannot afford them!
Why? In Abraham Maslow’s work on the hierarchy of needs, he states “a feeling of belonging” is the first social need we experience. This social need sometimes translates into “keeping up with the Joneses,” which is about “matching” your friends and neighbours in whatever new product or service they have.
Telemarketers and Door-to-door Sales
You may receive a phone call from telemarketers and told you they have a great deal for you, but when you got the bill, the price or terms may not be the same as they told you over the phone. When you call back the customer service hotline, they will tell you the “details”.
Sure you can ask for a refund, but you bear the burden of shipping back the item and any additional charge (like a 20% restock cost).You may not even notice the additional fees if you fail to check out the credit card statement!
Door-to-door sales even more difficult to deal with! They are well-prepared to sell the product or service to you and to persuade you, so you will feel more pressure. One of the common tactics they use is enticing FOMO. They will give you a “deal of the day” in order to close the sale. Beware!
Have you experienced shopping for the sake of shopping? What you shop for may not be for what you want and need, but you just want to shop. Through shopping you found something you lost such as happiness, fun, power, status, control and self-worth. When you do not feel good and shop as solution, you may become a shopping addict!
According to Abraham Maslow’s work on the hierarchy of needs, you shop to raise your self-esteem if impulse buying is your temptation!
I give you two choices. The first choice is to give you one marshmallow now. The second choice is if you can wait for fifteen minutes, I will give you two. How will you choose? Most people will take the first option. This is the famous Stanford Marshmallow experiment.
The desire for instant gratification happens in our daily life. When you walk by a Starbucks, you want a coffee, even you could get free coffee later! You walk by a high fashion boutique and go have a look even though cheaper clothes are down the street. If you cannot wait or think over your actions, you will fall into the instant gratification trap.
Quality and Quantity of Things (Best and More)
Do you want “the best of xxx”? Why you want the best? One of my aunts told me that she always brought the most expensive model of phones, appliances and whatever else she could afford. Yes, the expensive stuff is typically backed by quality, so the best is always expensive, but is “the best” the best for you?
Years ago my European washing machines broke down after 10 years of service. I replaced it with a newer model from the same brand. Was a no brainier choice.
One day I visited my friends and noticed they were using a Korean-made washing machine for over 5 years, and the performance was good and quiet. When I checked the price, it costed only one third of the price of my European machine, so I ordered one.
As a smart consumer, you always can save money with bargain alternative if you search for one. Instead of thinking of “the best” think of the “best fit” for your lifestyle.
Maybe the best isn’t your concern. You may want more. Do you feel having more means a better life? All that “more stuff” may become clutter and hold your life back. You are not defined by what you own and having fewer things means enjoying life. Less is more!
Easy Credit Payment Plan
It is too easy to get credit and to buy stuff in instalments!
Say you want to buy a furniture bundle for $3,000, but you don’t have the money. The furniture store then offers you a two-year no-interest credit payment plan where you just pay $125 per month. Because of these payments, part of your paycheck is eaten up already.
You may pay for the minimum payment, apply for additional credit, and then end up paying more interest (usually APR is 17% to 24%). At the end, the interest may have increased your total by over 50%! Easy credit is a trap!
Disassociation with Money
If we do something we think is bad, then we may not do it again. But if we do something we think is good, then we may do it again. For example, eating and spending. When you remove the bad feelings associated with spending the money and focus on the good feelings associated with eating, you feel okay to spend.
You may pay by credit cards and quickly forget about them until the statements come! By doing this, you borrow from what you intend to save and fall in the overspending trap.If we don’t feel bad about overspending, this makes us free to spend whatever.
I have an uncle who spent half of his paycheck in the casino and borrowed money to pay back his credit card. He told his family that the money was for entertainment and it felt good to spend!
Wining the Saving Money Game
I assume you like to control your spending and to save money. Most people start with budget planning and try 1,001 ways to save money. That never works because you cannot resist the temptations. No worry! If you can answer the following THREE questions, you can fix it!
Why do I need to save money?
Many people want to save money but they do not ask themselves why they need to save money and how they should use the money.
Different people have different reasons, such as for a dream, retirement, house, investment or vacation. For me, it is financial freedom. Set your goal, and determine your vision. When you want to spend money, think about how that money instead could contribute towards your goals. That will motivate you to keep saving!
Am I able to save money?
The answer is not “yes” or “no”. The answer is “I can control spending and save money for my goal”. Once you remind yourself of this constantly, your brain will help you to establish that saving money is easy!
Do I have smart consumer habits?
A smart consumer always knows what they need, not what they want. They have a shopping list that determines what they buy. Items on the list may have to be brought from different places because of price differences. As most experienced shoppers know, the price for an apple may be 20% cheaper at a neighbour shop!
For non-regular items, like a washing machine, you may try the following 5 steps approach:
- Do I need this?
>Yes. For washing my family’s and my clothing.
- How frequently will I use this?
>At least twice per week
- Can I afford it?
>It costs about $1,500 while my monthly income is $3,000. That means I need to finance it! I may finance through a line of credit, your savings, your emergency fund, or a credit line from a supplier.
- Any alternatives?
>Through an internet search, I found a competitive model that cost only $600 and has hundreds of good reviews. After going through those reviews, I will give that model a try.
- Are there bargains available?
>In addition to finding the cheaper model, I found the same model offered with free delivery plus a $100 coupon and 12-month, interest-free easy payment plan!
With those five steps, I saved more than $900, and you can too! As I mentioned earlier, an easy payment plan is a trap, but if you buy what you need, a payment plan will ease your financial stress.
You are now a smart consumer! Now you can focus on how to save money towards your goal!
Starting Saving Money - Know Where your Money Goes
You may start saving from food and household as most people did. But according to statistics, 80% of your paycheck is spent on the following five categories:
- Pensions & insurance
While 20% is spent on the following four categories:
- Apparel and service
- Cash contribution
Please spend 15 minutes working out the figures for each category so you can have an idea of where your paycheck goes. Afterwards, work from the top “cost driver” down to start your money saving journey!
Once you focus on the categories that cost you the most money, you can easily trim them instead of working here and there to save a few cents.
Over to You
Now you have learned the ten temptations that cause you spend money you could be saving. Be a smart consumer. Manage your spending. Find out where your money goes by determining the cost drivers.
Once you trim the cost drivers, you will see the money in your account that you can save up for your goal. Easy peasy!