Tuesday, March 23, 2010

Financial Peace University Week 6: Buyer Beware

This week – Buyer Beware!

This week we talked about common traps to avoid when buying things.   Some of the important points from the lesson:
  1. Learn the marketing method companies use to market products and services to you. You can be in control!
  2. Wait 24 hours before making a major purchase larger than $200 (or whatever amount you and your spouse decide on).
  3. Always talk to your spouse before making a major purchase.
Know the marketing techniques businesses are using to get you to SPEND:

Almost all businesses use highly trained individuals to get you to buy their product.  Most companies use the same tactics and marketing ploys.  Why? Because they work!  If we know what the tactic is, we can spot it, and hopefully not fall into the trap.

For example, one tactic a lot of companies are using is the 0% financing offer.  They lure you into buying a product (dryer, a car, a big screen TV, etc), with the 0% offer.   What they don’t tell you (except for in the fine print) is that if you don’t pay the balance of that loan in full by the time the initial term is over, your finance rates will shoot up considerably (often to 30% or more) , and you’ll often be liable for the finance charges for the 0% term as well.  Or, if that isn't bad enough, the cost of the 0% financing is already added in to the product you are buying.

Wait 24 hours before making a major purchase:
This one step is crucial.  This often eliminates the impulse purchases we all make.  If after the 24 hours you really need it, and you have the cash to pay for it, great.  Often times when we wait for the 24 hours, we realize that we really didn't need or want the item.  It was just a spur of the moment impulse.
Always talk to your spouse before making a major purchase:
Only after discussing and counseling with your spouse should you make a major purchase.  This keeps the lines of communication open, and the trust there.  Often times your spouse can help us decide if we really should get the item.

Look at the opportunity cost of the item:
This means, look at what you are giving up to buy that item.  Is it worth it??

Understand about the item before you buy anything:
Dave Ramsey talks about how we should never purchase anything that we don't understand.  This could be for insurance, mutual funds, or even a new camera. 

Next week
Next week is a lesson entitled “Clause and Effect” which deals with common traps to avoid when buying insurance of all kinds. See you next week!

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