The Right Way to Take Advantage of Sales

Today is Amazon Prime Day. If you are unsure what that entails, the long and short of it is that Amazon has devised a way to clear space in their warehouses for the upcoming fall releases by selling off their less popular merchandise for discounted prices. To top it off, they are creating additional exclusivity around their offers by limiting them to those who are paying members of their customer program, Amazon Prime.

As someone who is prone to fall for the lure of a good discount, it is interesting to see just how skilled Amazon are at creating hype around their products with their promotional efforts, such as Prime Day. People went crazy this time last year, as the 2016 iteration of the special deals day was the company’s biggest day ever. TVs, toys and, curiously enough, Amazon’s own products like their Kindle e-readers and tablet, and the Echo, which powers their voice-based home assistant Alexa, were hot items. Amazon is, of course, happy to knock off some percentages to move additional units of their own goods, to tie customers into their ecosystem, and at the same time recruit more paying members to their loyalty program. At the same time, so many people completely misunderstand what a discount is, and the term “saving money” actually means.

A Dollar Spent is a Dollar Spent

A common phenomenon that marketers rely on to lure consumers to spend money they otherwise wouldn’t is the mental disconnect between the cost of purchase and the money saved from utilising a discount. One friend who worked at a national sporting goods store where people go haywire during sales told stories of people who had never been skiing their whole life, yet spent hundreds and hundreds of dollars on skiing equipment.

With this 30% discount, I’m saving hundreds of dollars. It’s too good an offer to pass on!” the people would exclaim in their credit card-fuelled shopping haze. This type of misguided mental accounting, a mathematical sleight of hand, is one most of us have used to justify a splurge at one point or another. The result is often buyer’s remorse, a basement or an attic filled with stuff we just couldn’t afford to pass up the chance to buy, and a significantly thinner wallet.

While most people are already aware that the reasoning behind purchases like this is, at best, misguided, we will keep falling for it until we have seen the ridiculousness of it spelt out in black and white. So let us examine the faulty reasoning, so that we expose the marketers’ trick once and for all. First of all, it is important to define the two terms up for discussion here: Spending and saving.

Sale written on all behind park bench
Don’t let promotions, advertising and reduced prices fool you into spending more money.

You spend money when you purchase an item. You save money when you have money that you do not spend. It is that simple, and do not let anyone else try to convince you otherwise. If today, you were offered to purchase a TV that used to cost $1,000 for $800, how much would you have spent and saved if you took advantage of that deal? Yes, that is a trick question. The correct answer is that you have spent $800. Did your savings account increase by taking advantage of that promotional deal? If the answer is no, you did not save any money. People take the wrong turn here because it is so easy to draw the mental connection that spending less on a particular item equals saving more. But all you have to remember is that unless the savings account increases, you have not saved any money at all.

How To Make Sales Work to Your Advantage

As we have now established, sales and promotions are all about luring you to spend money that you didn’t originally intend to part ways with, by tricking you with apparent price reductions. Even if we overlook the fact that often advertised price reductions are compared to unrealistically high prices, you typically do not increase the balance of your savings account by purchasing something at a reduced price. The honourable exception to this is if you have made a purchasing decision ahead of time, and are waiting for the right time to make the deal.

Only if you have made the decision, and already allocated a certain amount of money to that purchase, will it make sense to take advantage of a good deal. The conscious consumer will always make their buying decisions independent of any advertised price. Instead, a smart buyer will decide what price a particular item is worth to them, and then try to acquire it at or below that price. If a good deal comes up at below the already specified maximum price, nothing is better than that, because then the difference can be allocated straight to the savings account. In other words, that person has actually saved some money, by acquiring something at less than the price they had budgeted and set aside for that item.

Further, there are tools you can take advantage of that will let you track the price of a particular item over time, and across many different online retailers. These services often differ from country to country, but a quick Google search will reveal which services are the most popular in your part of the world. By taking advantage of services like these, and always reminding yourself of the fact that the only way you can save money on a purchase is if it increases the balance of your savings account, you can make sure that savvy marketers will never dupe you again during sales season.

Grieving statue

How Grief Affects Your Spending Decisions

After our recent personal tragedy, I have been experiencing feelings I thought were a thing of the past for me: Strong and sudden impulses to spend money mindlessly, and without any particular rhyme or reason to it. In keeping with our strategy for coping with our grief, I shared these concerns with my better half, and it after airing them out, I discovered that this is a typical reaction in times like these.

My partner, who has a consumer-facing role in banking, could tell me, as I shared my thoughts and proposed that we buy a new car, that she had many encounters with people in dire financial straits who confided that their troubles started in similar situations. Whether it stemmed from unfathomable grief such as the loss of a close loved one, or seemingly less severe adverse events like not doing well enough in some aspect of life, people had pointed to events like these as the catalysts that put their finances in a tailspin. Why is it that I just proposed to my partner that we hire someone to remodel our entire house and that people tend to make poor money decisions in hard times?

Control and Rewards

There is no one definite and correct answer to the question posed above but based on my own experiences I have, through much introspection, some reflections on the matter. At the most base level, I believe we humans make poor decisions, especially as it relates to money and spending, in hard times to gain perceived control. When we feel down, it is more often than not the result of events outside our control. There was nothing I could do to affect the events that lead to my daughter being given a mere week to live. Similarly, there is little one can do to regain their job after a firing, or to restore the trust in someone who has committed a profound betrayal.

Struck by unexpected misfortune outside of our control, a whole range negative emotions take hold. Left without power to alter the adversarial outcome, we feel defenceless and paralysed at best, or worse yet, disenfranchised and impotent. Painfully aware that there are no quick fixes for grief, sorrow or loss, and that overcoming these feelings is a long and windy process, we look for quick fixes. We become desperate for something we can control, an outlet where we can force immediate changes simply by saying, doing, or buying.

Further compounding this urge to reclaim a modicum of control over our situation by spending money, most of us raised in Western societies associate spending money with rewards. In our childhood, we finally get to buy that new bike after dutifully saving our hard earned allowances for months or even years. As we transition into adulthood, this is further reinforced as we work hard for bonuses, and the opportunity to spend more money. The act of spending money has become a societal reward, and because doing good leads to both feeling good and buying things, many of us subsequently conflate buying stuff with feeling good.

Is it any wonder then, as we find ourselves at our lowest point, that we turn to mindless and irrational spending in an attempt to make ourselves feel better, and to reclaim control over our lives? In my sorrow, I have gained not just an understanding of my personal psychological shortcomings, but humility and empathy for those who find themselves in financial difficulties after going through personal tragedies. While I previously would be prone to carelessly brushing such circumstances off as a lack of discipline, I now realise that were it not for my incredible spouse; I would find myself in the same situation before long. I did, of course, follow up that realisation with a suggestion that we buy a brand new house, because, I argued, surely we deserved it after being forced to go through something like this.

How to Control Your Spending While Mourning

We all grieve in different ways, and not everyone will be inclined to mindless spending to dull their grief. For those of us with that particular inclination, my most important advice would be to work on alleviating these penchants before they come to the fore. It is of particular importance to dissolve the mental connection made between spending money and feelings of joy and happiness. By abandoning the hedonic treadmill, we can mitigate the urge to spend money when we life lays us low. I believe that the changes in my mindset which I have worked to implement over the past few years are an important contributing factor to why I have been able to avoid going on an all out irrational spending spree this past couple of weeks.

Another way I have been able to kerb detrimental shopping in these difficult times is by looking at the cause of why I want to spend money and try to achieve relief through other means. Realising that I wanted to spend money in an attempt to reassert some control over my destiny, I quickly decided that I could exert control by reallocating funds in a way beneficial to myself and my family, instead of buying meaningless stuff. In other words, instead of buying crap, I took the leap and made some investments I had been eyeing up for a while.

Grieving person
Don’t let grief and sorrow dictate your spending decisions. Photo by eflon.

In the name of transparency, I would be remiss if I didn’t mention that I did, in fact, give in to my impulses at some points in the last few weeks. As there is nothing quite like reading fantasy for escaping the real world, I loaded up my Kindle with fantasy books that featured on my to-read list. And one day, this one especially full of self-pity, I splurged and bought a new guitar. But wait, don’t condemn me yet! Instead of going all gung-ho and acquiring the exclusive and expensive Gibson model I had my eyes on, I made the sensible choice and bought the far cheaper Epiphone equivalent. Once I have reached my goals for guitar practice, perhaps I will allow myself to upgrade.

My point here is that if there is a time to afford yourself certain allowances outside of what you usually would contemplate, that time is when you are down and beaten. Straying from the norm and giving yourself some leeway can help ease some of the constant pressure of grief, if only for a moment. And, as long as you do it a constructive manner, I am convinced that it will be of benefit in the long run.

What’s Next for Abovare?

In my previous post, I mentioned that I was unsure of what the future of Abovare holds. While our wounds are still fresh, I believe that my partner and I have progressed a little in our grieving process since then. We are taking some time together, without the pressure of tasks and to-do-lists, to allow ourselves to feel the loss of our girl. And, in time, we hope that we will rediscover joy and happiness of normalcy and everyday life.

Until then, I will not be making any promises about the activity level here at Abovare. I have, however, found some relief in reimmersing myself with the subject of personal finance in the last few days. And, as long as it is something I am doing because I want to, you may find me sharing some of the most interesting articles I have read on Twitter, participating in the Rockstar Finance Forums, or even publishing new posts here.

Lastly, I want to thank every one of you who reached out to me after my last post, whether it was in the comments of the post, through email, twitter or elsewhere. I know it’s hard to find the words to share with someone suffering a personal tragedy, but everytime someone reaches out, it feels as if they take a small of my sorrow and makes it their own. And that helps. All the kindness I have experience from friends and strangers alike has made me more hopeful than ever, even as I am going through the most difficult period of my life. And I intend to pay it forward, every chance I get and let that be my daughter’s legacy.

Header photo by Marcela.