How to Want Less Stuff
• Dayana Yochim
We Americans may be tightening our belts, but that doesn't mean
we're happy about it.
We sure love our stuff -- shopping for it, setting it up, displaying it,
and demonstrating its superiority (speed/capacity/color/taste/size)
to the other lesser stuff out there.
Of course, no discussion of stuff is complete without a reference to
George Carlin's famous monologue about it. "The whole meaning
of life is trying to find a place for your stuff," he says. "That's all
your house is ... a pile of stuff with a cover on it." (Watch it here. PG-
13 rating, FYI.)
Good point, George.
• The only reason most people move is to find a bigger place for
their stuff.
• When someone breaks into your house, they're not interested
in your 4th grade mementos. No. They're after the good stuff.
• Stuff is so important to us that an entire industry exists simply
to keep an eye on it.
A while ago my colleague Selena Maranjian wrote about stuff, and
gave advice on how to want less of it. She quotes a nice four-step
system provided by "NaggingFool" from our "Living Below Your
Means" discussion board:
Step 1: Avoid people who want you to want more stuff.
• Throw away catalogs without reading them.
• Don't watch commercials on television.
• Don't read the adverts in the weekly paper.
• Don't hang out in shopping areas for recreation.
Step 2: Realize how much junk you have now, and how much
trouble it is.
• Take a complete inventory of your house contents for
insurance purposes.
• Do a weekly "27-fling boogie" a la Flylady (go through the
house and find twenty seven things that you don't want to keep
anymore).
• Visualize moving all of your stuff to a new home, or your heirs
going through everything after your death.
Step 3: Learn to appreciate the stuff you have.
• Keep warranties.
• Perform basic repair and maintenance.
• Loan things you don't use frequently to other people.
Step 4: Think about what else you might want, instead of more stuff.
Hi ho, it's off to the mall we go anyways
Of course at some point you're going to have to replenish the
pantry, replace some light bulbs, and maybe even buy some stuff
to keep the other stuff you have in good working condition.
Before you reach for your wallet, do some pre-shopping prep so
you acquire only as much stuff as you really need:
Retail Tricks That Make You Overspend
By Dayana Yochim
April 23, 2008 | Comments (1)
Recs
15
Feelings and finances are as inextricable as the smell of popcorn
and the craving for a salty snack. Over the years, we've interviewed
psychologists, economists, CEOs, and investment analysts about
the mood-money connection. Here are a few tricks the brain plays
on our basic math skills, and a few examples of how marketers pull
our heartstrings to loosen our purse strings. As the old saying
goes, buyer beware.
You owe me one
When marketers tap into our natural propensity to return a favor,
the money flows. That's how Tupperware-party participants (plied
with friendly chitchat and free crudites) get swept up in a buying
frenzy.
Bob Cialdini, professor of psychology and author of Influence:
Science and Practice, calls this strategy "reciprocity," and he
illustrates how powerful it can be in practice. When the American
Disabled Veterans organization sent out its standard solicitation, it
got an 18% donation-response rate. When customized address
labels were added to the packet, the contribution rate jumped to
35%. "They become benefactors before they make a request," he
says. "I've gotten this gift with my name on it. As soon as I begin to
use it, I feel obligated to say 'yes' to their request in return."
Buy now or regret later
Flea-market shoppers must make split-second buying decisions.
Savvy mass marketers also play on shoppers' limited-time-only
emotions to encourage unplanned purchases.
Costco CEO Jim Sinegal revealed how the warehouse chain takes
advantage of that mindset. "We refer to it as a treasure hunt. We
carry about 4,000 stock-keeping units, and about 1,000 of them are
constantly in that changing mode. In the past, you may see that we
have some Coach handbags. The next time you come in, the Coach
handbags aren't there, but perhaps there are some Fila jackets. The
attitude is that if you see it, you have got to buy it, because it may
not be there next time." (Guilty!)
Tears cloud your cash decisions
A study in the mid-1990s found that disgust (triggered by showing
a gross scene from the movie Trainspotting) made test subjects
lower their valuation of a commodity, while sadness (brought on by
a weeper clip from The Champ) increased people's value
assessments.
Jennifer Lerner, Ph.D., assistant professor of social and decision
sciences and co-author of the study, explained that when people
are disgusted, they want to get rid of things and avoid acquiring
new things. Sadness, however, drives us to change our
circumstances. "It's out with the old, in with the new," she says.
But in pursuit of "the new," our unhappiness dulls our ability to
assign an accurate value, and we are more likely to pay a premium
for replacement items. In other words, don't shop on an empty
stomach, or after watching Terms of Endearment.
More is better, and cheaper ... right?
Ah yes, the 24-pack of tuna and 280-ounce bag of gummy bears --
tempting, indeed. We haul home so much industrial-sized stuff that
we should be charging it rent. Just remember, too much of a good
thing can actually be a bad thing. The next time you see a
supposed "deal" on something that is not an immediate need, ask
yourself:
• Is it really a deal? Meaning, do you know the prices on similar
products elsewhere, and recognize when the price you're seeing
on the item really is a rare bargain? Pay particular attention to
higher-dollar items like cleaning products, Brita water-pitcher
filters, dog food, or whatever it is that tends to comprise the bulk of
your grocery bill. You'll drive yourself crazy trying to sweat all the
small stuff, so concentrate instead on big-ticket savings.
• Do I really need it -- now or later? It's easy to convince yourself
that you absolutely cannot get by without the shredded Swiffer
thingie that looks like an old-fashioned duster. (Somehow I've
managed to make do without it for this long.) However, particularly
while warehouse shopping, you're likely to run across items you
know will come in handy a month or two down the road. In that
case, stockpiling is fine, so long as you don't forget about those
three tubs of peanut butter already in your pantry the next time
you're at the grocery store.
Now you know how to spot retailers' mind games. And the next
time feelings start invading black-and-white money matters, you'll
be better prepared to decide what's ultimately best for you and
your bottom line.
Get It Done: 5 Ways to Stop Buying Stupid Stuff
By Dayana Yochim
April 23, 2008 | Comments (2)
Recs
22
Shop with a list; compare the per-unit cost; scour the sales
circulars. Been there, tried that. I still waltz out of Target with bags
full of stuff that I didn't intend to buy.
It's no wonder: Two-fers, upgrades, bulk buys, bonus points, door-
buster deals -- they're like magnets for our money.
Costco has the formula down pat. In a Motley Fool interview, CEO
Jim Sinegal copped to purposely merchandising to the impulse-
purchase mind-set. Costco highlights an ever-changing array of
items at the entrance -- from Coach handbags to Fila track suits --
that are probably on no one's shopping list. Yet they end up in a lot
of customers' shopping carts. Sinegal explained, "The attitude is
that if you see it, you have got to buy it, because it may not be there
next time."
Exactly.
So how do you resist the pull of blue-light specials and expertly
orchestrated merchandising? Let's start by talking about your
relationship with your mother.
Start shopping smarter
We're only slightly kidding with that "mother" crack. If you want to
steer your shopping cart -- and your finances -- in the right
direction, you really do need to explore the mind-money
connection. Marketers certainly have.
But you can resist those retail brain-benders. The next time you
reach for your wallet, try one of these five mental money tricks to
help you walk away from the checkout counter with no regrets --
and a fatter wallet.
1. Ignore the source of your spending money
Every dollar is worth a dollar, no matter whether it comes from an
ATM, a great-aunt, or the laundry hamper. Yet people show less
restraint with so-called "found money" (tax refunds, work bonuses,
and inheritances) than they do with funds they earned (paychecks
and babysitting money).
A little accounting amnesia can work wonders for those who tend
to blow through windfall cash. The authors of one of my favorite
books -- Why Smart People Make Big Money Mistakes -- suggest
banking found money for a while before spending a dime. Mingling
the dough with money you worked for mentally converts the cash
into "savings." And you're less likely to treat savings like loot won
with a scratch-off ticket.
2. Sweat the big stuff
Oddly, we're more thoughtful with large-sum unexpected windfalls
than we are with smaller amounts. However, many people have a
blind spot when it comes to spending earned money on big-ticket
items.
According to those surveyed for the book Are You Normal About
Money?, just 8% of us price out a vacation before we hit the road.
Yet the average trip tab -- around $2,300 -- amounts to about 8% of
the average American's annual income.
In everyday shopping terms, it's like spending 20 minutes a week to
find the gas station charging $0.02 less per gallon, but not even
bothering to negotiate the price of the car you're filling up.
Consider the biggest slices of your spending pie, and practice cost-
consciousness where it counts: vacations, transportation, holiday
and home expenses, or cosmetic dentistry. Comparison-shopping
in these categories can save you some serious cash.
That said, don't dismiss those seemingly small money decisions
outright. A few percentage points of interest on your credit card or
checking account, or paying a few bucks more per stock trade,
may not sound like much, but they add up.
3. Comparison-shop with skepticism
On the lookout for rock-bottom prices? Put on your blinders. In an
oft-cited experiment by two Berkeley business school professors,
shoppers given the choice between two microwaves -- a low-end
and midrange option -- split nearly equally down the middle, with
43% choosing the more expensive oven. But when a pricier
alternative was added to the mix, the majority of shoppers (60%)
decided the mid-range microwave was the best deal.
Academics call this "extremeness aversion" -- wary of alternatives
at both ends of the price spectrum, even the bargain hunters
decide to trade up. The resulting budget creep occurs on
everything from cars to cameras to coffee.
To avoid this Jedi money mind trick, stay focused. Weigh the merits
of each product independently. Pick your must-have features and a
target price range. Compare like with like -- and erase from your
mind the alternatives that don't fit your criteria.
4. Keep separate tabs
"What's another $[fill in the blank] when I'm already spending $[fill
in the blank]?" Contractors, car salesmen, and electronics store
clerks bank on this kind of faulty thinking. In the context of a larger
purchase, somehow $300 cup holders and $3,000 Corian
countertops start to make sense.
Don't let upgrades and add-ons pad your tab. Instead, consider
each option separately, and ask yourself if you'd pay $[fill in the
blank] were you shopping solely for that item.
5. Leave home without your credit card
It's easy -- too easy -- to pay with plastic. That's why the price of
credit card convenience is higher than that of cash. Yes, even if you
pay your credit card bill in full every month.
Studies show that people spend more -- and more stupidly -- when
no actual cash changes hands. We succumb to impulse buys (an
estimated 59% of grocery store purchases are not planned) and
even tip more at restaurants when we put the tab on plastic.
Smart People/Big Mistakes authors Gary Belsky and Thomas
Gilovich say that plastic makes us devalue what we spend because
we don't experience the immediate loss of buying power that we do
when we pay with cash. Like Vegas gambling chips, credit cards
mask the tangible aspects of spending money. (Quick gut check:
Visualize the difference between handing the cashier $40 of the $80
in your pocket versus putting it on your card. Feel the pain?)
Pay only in cash, and you'll likely see a dip in your daily
expenditures. Imagine the results after an entire year. Now that's a
rewards program Visa and MasterCard can't match.
How-to Guide: Spend Smarter
By Dayana Yochim
April 28, 2008 | Comments (4)
Recs
5
Put the car keys down. Don't flip through the Sunday sales
circulars or fire up the Net just yet. It's time to learn how to shop like
a Fool.
If you want to save some significant coin on your retail expeditions,
you first need a game plan. Even if you're rarin' to score deals on
every last item on your shopping list, trying to do so will no doubt
result in extreme retail fatigue.
The most evolved shopper-gatherers concentrate their effort on the
biggest prey. They've done the math: 20% off a $500 item nets $90
more than what they'd save scoring the same discount on a $50
trinket.
However, this basic rule of retail eludes the majority of consumers.
Instead, we clip coupons for canned soda, look for the generic
brand of our favorite cereal, and wait until the end of summer to
score half-priced swimming trunks. And then we're too tuckered
out to save money on the things that will put some serious cash
back in our pockets.
Consider the biggest slices of your spending pie, and practice cost
consciousness where it counts: vacations, transportation, holiday
and home expenses, and electronics. Really planning a shopping
strategy to procure these items could save you some serious cash.
Get it done: Plan your next big purchases
Before you scratch that retail itch, you need to devote some time to
composing a shopping list like no other.
1. Compile a major purchase shopping list: Depending on your
budgetary constraints and the time you're willing to devote to cost-
cutting work up front, start off by defining what a major purchase
entails for you -- for example, it might be anything that costs more
than $100, or $1,000.
2. Organize your wish list: Separate the items based on the time
frame in which you intend to buy them. Which purchases do you
plan to make during the next month? The next three to six months?
The next six months to one year? More than a year from now?
Remember, this is not a shopping agenda set in stone.
Circumstances and needs change, so keep an eraser handy.
3. Make a list of must-have features: Take a first crack at compiling
each item's features that you absolutely cannot do without. (This is
more essential with complex products and services than it is for
ones that have no moving parts and limited color and size options.)
Bonus points for ranking them in order of importance. While you're
at it, jot down the gadgets and add-ons that you really don't need.
Doing so will help you stay strong when the salesperson puts on
the hard sell.
4. Pick a price range: Again, committing this item to paper in this
initial stage helps you keep your resolve while others fall under the
gleaming trance of whistles, chrome, and blinking lights.
Congratulations! You've now shielded yourself from the flurry of
marketing madness designed to get you to buy bigger, stronger,
faster, and shinier things than what you really need.
Still, in the face of retail might, even those with the strongest
resolve get weak-kneed when the lighting and mood music are
right. Don't fret. We have advice on how to resist the most dastardly
of retail tricks -- the impulse purchase.
Get it done: Three tricks to curb the urge to splurge
The key to keeping your mind from playing tricks on you and your
wallet is to master an emotion-free, neutral frame of mind during
every shopping foray. Doing so prevents those mind games from
invading black-and-white money decisions. Maintain this detached
state with three simple tricks:
1. Fend off "the wants": Kids aren't the only ones who scream "I
want! I want!" from the supermarket aisles. A little voice in all of our
heads can be as stubborn as a toddler in a candy store. When you
see a supposed deal on something that is not an immediate need,
ask yourself two questions:
• Is it really a deal? Do you know the prices on similar products
elsewhere and recognize when the price you're seeing on the item
is really a rare bargain?
• Do you really need it -- now or later? It's easy to convince
yourself that you absolutely cannot get by without the latest and
greatest thingamajig. Yet somehow you've survived up until now
without it. If you do run across an item that you know will come in
handy a month or two down the road, pick it up, so long as the next
time you're at the grocery store you don't forget about those three
tubs of peanut butter already in your pantry. One way to control the
"once-in-a-lifetime" bargain temptation is to keep with you a list of
long-term items that you need.
2. Keep separate tabs: "What's another $50 when I'm already
spending $500?" Contractors, car salespeople, and electronics-
store clerks bank on this kind of faulty thinking. In the context of a
larger purchase, somehow $300 cupholders and $3,000 Corian
countertops start to make sense. Don't let upgrades and add-ons
pad your tab. Instead, consider each option separately and ask
yourself whether you'd pay that same amount were you shopping
solely for that item.
3. Leave home without your credit card: It's easy -- too easy -- to
pay with plastic. Studies show that people spend more -- and more
impulsively -- when no actual cash changes hands. Gary Belsky
and Thomas Gilovich, authors of Why Smart People Make Big
Mistakes and How to Correct Them, say that plastic makes us
devalue what we spend because we don't experience the
immediate loss of buying power that we do when we pay with cash.
Like Vegas gambling chips, credit cards mask the tangible aspects
of spending money. (Quick gut check: Visualize the difference
between handing the cashier $40 of the $80 cash in your pocket
versus putting it on your card. Feel the pain?)
Pay in cash only, and you'll probably see a dip in your daily
expenditures. Imagine the results after an entire year. Now that's a
rewards program that the credit card companies can't match.
Ready? Set? Shop!
With your emotions in check and a map to the retail minefield in
hand, you're ready to tackle that shopping list like a pro buyer. An
informed consumer can steer a shopping cart with confidence. So
get ready to play ball.
1. Do some retail recon: Shopping before you go shopping might
sound redundant, but the only way to spot the difference between
a deal and a dud is by doing some retail reconnaissance work.
Many ads leave out an item's original price and simply scream out
the sale cost. Get to know the pricing history of the items on your
wish list. Keep a folder for sales circulars on items of interest.
2. Make merchants play good cop/bad cop: After you've done your
research, you may have already identified the retailer that has the
item you want at the best price. But you might be able to do better.
Flash your cash and a competitor's lower advertised price (you'll
need physical proof) and ask whether the merchant can match the
offer or do better. Don't get too cocky, though. Most will honor
coupons or sale prices only if they have the exact item in stock. It's
all about finding the right salesperson and being willing to settle for
your second-best option.
3. Don't dismiss small chains and mom-and-pop stores: Many
smaller chains and independent stores will meet or beat a big-box
retailer's advertised price or provide free add-ons when presented
with firm evidence and a ready purchaser. Service at such stores is
often better than at the big chains, too.
4. Ask about other ways to save: Don't be shy. Chat up a sales
clerk and ask when an item will go on sale or find out whether
there's a price break for using cash or buying multiples. And if you
have a coupon, go ahead and present it -- even if it is expired. You
might be surprised how many stores will gladly accept it anyway.
5. Don't get suckered by the upsell: When it comes to most
electronics, skip the extended warranty, which can pad the price of
the item by 10% to 30%. With just a few exceptions -- such as
treadmills and big-screen plasma TVs -- warranties are rarely worth
the extra price. If you feel the need to purchase extra protection,
pay no more than 15% of the product's price, and buy the
manufacturer's warranty, not the store's version.
6. Reread return and exchange policies around the holidays:
Holiday return/exchange policies become more labyrinthine every
season. Restocking fees (particularly on electronics purchases) are
commonplace -- last year, Target, Circuit City, and Best Buy
charged 15% to return many items. Some stores have instituted
tighter deadlines on holiday refunds and exchanges and may give
you credit only for an item's post-holiday price. And some retailers
like to crack down on frequent-return shoppers by limiting the
number of returns you can make within a certain period of time.
Christmas in July has never sounded better, eh?
Quick tips: Rebuy for holiday savings
Holiday shopping may not be your favorite sport. But if you leave it
to the last minute, you could miss out on some bona fide bargains.
Get a jump on the competition by checking out Black Friday
websites (including BlackFridayAds.com, bfads.net, and Gottadeal.
com) all season for a sneak peek at special promotions. Here's a
trick for avoiding the crowds and limited availability of advertised
products: Buy the item before the sale and return on the day of the
sale for a price adjustment for the difference. Warning, though:
Retailers are becoming a lot stricter about their return policies
around the holidays, so don't assume that the same old rules
apply. Scour the return policy with care, and be nice to the sales
clerks.
Let your fingertips do the browsing
No trip to an outlet mall can match the breadth of product choices
you can pull up on your computer screen. A crash course in your
options is particularly useful if you're shopping for a complex
product -- anything with a plug, for example. Plus, there are plenty
of satisfied and unsatisfied consumers posting product reviews
online.
Here's how to navigate the Web retail bonanza without getting
overwhelmed.
1. Check out comparison-shopping tools: Sites such as
Coolsavings.com, Shopzilla.com, Streetprices.com, and Dealnews.
com's companion sites offer tools to compare prices.
2. Re-sort and revisit: Some comparison websites deliver results
that are skewed by ad dollars -- in other words, the stores that pay
for placement get top billing or activated links to their storefront.
Try loading results based on price, location, or rating to get a full
picture of your options.
3. Go to the source: To capture results from retailers that may not
be included in comparison sites and to check on the latest
promotions, type in the URL of the store directly.
4. Erase your electronic footprints: Delete all cookies from your
browser and search again another day. You want to make sure
you're getting as good a price on an item as a first-time visitor to
the website would. Some e-tailers serve up your old search results
(and old prices) to those who have browsed there before.
5. Compare clicks and mortar: Does your favorite store have an
online outlet? Sign up for its newsletter for advance notice of sales
and subscriber-only coupons. You should also compare online and
offline prices, because they aren't always identical.
6. Get a rebate for your spending: Many websites make money
when they refer you to a particular online shopping site. A few sites
let browsers -- that's you -- in on the deal by offering a cut of the
referral fee. Check out ebates.com and MrRebates.com. To get the
dough, you need only register with the site and use its link to the
destination store. However, before you click "buy," you have one
last stop for savings ...
7. Crack the code: If you shop online, don't leave money on the
table by leaving the "enter promotional code here" box blank. Get
the scoop on possible savings at sites such as Currentcodes.com,
CouponCabin.com, and RetailMeNot.com. Or type in the retailer's
name and "coupon code" in your search engine to see what offers
pop up.
Turn bad purchases into cash
There's nothing worse than the tangible reminder of an unwise
purchase. Hanging in your closet with the tags still on or lingering
on your credit card statement, retail blunders are a bummer.
If you are unable to return an item for whatever reason, the game
isn't over just yet. Here's how to get rid of the evidence and
possibly get a little something back, too.
1. Swap it: Several websites let holders of unwanted gift cards to
sell or trade them. Listing is usually free, but you'll pay a fee if your
card sells -- anywhere from $1 to a percentage of the gift card's face
value. Check out swapagift.com, CertificateSwap.com, and
Cardavenue.com. CDs, DVDs, and video games are swappable at
zunafish.com for a $1 fee (plus shipping costs).
2. Sell it: You don't need to set up shop on the front porch to hawk
stuff you no longer want or didn't need in the first place. Try your
hand at copywriting and keyword-picking at sites such as eBay,
Amazon.com's Marketplace, and Half.com (also owned by eBay). If
you don't want to give these folks a cut for providing a selling
platform, head to Craigslist. This online version of the local town
crier offers free listings and person-to-person transactions.
For those who prefer not to deal directly with the bargain-clicking
public, take your choice items (brand names and designer labels, in
particular) to a local consignment store. The folks there usually
take a 50% to 60% cut of the final selling price. But getting $25 for a
tweed Polo blazer is better than letting it take up precious closet
space.
3. Deduct it: The easiest thing to do with unwanted merchandise is
to give it away or donate it to charity. However, doing the latter isn't
as simple as in years past, when you dropped off a bag and
grabbed a blank donation receipt. The IRS now requires that any
noncash charitable contributions must be in "good used condition
or better" to qualify as a deduction. If the tags are still on the
reindeer cardigan from Aunt Ida, chances are it'll qualify. However,
to avoid trouble with the tax man, Fool tax guru Roy Lewis advises
his clients to take digital photos of everything donated and
reference their current condition. Check out the Salvation Army
valuation site to find out how much you can write off for common
household items.
4. Regift it: Finally, when all else fails, there's always that regifting
closet to stock. Nearly one in four of us admits to passing off
unwanted gifts to others. Just make sure it's done tastefully and
that you give us something that we really, really like.
Conclusion
Smart shopping may seem like a constant battle against the
marketing machine, but remember that the ultimate reward is in
what you do with the savings you've earned. By saving on big
purchases, you free up cash for other pursuits -- college for your
kids, an early retirement, vacation with the family, or a down
payment on a house. That's something that only you can create --
so it's worth your time now to save for your future.
• Dayana Yochim
We Americans may be tightening our belts, but that doesn't mean
we're happy about it.
We sure love our stuff -- shopping for it, setting it up, displaying it,
and demonstrating its superiority (speed/capacity/color/taste/size)
to the other lesser stuff out there.
Of course, no discussion of stuff is complete without a reference to
George Carlin's famous monologue about it. "The whole meaning
of life is trying to find a place for your stuff," he says. "That's all
your house is ... a pile of stuff with a cover on it." (Watch it here. PG-
13 rating, FYI.)
Good point, George.
• The only reason most people move is to find a bigger place for
their stuff.
• When someone breaks into your house, they're not interested
in your 4th grade mementos. No. They're after the good stuff.
• Stuff is so important to us that an entire industry exists simply
to keep an eye on it.
A while ago my colleague Selena Maranjian wrote about stuff, and
gave advice on how to want less of it. She quotes a nice four-step
system provided by "NaggingFool" from our "Living Below Your
Means" discussion board:
Step 1: Avoid people who want you to want more stuff.
• Throw away catalogs without reading them.
• Don't watch commercials on television.
• Don't read the adverts in the weekly paper.
• Don't hang out in shopping areas for recreation.
Step 2: Realize how much junk you have now, and how much
trouble it is.
• Take a complete inventory of your house contents for
insurance purposes.
• Do a weekly "27-fling boogie" a la Flylady (go through the
house and find twenty seven things that you don't want to keep
anymore).
• Visualize moving all of your stuff to a new home, or your heirs
going through everything after your death.
Step 3: Learn to appreciate the stuff you have.
• Keep warranties.
• Perform basic repair and maintenance.
• Loan things you don't use frequently to other people.
Step 4: Think about what else you might want, instead of more stuff.
Hi ho, it's off to the mall we go anyways
Of course at some point you're going to have to replenish the
pantry, replace some light bulbs, and maybe even buy some stuff
to keep the other stuff you have in good working condition.
Before you reach for your wallet, do some pre-shopping prep so
you acquire only as much stuff as you really need:
Retail Tricks That Make You Overspend
By Dayana Yochim
April 23, 2008 | Comments (1)
Recs
15
Feelings and finances are as inextricable as the smell of popcorn
and the craving for a salty snack. Over the years, we've interviewed
psychologists, economists, CEOs, and investment analysts about
the mood-money connection. Here are a few tricks the brain plays
on our basic math skills, and a few examples of how marketers pull
our heartstrings to loosen our purse strings. As the old saying
goes, buyer beware.
You owe me one
When marketers tap into our natural propensity to return a favor,
the money flows. That's how Tupperware-party participants (plied
with friendly chitchat and free crudites) get swept up in a buying
frenzy.
Bob Cialdini, professor of psychology and author of Influence:
Science and Practice, calls this strategy "reciprocity," and he
illustrates how powerful it can be in practice. When the American
Disabled Veterans organization sent out its standard solicitation, it
got an 18% donation-response rate. When customized address
labels were added to the packet, the contribution rate jumped to
35%. "They become benefactors before they make a request," he
says. "I've gotten this gift with my name on it. As soon as I begin to
use it, I feel obligated to say 'yes' to their request in return."
Buy now or regret later
Flea-market shoppers must make split-second buying decisions.
Savvy mass marketers also play on shoppers' limited-time-only
emotions to encourage unplanned purchases.
Costco CEO Jim Sinegal revealed how the warehouse chain takes
advantage of that mindset. "We refer to it as a treasure hunt. We
carry about 4,000 stock-keeping units, and about 1,000 of them are
constantly in that changing mode. In the past, you may see that we
have some Coach handbags. The next time you come in, the Coach
handbags aren't there, but perhaps there are some Fila jackets. The
attitude is that if you see it, you have got to buy it, because it may
not be there next time." (Guilty!)
Tears cloud your cash decisions
A study in the mid-1990s found that disgust (triggered by showing
a gross scene from the movie Trainspotting) made test subjects
lower their valuation of a commodity, while sadness (brought on by
a weeper clip from The Champ) increased people's value
assessments.
Jennifer Lerner, Ph.D., assistant professor of social and decision
sciences and co-author of the study, explained that when people
are disgusted, they want to get rid of things and avoid acquiring
new things. Sadness, however, drives us to change our
circumstances. "It's out with the old, in with the new," she says.
But in pursuit of "the new," our unhappiness dulls our ability to
assign an accurate value, and we are more likely to pay a premium
for replacement items. In other words, don't shop on an empty
stomach, or after watching Terms of Endearment.
More is better, and cheaper ... right?
Ah yes, the 24-pack of tuna and 280-ounce bag of gummy bears --
tempting, indeed. We haul home so much industrial-sized stuff that
we should be charging it rent. Just remember, too much of a good
thing can actually be a bad thing. The next time you see a
supposed "deal" on something that is not an immediate need, ask
yourself:
• Is it really a deal? Meaning, do you know the prices on similar
products elsewhere, and recognize when the price you're seeing
on the item really is a rare bargain? Pay particular attention to
higher-dollar items like cleaning products, Brita water-pitcher
filters, dog food, or whatever it is that tends to comprise the bulk of
your grocery bill. You'll drive yourself crazy trying to sweat all the
small stuff, so concentrate instead on big-ticket savings.
• Do I really need it -- now or later? It's easy to convince yourself
that you absolutely cannot get by without the shredded Swiffer
thingie that looks like an old-fashioned duster. (Somehow I've
managed to make do without it for this long.) However, particularly
while warehouse shopping, you're likely to run across items you
know will come in handy a month or two down the road. In that
case, stockpiling is fine, so long as you don't forget about those
three tubs of peanut butter already in your pantry the next time
you're at the grocery store.
Now you know how to spot retailers' mind games. And the next
time feelings start invading black-and-white money matters, you'll
be better prepared to decide what's ultimately best for you and
your bottom line.
Get It Done: 5 Ways to Stop Buying Stupid Stuff
By Dayana Yochim
April 23, 2008 | Comments (2)
Recs
22
Shop with a list; compare the per-unit cost; scour the sales
circulars. Been there, tried that. I still waltz out of Target with bags
full of stuff that I didn't intend to buy.
It's no wonder: Two-fers, upgrades, bulk buys, bonus points, door-
buster deals -- they're like magnets for our money.
Costco has the formula down pat. In a Motley Fool interview, CEO
Jim Sinegal copped to purposely merchandising to the impulse-
purchase mind-set. Costco highlights an ever-changing array of
items at the entrance -- from Coach handbags to Fila track suits --
that are probably on no one's shopping list. Yet they end up in a lot
of customers' shopping carts. Sinegal explained, "The attitude is
that if you see it, you have got to buy it, because it may not be there
next time."
Exactly.
So how do you resist the pull of blue-light specials and expertly
orchestrated merchandising? Let's start by talking about your
relationship with your mother.
Start shopping smarter
We're only slightly kidding with that "mother" crack. If you want to
steer your shopping cart -- and your finances -- in the right
direction, you really do need to explore the mind-money
connection. Marketers certainly have.
But you can resist those retail brain-benders. The next time you
reach for your wallet, try one of these five mental money tricks to
help you walk away from the checkout counter with no regrets --
and a fatter wallet.
1. Ignore the source of your spending money
Every dollar is worth a dollar, no matter whether it comes from an
ATM, a great-aunt, or the laundry hamper. Yet people show less
restraint with so-called "found money" (tax refunds, work bonuses,
and inheritances) than they do with funds they earned (paychecks
and babysitting money).
A little accounting amnesia can work wonders for those who tend
to blow through windfall cash. The authors of one of my favorite
books -- Why Smart People Make Big Money Mistakes -- suggest
banking found money for a while before spending a dime. Mingling
the dough with money you worked for mentally converts the cash
into "savings." And you're less likely to treat savings like loot won
with a scratch-off ticket.
2. Sweat the big stuff
Oddly, we're more thoughtful with large-sum unexpected windfalls
than we are with smaller amounts. However, many people have a
blind spot when it comes to spending earned money on big-ticket
items.
According to those surveyed for the book Are You Normal About
Money?, just 8% of us price out a vacation before we hit the road.
Yet the average trip tab -- around $2,300 -- amounts to about 8% of
the average American's annual income.
In everyday shopping terms, it's like spending 20 minutes a week to
find the gas station charging $0.02 less per gallon, but not even
bothering to negotiate the price of the car you're filling up.
Consider the biggest slices of your spending pie, and practice cost-
consciousness where it counts: vacations, transportation, holiday
and home expenses, or cosmetic dentistry. Comparison-shopping
in these categories can save you some serious cash.
That said, don't dismiss those seemingly small money decisions
outright. A few percentage points of interest on your credit card or
checking account, or paying a few bucks more per stock trade,
may not sound like much, but they add up.
3. Comparison-shop with skepticism
On the lookout for rock-bottom prices? Put on your blinders. In an
oft-cited experiment by two Berkeley business school professors,
shoppers given the choice between two microwaves -- a low-end
and midrange option -- split nearly equally down the middle, with
43% choosing the more expensive oven. But when a pricier
alternative was added to the mix, the majority of shoppers (60%)
decided the mid-range microwave was the best deal.
Academics call this "extremeness aversion" -- wary of alternatives
at both ends of the price spectrum, even the bargain hunters
decide to trade up. The resulting budget creep occurs on
everything from cars to cameras to coffee.
To avoid this Jedi money mind trick, stay focused. Weigh the merits
of each product independently. Pick your must-have features and a
target price range. Compare like with like -- and erase from your
mind the alternatives that don't fit your criteria.
4. Keep separate tabs
"What's another $[fill in the blank] when I'm already spending $[fill
in the blank]?" Contractors, car salesmen, and electronics store
clerks bank on this kind of faulty thinking. In the context of a larger
purchase, somehow $300 cup holders and $3,000 Corian
countertops start to make sense.
Don't let upgrades and add-ons pad your tab. Instead, consider
each option separately, and ask yourself if you'd pay $[fill in the
blank] were you shopping solely for that item.
5. Leave home without your credit card
It's easy -- too easy -- to pay with plastic. That's why the price of
credit card convenience is higher than that of cash. Yes, even if you
pay your credit card bill in full every month.
Studies show that people spend more -- and more stupidly -- when
no actual cash changes hands. We succumb to impulse buys (an
estimated 59% of grocery store purchases are not planned) and
even tip more at restaurants when we put the tab on plastic.
Smart People/Big Mistakes authors Gary Belsky and Thomas
Gilovich say that plastic makes us devalue what we spend because
we don't experience the immediate loss of buying power that we do
when we pay with cash. Like Vegas gambling chips, credit cards
mask the tangible aspects of spending money. (Quick gut check:
Visualize the difference between handing the cashier $40 of the $80
in your pocket versus putting it on your card. Feel the pain?)
Pay only in cash, and you'll likely see a dip in your daily
expenditures. Imagine the results after an entire year. Now that's a
rewards program Visa and MasterCard can't match.
How-to Guide: Spend Smarter
By Dayana Yochim
April 28, 2008 | Comments (4)
Recs
5
Put the car keys down. Don't flip through the Sunday sales
circulars or fire up the Net just yet. It's time to learn how to shop like
a Fool.
If you want to save some significant coin on your retail expeditions,
you first need a game plan. Even if you're rarin' to score deals on
every last item on your shopping list, trying to do so will no doubt
result in extreme retail fatigue.
The most evolved shopper-gatherers concentrate their effort on the
biggest prey. They've done the math: 20% off a $500 item nets $90
more than what they'd save scoring the same discount on a $50
trinket.
However, this basic rule of retail eludes the majority of consumers.
Instead, we clip coupons for canned soda, look for the generic
brand of our favorite cereal, and wait until the end of summer to
score half-priced swimming trunks. And then we're too tuckered
out to save money on the things that will put some serious cash
back in our pockets.
Consider the biggest slices of your spending pie, and practice cost
consciousness where it counts: vacations, transportation, holiday
and home expenses, and electronics. Really planning a shopping
strategy to procure these items could save you some serious cash.
Get it done: Plan your next big purchases
Before you scratch that retail itch, you need to devote some time to
composing a shopping list like no other.
1. Compile a major purchase shopping list: Depending on your
budgetary constraints and the time you're willing to devote to cost-
cutting work up front, start off by defining what a major purchase
entails for you -- for example, it might be anything that costs more
than $100, or $1,000.
2. Organize your wish list: Separate the items based on the time
frame in which you intend to buy them. Which purchases do you
plan to make during the next month? The next three to six months?
The next six months to one year? More than a year from now?
Remember, this is not a shopping agenda set in stone.
Circumstances and needs change, so keep an eraser handy.
3. Make a list of must-have features: Take a first crack at compiling
each item's features that you absolutely cannot do without. (This is
more essential with complex products and services than it is for
ones that have no moving parts and limited color and size options.)
Bonus points for ranking them in order of importance. While you're
at it, jot down the gadgets and add-ons that you really don't need.
Doing so will help you stay strong when the salesperson puts on
the hard sell.
4. Pick a price range: Again, committing this item to paper in this
initial stage helps you keep your resolve while others fall under the
gleaming trance of whistles, chrome, and blinking lights.
Congratulations! You've now shielded yourself from the flurry of
marketing madness designed to get you to buy bigger, stronger,
faster, and shinier things than what you really need.
Still, in the face of retail might, even those with the strongest
resolve get weak-kneed when the lighting and mood music are
right. Don't fret. We have advice on how to resist the most dastardly
of retail tricks -- the impulse purchase.
Get it done: Three tricks to curb the urge to splurge
The key to keeping your mind from playing tricks on you and your
wallet is to master an emotion-free, neutral frame of mind during
every shopping foray. Doing so prevents those mind games from
invading black-and-white money decisions. Maintain this detached
state with three simple tricks:
1. Fend off "the wants": Kids aren't the only ones who scream "I
want! I want!" from the supermarket aisles. A little voice in all of our
heads can be as stubborn as a toddler in a candy store. When you
see a supposed deal on something that is not an immediate need,
ask yourself two questions:
• Is it really a deal? Do you know the prices on similar products
elsewhere and recognize when the price you're seeing on the item
is really a rare bargain?
• Do you really need it -- now or later? It's easy to convince
yourself that you absolutely cannot get by without the latest and
greatest thingamajig. Yet somehow you've survived up until now
without it. If you do run across an item that you know will come in
handy a month or two down the road, pick it up, so long as the next
time you're at the grocery store you don't forget about those three
tubs of peanut butter already in your pantry. One way to control the
"once-in-a-lifetime" bargain temptation is to keep with you a list of
long-term items that you need.
2. Keep separate tabs: "What's another $50 when I'm already
spending $500?" Contractors, car salespeople, and electronics-
store clerks bank on this kind of faulty thinking. In the context of a
larger purchase, somehow $300 cupholders and $3,000 Corian
countertops start to make sense. Don't let upgrades and add-ons
pad your tab. Instead, consider each option separately and ask
yourself whether you'd pay that same amount were you shopping
solely for that item.
3. Leave home without your credit card: It's easy -- too easy -- to
pay with plastic. Studies show that people spend more -- and more
impulsively -- when no actual cash changes hands. Gary Belsky
and Thomas Gilovich, authors of Why Smart People Make Big
Mistakes and How to Correct Them, say that plastic makes us
devalue what we spend because we don't experience the
immediate loss of buying power that we do when we pay with cash.
Like Vegas gambling chips, credit cards mask the tangible aspects
of spending money. (Quick gut check: Visualize the difference
between handing the cashier $40 of the $80 cash in your pocket
versus putting it on your card. Feel the pain?)
Pay in cash only, and you'll probably see a dip in your daily
expenditures. Imagine the results after an entire year. Now that's a
rewards program that the credit card companies can't match.
Ready? Set? Shop!
With your emotions in check and a map to the retail minefield in
hand, you're ready to tackle that shopping list like a pro buyer. An
informed consumer can steer a shopping cart with confidence. So
get ready to play ball.
1. Do some retail recon: Shopping before you go shopping might
sound redundant, but the only way to spot the difference between
a deal and a dud is by doing some retail reconnaissance work.
Many ads leave out an item's original price and simply scream out
the sale cost. Get to know the pricing history of the items on your
wish list. Keep a folder for sales circulars on items of interest.
2. Make merchants play good cop/bad cop: After you've done your
research, you may have already identified the retailer that has the
item you want at the best price. But you might be able to do better.
Flash your cash and a competitor's lower advertised price (you'll
need physical proof) and ask whether the merchant can match the
offer or do better. Don't get too cocky, though. Most will honor
coupons or sale prices only if they have the exact item in stock. It's
all about finding the right salesperson and being willing to settle for
your second-best option.
3. Don't dismiss small chains and mom-and-pop stores: Many
smaller chains and independent stores will meet or beat a big-box
retailer's advertised price or provide free add-ons when presented
with firm evidence and a ready purchaser. Service at such stores is
often better than at the big chains, too.
4. Ask about other ways to save: Don't be shy. Chat up a sales
clerk and ask when an item will go on sale or find out whether
there's a price break for using cash or buying multiples. And if you
have a coupon, go ahead and present it -- even if it is expired. You
might be surprised how many stores will gladly accept it anyway.
5. Don't get suckered by the upsell: When it comes to most
electronics, skip the extended warranty, which can pad the price of
the item by 10% to 30%. With just a few exceptions -- such as
treadmills and big-screen plasma TVs -- warranties are rarely worth
the extra price. If you feel the need to purchase extra protection,
pay no more than 15% of the product's price, and buy the
manufacturer's warranty, not the store's version.
6. Reread return and exchange policies around the holidays:
Holiday return/exchange policies become more labyrinthine every
season. Restocking fees (particularly on electronics purchases) are
commonplace -- last year, Target, Circuit City, and Best Buy
charged 15% to return many items. Some stores have instituted
tighter deadlines on holiday refunds and exchanges and may give
you credit only for an item's post-holiday price. And some retailers
like to crack down on frequent-return shoppers by limiting the
number of returns you can make within a certain period of time.
Christmas in July has never sounded better, eh?
Quick tips: Rebuy for holiday savings
Holiday shopping may not be your favorite sport. But if you leave it
to the last minute, you could miss out on some bona fide bargains.
Get a jump on the competition by checking out Black Friday
websites (including BlackFridayAds.com, bfads.net, and Gottadeal.
com) all season for a sneak peek at special promotions. Here's a
trick for avoiding the crowds and limited availability of advertised
products: Buy the item before the sale and return on the day of the
sale for a price adjustment for the difference. Warning, though:
Retailers are becoming a lot stricter about their return policies
around the holidays, so don't assume that the same old rules
apply. Scour the return policy with care, and be nice to the sales
clerks.
Let your fingertips do the browsing
No trip to an outlet mall can match the breadth of product choices
you can pull up on your computer screen. A crash course in your
options is particularly useful if you're shopping for a complex
product -- anything with a plug, for example. Plus, there are plenty
of satisfied and unsatisfied consumers posting product reviews
online.
Here's how to navigate the Web retail bonanza without getting
overwhelmed.
1. Check out comparison-shopping tools: Sites such as
Coolsavings.com, Shopzilla.com, Streetprices.com, and Dealnews.
com's companion sites offer tools to compare prices.
2. Re-sort and revisit: Some comparison websites deliver results
that are skewed by ad dollars -- in other words, the stores that pay
for placement get top billing or activated links to their storefront.
Try loading results based on price, location, or rating to get a full
picture of your options.
3. Go to the source: To capture results from retailers that may not
be included in comparison sites and to check on the latest
promotions, type in the URL of the store directly.
4. Erase your electronic footprints: Delete all cookies from your
browser and search again another day. You want to make sure
you're getting as good a price on an item as a first-time visitor to
the website would. Some e-tailers serve up your old search results
(and old prices) to those who have browsed there before.
5. Compare clicks and mortar: Does your favorite store have an
online outlet? Sign up for its newsletter for advance notice of sales
and subscriber-only coupons. You should also compare online and
offline prices, because they aren't always identical.
6. Get a rebate for your spending: Many websites make money
when they refer you to a particular online shopping site. A few sites
let browsers -- that's you -- in on the deal by offering a cut of the
referral fee. Check out ebates.com and MrRebates.com. To get the
dough, you need only register with the site and use its link to the
destination store. However, before you click "buy," you have one
last stop for savings ...
7. Crack the code: If you shop online, don't leave money on the
table by leaving the "enter promotional code here" box blank. Get
the scoop on possible savings at sites such as Currentcodes.com,
CouponCabin.com, and RetailMeNot.com. Or type in the retailer's
name and "coupon code" in your search engine to see what offers
pop up.
Turn bad purchases into cash
There's nothing worse than the tangible reminder of an unwise
purchase. Hanging in your closet with the tags still on or lingering
on your credit card statement, retail blunders are a bummer.
If you are unable to return an item for whatever reason, the game
isn't over just yet. Here's how to get rid of the evidence and
possibly get a little something back, too.
1. Swap it: Several websites let holders of unwanted gift cards to
sell or trade them. Listing is usually free, but you'll pay a fee if your
card sells -- anywhere from $1 to a percentage of the gift card's face
value. Check out swapagift.com, CertificateSwap.com, and
Cardavenue.com. CDs, DVDs, and video games are swappable at
zunafish.com for a $1 fee (plus shipping costs).
2. Sell it: You don't need to set up shop on the front porch to hawk
stuff you no longer want or didn't need in the first place. Try your
hand at copywriting and keyword-picking at sites such as eBay,
Amazon.com's Marketplace, and Half.com (also owned by eBay). If
you don't want to give these folks a cut for providing a selling
platform, head to Craigslist. This online version of the local town
crier offers free listings and person-to-person transactions.
For those who prefer not to deal directly with the bargain-clicking
public, take your choice items (brand names and designer labels, in
particular) to a local consignment store. The folks there usually
take a 50% to 60% cut of the final selling price. But getting $25 for a
tweed Polo blazer is better than letting it take up precious closet
space.
3. Deduct it: The easiest thing to do with unwanted merchandise is
to give it away or donate it to charity. However, doing the latter isn't
as simple as in years past, when you dropped off a bag and
grabbed a blank donation receipt. The IRS now requires that any
noncash charitable contributions must be in "good used condition
or better" to qualify as a deduction. If the tags are still on the
reindeer cardigan from Aunt Ida, chances are it'll qualify. However,
to avoid trouble with the tax man, Fool tax guru Roy Lewis advises
his clients to take digital photos of everything donated and
reference their current condition. Check out the Salvation Army
valuation site to find out how much you can write off for common
household items.
4. Regift it: Finally, when all else fails, there's always that regifting
closet to stock. Nearly one in four of us admits to passing off
unwanted gifts to others. Just make sure it's done tastefully and
that you give us something that we really, really like.
Conclusion
Smart shopping may seem like a constant battle against the
marketing machine, but remember that the ultimate reward is in
what you do with the savings you've earned. By saving on big
purchases, you free up cash for other pursuits -- college for your
kids, an early retirement, vacation with the family, or a down
payment on a house. That's something that only you can create --
so it's worth your time now to save for your future.
| How to want less stuff and save for the future |
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