Last week – credit sharks in suits
Last week was week 5 in Dave Ramsey’s “Financial Peace University“. The lesson for week 5 was focused on credit sharks, and the tactics they use to make you and your family go hungry. Some of the lessons we learned:
- If you are unable to pay the minimum payments, use the Pro-Rata plan.
- Always budget for your necessities before paying off any debt.
- Check your credit report for errors every two years.
What was really stressed in this lesson was that you really do need to pay your debt, but never pay your debt before taking care of your own essentials including food, clothing, shelter and transportation. The debt collection companies have to work within certain federal guidelines, and you can work with them, within that framework.
This week – Buyer Beware!
- Learn the marketing method companies use to market products and services to you. Know you can be in control!
- Wait 24 hours before making a major purchase – larger than $200.
- Always talk to your spouse before making a major purchase.
Know how they’re selling to you so you have the power
Dave Ramsey talks about how when you’re purchasing something that they almost always will use the same or similar tactics to get you to buy. You need to know how the companies are selling to you in order to overcome their tactics, and make a smarter purchase.
For example, one tactic a lot of companies nowadays are using is the 0% financing offer. They lure you in to buy a car, a couch or that beautiful new 60″ TV by offering you a 0% financing deal on the purchase of that product. What they don’t tell you (except for in the fine print) is that if you don’t pay the balance of that loan by the time the initial term is over, your finance rates will shoot up to 20-30% , and you’ll often be liable for the finance charges for the 0% term as well. Or if that isn’t the case, and your 0% financing is legit, you’ll often find that the price of the item you’ve purchased has been increased before you bought to cover the cost of financing it.
Another thing that many companies will do is use a distraction technique. They’ll tell you about all the things the product will do for you, how wonderful it is, and how your life will be better because of it. Meanwhile they’ll avoid talking about the price unless it is in terms of how you can’t afford not to make the deal. One Dave Ramsey caller talked about this:
Brian called in to tell Dave about the time he went to a seminar for a vending machine company. He bought three $6,000 machines after hearing how much money they would make him. The machines barely brought in any money and Brian spent over $20,000 for this “lucrative” deal!
Research the items you’re buying, and know the tactics that businesses are using to get you to buy. They aren’t doing the deals because they’re a good deal for you, the customer. They’re in it to make money, and they know in the long run that you’ll lose out, and they’ll profit.
Wait 24 hours before making a major purchase
Always wait at least 24 hours before making a major purchase. Use that time in order to fully research the decision you’re about to make, whether it makes financial sense, and whether you really need the item. Often you’ll find that the item you just HAD to have, no longer interests you.
If after waiting 24 hours, discussing it with your significant other and making sure you have the cash to pay for it you still want the item move forward with the purchase.
I’ve found in my personal life that more often than not I end up not buying what I was looking at.
Always talk to your spouse before making a major purchase
Dave talks about how it is so important to keep the lines of communication open in a relationship, and that whenever you make a major purchase, you need to make sure that you’re discussing it with your spouse beforehand.
Many people would rather ask forgiveness than permission when buying something, but it’s important to remember that without discussing it you’re opening the marriage to a level of distrust and disharmony that you don’t need to be there. Discuss your purchase with your spouse, get their input (yes, they do have valuable things to say, I promise!) and then only after discussing it, make your purchase.
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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Good advice, but I think the 24 hour delay should be viewed as the absolute minimum.
I’ve found that it’s better to write a diary/calendar entry for non-essential purchases one month in the future. If I still need the item in a month’s time (having researched the market, discussed it with my wife, etc), only then will I buy it. It rarely happens!
OK, there’s a chance that I may lose out financially if a heavily discounted, “once in a lifetime” item reverts to it’s normal price, but I can live with the disappointment