Human Weakness: Money Matters

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Minggu, 28 September 2008

Over Spending & Impulse Buying: 8 Reasons Why You’re Not To Blame

I was returning from work Friday evening (I take the bus), when I overheard a conversation between two women (possibly co-workers heading home).
One woman complimented the other on the blouse she was wearing. She smiled and responded, “Glad you liked it. You know, I had to hide this from my husband. He would throw a fit if he knew how much I paid for this!”

I am sure you can also relate to similar situations. Think back to the last time you spent money. Perhaps it was yesterday or even a few hours ago. Perhaps you can’t remember the last thing that you bought!
Ask yourself the reason for making that spending decision. Did you buy something necessary such as groceries or medication? Was the item something you needed or just wanted at that moment? Did you worry about having enough money to pay for the item? Did the purchase cost more than you thought it should or did you even worry about the price? Did spending the money make you feel guilty or did it give you pleasure?

At one point or another we all come across moments where we can’t resist the urge to buy something. I usually get the “reality” check when I receive my credit card bill! While we sometimes get criticized for over spending and impulse buying, I don’t think that it’s ENTIRELY our fault! Society, strategic product decisions, advertising and marketing make certain items so…. appealing!

1. “Touch me, use me, take me home!”

This is especially true for electronic items. Have you noticed how companies unveil their latest gadgets? Ideally, they want you to pick it up, touch it, or interact in a multisensory way. They want you to “come and experience” it(for free!). Naturally, you want to. After all, there is so much hype around the product, and you want to “try it yourself”.

When you get a taste of the experience, you instantly get emotionally attached to it. Before you know it, you are thinking of ways to ”squeeze” some money to buy this “marvelous” product!

2. “Use this coupon to get a 10% discount”

I often feel like I am loosing “free” money if I don’t use the coupon.
Coupons can compel you to buy items that you don’t really need. Often, it is likely that you wouldn’t have bought the item, had you not seen the coupon. Saving $2.00 off a $20 item is good, but not spending the $20 in the first place is much better. Don’t you think?

3. Temptation near the checkout counter
Once you purchase the items you need, you have to wait a few minutes until it’s your turn to pay the bill. Irresistible DVDs, alluring magazines, along with overpriced beverages and candy…. Retailers make good use of this situation, by placing these near the counter!

4. "Oh my gosh! That's so cool. I've gotta get one."

Shops have a funny way of ”romancing the consumer”! Whether it’s just wandering into a store or standing before a display window, you get sucked in.

5. “Buy 2 and get one free”

Arh! The word “free”! You feel compelled to buy it, just because you get one item free. Have you noticed that most of these item prices end with .99($5.99, $14.99)? This make it a little more difficult in calculating the “saving”. I am yet to see a person computing the mathematics! As a result, “buy two get one free” might actually lead to saving a few cents.
Another factor to keep in mind is the expiry date. Sometimes, they package things you need, but these items are about to expire. So having 3 of the same item wouldn’t do you any good.

6. “I buy things thinking they’ll cheer me up, give me something to do.”
Recently one of my friend’s broke up with her boyfriend and to get through the ordeal she started spending time at the mall. If she saw something that made her feel good, she would simply buy it without thinking much.
Shops go to extra lengths to ensure that shopping is an enjoyable event for the customer. There are times when I went shopping and felt like I did something good, fun, and beneficial!

7. “30% Off on when you purchase above ...!"
When you see a “super deal” like this, you feel like a winner. These deals make you believe that you WILL save money. However, this offer requires you to spend a certain amount, in order to get the percentage off. This is a great bargain if you have items that you actually NEED to buy, but often you end up buying frivolous items just to take advantage of deal.

8. “Call and order right now and receive this added bonus of..”

Our desire to spend start with the hundreds of advertising messages we're bombarded with each day from multiple media, from television and radio to billboards and email pop-ups.
Advertising agencies carefully select models, images, settings, scenes, and story lines to evoke an image, a feeling, and a fantasy of how one's life would be transformed through owning a product. How many times have you fallen a prey to these advertisements?

Have you caught yourself falling trap to any of these situations?

Reference:

Senin, 02 Juni 2008

Money And Processions: Breaking Free From The Materialism Trap

I was invited for a dinner by one of my friend’s last friday. Apart from the host, I didn’t know anyone there. I was left with no choice but to actually use some of the things I learned in The Winner’s Way! So there I was trying to make a liberated conversation.

After some awkward moments of "Hi" and "What do you" I manage to strike conversation with a couple of people. I realized like me, they too were unknown to each other. Eventually our group got comfortable with each other. That’s when one guy brought up the subject of money. One subject that every one seemed to have an opinion about! He started out by making a witty remark about how low his salary was. Then everyone found the "me too" aspect of it, and was fueling the conversation.

One person said that he would be happy if he could earn a salary, which would enable him to buy the things he wanted. For example, if he wanted 42 inch flat screen television, he should be in a comfortable position to buy that. Then another said, "If I can afford it, there is a possibility I might not want to buy it. But it is always nice to know that I can buy it, even if I don’t need it." Even though I could also relate to what was said, I didn’t make any remarks at the time. I thought I would leave it for a blog post!

Anyway, isn’t it true? The more money we make, the more we tend to spend. Most of the time, we want things we can’t afford; when we can afford such item we don’t seem to have the "want" to buy it; the endless cycle of materialism continues. Can you relate to that?

The difference between wants and needs

Our wants and needs are not the same. Of course, you already know that! I want you to take a good look around your household. Tell me honestly, can you spot any items you once bought thinking they were an absolute need. Are you still using those items or are they just collecting dust somewhere?

Sometimes, it is difficult to draw a line between the two. A want for one person, may be a need for another person. They are dependent on our culture, career, lifestyle etc.

Don’t allow yourself to substitute a need for a want

When you looked around your household, surely you must have found several items that you once you stamped as needs.

If you can take the time to start being honest with yourself, you will find that a lot of the things which you assumed were an absolute necessity until now, are in reality, nothing more than wants.

Identify patterns of spending

This is something I did to great effect when I was in my internship. We were given a minimal salary to get by. I wanted to make the maximum out of that and save whatever was possible. At the time, I didn’t know a great deal about budgeting. It all started with a simple list of all things that I found myself buying. Then I ranked each item. I wanted to see what was important and where the money was going.
This will no doubt enable you to notice where you financial priorities are and where it should be.

Temptation, the only thing I can’t resist

Magazines, news papers, television, internet.. In this day and age, we are exposed to loads of advertising. Have you ever felt like everyone is trying to sell you something? Sometimes, we get the need to buy something only when the need is created for us.

No saving is too small

The tendency is more to buy less expensive things we don’t really need. We think, "Oh, it doesn’t cost much, no harm in buying". Over time, these things accumulate and these are some of the things that can be identified by keeping a log of your spending habits.

Life is not ALL about wants and needs

I know that this might sound a bit contradicting. In reality, there are times when we all like to buy the wants. For example, you might want to buy your loved one flowers or a gift. This doesn’t necessarily reflect a need.

What I am trying to say is, don’t be too hard on yourself and forbid yourself of every pleasure. At the end of the day, some things can’t be bought in dollars and cents. Use your best judgment.

"Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like." ~ Will Rogers

Senin, 07 April 2008

6 Investment Misconceptions That Stop You From Becoming A Millionaire

I hope you won’t find it surprising when I say that once upon a time, my knowledge on finance matters was nil (excuse: I hail from the field of software!) The little I knew, I learned from the basic accounting class, which was taught in school.
After graduation, I got a steady job and along with it came an appealing paycheck. Little by little I managed to grow my savings and one day I realized that I have an attractive amount nicely sitting away in the bank. I spoke with one of my finance literate friend’s and was advice to invest the money.

He used the word investment, and to me, it sounded like something only the rich do or something that only a skilled professional can do. My friend patiently explained to me in layman terms that, I need to make my money make more money for me. Now that got me interested. Here I was working 60 hours a week and I was dreaming how nice it would be to double my salary without actually working for it!

Irrespective of how attractive that thought was, that alone wasn’t sufficient for me to take the plunge on investing. Years later, I have educated my self on various finance matters and I consider myself to be wiser (and older!) than before. I wish I knew then what I know now… for I would have definitely taken some steps towards investing. Had I done so then, I probably would have been a millionaire by now!

If.. would... could.. Yes, I know, I can’t change the past. I am glad that I am into investing now, even though it’s a few years overdue. So today, I will share with you a few misconceptions that I had, with the hope that you won’t make the same mistakes I did. Your million may well be within reach!

#1. Investing is too risky

As an undergraduate, I watched a lot of movies. "Wall Street" was also amongst them. Now, "who in their right mind would invest after watching that" I thought! I didn’t want to see (or imagine for that matter!) my hard earned money disappear overnight! Movies such as these intrigued me to find out more about such situations. I read books, read web sites and also spoke to a few investment analysts as well. The more knowledgeable I became, I realized that the risk level is entirely up to me.
I learned that there are "play safe" investing options such as bonds, as well as the other extreme of high risk-stocks! There is a fine line between risk taking and reckless suicide.

#2. Investing is too hard

To be honest, I was scared of those big finance words. I mean who knows what Fed Fund rates, mutual funds, indexes, or blue chip stocks are? At one point of time, these were all Greek to me! If I learned all these, so can you! You know, once you get the hang of it, it is not so hard to learn.

Perhaps the easiest and cheapest thing to do is to read around the subject. Articles related to how to learn to invest money can be found almost anywhere (books, web etc).
Luckily for me, I had a couple of indispensable assets; friends in the finance world. I couldn’t have done it without their patience and tolerance.

#3. Learning about investment is a waste of time

I should also warn you that if you ask your financial adviser or investment analyst they would surely tell you, "you don’t have to worry about it. It is what I do for you". You hand them your money and they will take care of it.

I don’t know about you, but I am investing MY money. For the investment analyst it is his job (no offense). I am probably the only one who cares a great deal about what happens to my money! So learning more on the subject is certainly not a waste of time for me.

#4. You need a lot of money to invest

As I mentioned before, I thought that investing is something the rich did. I assumed that I needed a fair amount of money before I could actually start investing. Or may be I was looking for a reason to postpone investing!

#5. You need invest most of your savings

Since I didn’t have a big sum of savings, I thought that I would have to invest most of the savings. I was advised to set aside money for at least 6 months, for all my expenses.

#6. High investment returns mean more risk

So after my friend’s persuasion, my information dig up and analysis, I decided it was time, my money made more money for me. Through my friend I met an investment analyst and we were discussing my options. All of a sudden he was talking about high return investment. Alarm bells inside my mind went off. I felt that high return would mean more risk, and I was not about to take huge risks. I wanted my investment journey to be "slow and steady" rather than "very dangerous"!

My investment analyst assured me that it would only be dangerous if you don’t know what you are doing. He gave an example of driving a car and went on to say “when you put someone in the driver's seat who doesn't know how to drive, a relatively safe trip becomes an incredibly risky trip”

To be honest, I am still a bit skeptical on this one. After all, this was coming from someone who was getting commission! However, I managed to make a compromise with a share of high and average investments. Do you have any experiences related to high investment returns? Was the return worth the risk?

The earlier you start, the more money you will earn; the closer you will be, to your million! Even if it’s only a small amount, the money you invest today will earn you a big sum in the future. Good Luck!

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Keep Some Cash Under Your Mattress
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Make Money, Not Excuses!

Senin, 18 Februari 2008

Thinking About Money The Rich Dad, Poor Dad Way (Book Review)

Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not! is Robert Kiyosaki's and Sharon Lechter's first best-selling book.It has been on The New York Times Best Seller List for five years and was USA Today's No. 1 money book for 2004.

Given Robert Kiyosaki’s popularity, some readers might disagree with the opinions stated in this post. However, this is my unbiased thoughts on the book, regardless of its popularity.

The entire book is wrapped around a story of how he learned, observed and distinguished two people making money; rich dad and the poor dad.(I wonder why this book wasn’t titled, “The tale of two dads”! )
His real dad who was highly educated, is called the "Poor Dad". The other, was his best friend Mike's dad, who was an entrepreneur with very little school education. Kiyosaki calls him the "Rich Dad".

Browsing Through Rich Dad, Poor Dad

Lesson 1: The Rich Don’t Work For Money
The book starts off with some appealing stories about two little boys (Kiyosaki and Mike)who are trying to make money. Rich dad teaches the boys priceless lessons on money, by making them learn through experience. Kiyosaki's Poor dad also gave him advice; contradicting advice to Rich Dad. Kiyosaki talks about how he struggled as a kid to choose between the two very different ways of dealing with money.

Lesson 2: Why Teach Financial Literacy? makes his case by stating, the growing gap between rich and poor is rooted in the antiquated educational system. Later he helps the reader understand the difference between an asset and a liability.

Lesson 3: Mind Your Own Business relates his experience of selling photocopiers on commission at Xerox and how he used his earnings to buy real estate. Basically, the message Kiyosaki gives in this chapter is to keep your day job, but start minding your own business!

Lesson 4: The History of Taxes and the Power of Corporations advices you to do your own research and find out what tax laws will bring the best advantages.

Lesson 5: The Rich Invent Money highlights that self-confidence coupled with a high financial IQ, can earn more rather than merely saving a little bit every month. It also urges you to make good use of your time and find the best deals.

Lesson 6: Work to Learn –Don’t Work for Money brings to light, five obstacles to financial independence; Fear, Cynicism, Laziness, Bad Habits and Arrogance. Unlike other chapters this chapter offers you some actionable suggestions on how to deal with it.

My favorite excerpt

Most people never study the subject [money]. They go to work, get their paycheck, balance their checkbooks, and that’s it. On top of that, they wonder why they have money problems. Few realize that it’s their lack of financial education that is the problem.

What this Rich Dad, Poor Dad is NOT

Before I bought this book, I read a fair amount of reviews. Even though the book was a best seller, there were quite a number of critiques. Here's my 2 cents ...

This book doesn't tell people what to do

Fact or fiction

When I initially began reading Rich Dad, Poor Dad, I wondered whether the story portrayed by Kiyosaki was true. Did he really have a “Poor Dad” with such an attitude? I suppose I will never know. The more I read of this book, it didn't really matter whether the story was fact or fiction. He tells a very good story! There is a moral in the story and it definitely teachers you something.

Overall

I found Rich Dad, Poor Dad to be very inspiring. Somehow, I felt that I was reading this book, a few years too late! The book doesn’t overwhelm people with technical jargon. It simply concentrates on the inner being of what it takes to be rich.

I’d recommend this book as an good way to challenge your thinking about work and money, in ways you haven't thought before. However, if you need technical "how to's" and "to do's" in personal finance, this book is not for you.

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Jumat, 28 Desember 2007

Earn More Money With Smorty

Smorty is a service that connects bloggers and advertisers.

How Smorty can benifit you

Bloggers
• You could to write reviews about the campaigns that are offered to you.
• Use the affiliate program and earn some extra dollars

Advertisers
• Advertise on blogs and get as many back links from the them as possible
• Increase your exposure

Payment details
• Smorty assignments generally range from $6 - $15 each
• Payment is done via Paypal, on a weekly basis.

My 2 cents;
• The registering process is very easy. You can join for free. Once the your blog is approved, you can begin your assignments. I was amazed when I received an approval mail within a day.
• The user interface of the website is simple and easy to understand. It will be suited even for someone who just entered the blogging world.
• The requirements of each Smorty assignment is well-explained in detail. The cost for the post is also indicated along with it. Thus, considering the time and the effort spent you can decide whether its worthwhile going ahead with the assignment.
• The payment doesn’t make one too enthusiastic. However, if you have some time on your hands and can write several posts a day… um.. do the calculations!
• If you love making money online using your blog, give Smorty a try and get paid to blog!

Senin, 23 April 2007

Make Money, Not Excuses!

This post is my two cents, based on an article I read over the week-end. It was titled 6 (Worthless) Excuses For Not Saving Money

I found myself nodding, for many of the excuses mentioned. What about you?

Excuse No. 1: I don't make enough
I am sure at some point of life, all of us have said this. You get a pay cheque and even before you know it, POOF it’s gone. That leaves you with a few more weeks to get by, before you get your next pay cheque. Even then, the cycle continues. Sounds familiar?

The human tendency is to always want more. It’s no different with money. One might argue that with the rising inflation and taxes, we NEED more. We DO, we DO!

In spite of salary increments/personal profits, will what we make, ever be enough for us?

Excuse No. 2: I'll get around to it later
Some of us tend to postpone saving. There have been many time, I have said to myself, You are too young to save! Most people, give saving a serious thought, only when retirement is within sight.

Excuse No. 3: I deserve a little luxury in my life
I work so hard, I NEED to reward my self.
If not now, when will I get to enjoy life?

Personally, I think we all deserve a little luxury from time to time. We NEED to go out and have some fun. Yes, you can still save, if you are mindful of the percentage to allocate for “luxury”.

Excuse No. 4: Someone else will take care of it
Depending on your household, you assume that someone else will pay the electricity bill. In the end, you realize that that person was waiting for you to pay the bill and thus, now there is a fine as well.
It is indeed great if you have someone to bare .. ooooops I mean share the bills with. However, make sure that the “ground rules” are laid beforehand.

Excuse No. 5: I'm saving through my 401(k)
No comment on this one!

Excuse No. 6: This item or service will pay for itself
Wouldn’t it be nice if we could use Harry Potter wizardry um… any wizardry for that matter, and wipe away the bills? Dream on… ;-)

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Selasa, 27 Februari 2007

Keep Some Cash Under Your Mattress

When it comes to money matters, I have to admit I know very little. When I started my career I thought as long as I get my monthly pay check I will be ok. A few years down the line I'm thinking if I can pay all the bill and still stay alive… then I will be ok. Just kidding! I few undergraduate (painstaking grrrr) courses have taught me a little more than that!

Anyway, I am always on the look out to further my knowledge on finance matters. As a result I have subscribed to a few good blogs. That's how I came across an interesting post on Why I Keep Cash Under My Mattress written by Trent.
I believe what the he was trying to get through was to have a stack of money at hand. In case of an emergency this would come in handy. Use Credit card, debit card you say? That's what I thought as well.
However, Trent gives some facts you can't ignore. Hurricane Katrina, tsunami of 2004 are a few examples.

Of course the other side of the coin is interest? You will be loosing some interest on the money you keep under your mattress! So I guess at the end of the day, it is up to you decide whether it is worth having some money "under the mattress". If yes, how much.
All in all, the post was a 'tap tap' on my think tank. As a practice do you have some money "under your mattress"? Or do you think it is a waste?

Related Post
10 Questions that Determine your Financial Fitness

Rabu, 10 Januari 2007

10 Questions that Determine your Financial Fitness

December- gifts, holidays, dinners… It sure was a handful. We are into January now, back to routine life and routine spending.

Those of you, who planned your spending wouldn’t probably notice the hole in the wallet. However, for the others, there is still hope.

I read a post at Life Training, which had some useful questions, to shape up your finance fitness. Start exercising ….

#1. Do you pay yourself first? highlights that before you pay any of your bills, you need to set aside a certain amount of money for savings, retirement or investing.

#2. Do you save at least 10% of your income? Um….

#3. Have you set aside a separate emergency fund to cover at least 3-months worth of expenses? True enough, life is double-sided and we need to be prepared to handle the worst of times.

#4. Do you know the exact amount of your debts, as well as the interest rates? At least you know where you stand.

#5. Do you accelerate the payments of your debts? These are the loans, lease etc

#6. Do you have financial goals? This comes under the Ctrl-Alt-Del your life NOW, or you’ll hate yourself later category.

#7. Do you have a record keeping system? Guilty!

#8. Do you live within a budget? Welcome to reality

#9. Do you know your net worth? I am still trying to figure that one out!

#10. Do you put your eggs in different baskets? Which basically means relying only on one form of investment could be a recipe for disaster.

Reading over some of these questions, it did feel like common sense to me. However, when it comes to spending, common sense doesn’t seem to knock on the door! Does that happen only to me? Hm..