Financial Stupidity


There is a new business that uses consumer stupidity so they can make money and they pretend like they are doing you a favor.  The commercial shows a woman buying a pair of shoes that retail for $700 and she is buying them for $400 because they are USED.  Do you get this???  They are selling high end fashion that someone else bought and didn't want and now you get to be the fish on the hook.  Start with the simplest of questions: WHY would the previous owner sell the shoes if they were so great?  Let's see, they were too expensive and she needs to make a payment on her credit card perhaps?  The funny part of it is that this nonsense is justified because these $700, opps, $400 shoes are brand name shoes so for those people that pay for the name on the butt, then it is worthwhile.  What can't be assessed is whether these $400 shoes will last any longer than a good pair of boots or even sneakers.  What is really funny is that the only people that care about these brand names shoes or purses or dresses or whatever, is someone else that is impressed by the name instead of the functionality.  Walking down the street, can you pick out a real fashion purse or shoes as compared to the counterfeit?  This is not pushing the idea of buying counterfeit but insteads pushing the idea of smart decisions.  

We have become a society that makes financial decisions based on looks, fashion and brand names.  For those people that have the excess wealth, this is great but for the ordinary person this compulsion simply drives the person into debt.  Ever known someone that was always buying expensive dresses, putting them on the credit card, wearing them a little while then selling them to make the credit card card payments.  Here's the real truth, the price of the sale never covers the cost of the purchase, this is simply a scam by the fashion industry to keep nonsense in vogue.  The worst part is that you may need the money but instead have a compulsion to be a fashion plate instead of being cash positive.  The commercial for the 'App' tells us that this woman has sold enough to pay for her vacation - now consider, she paid retail and sold at 50% off, if she had not bought the item in the first place, how much MORE MONEY would she have?

Remember the good old days when comfort was more important than a brand name?  The nice thing about comfortable was that the products lasted and could be worn over and over again and who wants to sell something that's comfortable?  The smartest criteria in buying clothes is simple, it is an investment not a fashion statement, buys clothes that go together and require the least amount of upkeep (pernament press as compared to dry clean).  

Back to the new business that has a goal of taking advantage of the consumer gullibility, the web site or application lets you post something and you can make money.  Now, stop and think, did you make money or lose money.  This is the confusing part, the application on your phone says that all you have to do is take a picture of the items to get rid of, put a price and presto, you have paid for your vacation.  Once again, STOP and think.  You have money in hand but you have less clothes or shoes or purses and now you need to replace the stuff that is gone.  Now for the hard part, can you replace everything for the same price as money you got for selling your stuff and, you know, the money you spent on that vacation?  

This is a circular game by retailers to get you to buy something, sell it to someone else for less than you paid (you lost money on the deal) and then buy something new with all of the money you have.  Figured out the problem?  Smart financial management says to buy something that has value and will last and can be used over a long period of time so that you can put the money you do not spend into savings, start a business, get a new car, buy a house, tons of stuff that is possible when you do not waste money on short term purchases.  Here is the simple secret - everything is an investment and the investment must last long enough to go out of fashion and then come back into fashion.  Everybody likes having nice stuff, so instead of buying something to fill a hole in your self esteem, find the right item that will last.  



This has nothing to do with gender, do you actually listen to the advertisements?  If the goal of selling stuff is to afford a vacation, why buy the stuff in the first place?  You just wasted the value from the price you paid to the price you received.  The important point is the she is selling stuff she bought for herself and now she is selling it because???  That is the question - what has changed that she no longer needs the stuff.  The real question you need to ask is simple: "Why did you buy it in the first place?"

Now consider the flip side - they want you to buy used merchandise at a discount from retail because someone else bought it and decided to get rid of it.  Now for the real question - are you so self absorbed that you need to define yourself based on the labels of your clothes (also include shoes and purses) designer?  If you can't afford to $800 for a pair of shoes, how can you possibly justify spending $400 for the same shoes?  Re-evaluate your priorities.

In speaking with a woman (don't draw conclusions because men do this too), her comment was that there is a SALE at some brand name store and she just has to go in and buy something.  The question posed was: "Do you NEED a new purse from this store?"  The answer is always the same: don't NEED, but MUST BUY.  Why is that the response?  

Advertising is intended to perform one purpose, convince you to change your opinion of your need for a product or service.  These advertisements try to appear like they are informing you of critical information but if you look closely and REALLY listen then you can figure out the deception.  Again, don't get the wrong impression, this is true of all advertisements and all products.  So many advertisements simply ignore half of the truth and never discuss the negatives, and this is where your ability to think comes into play.  Insurance companies sell you on their Apps or their experience in handling strange claims but the only important concern for most people is the cost over the long term.  If these strange claims has caused them to incur excessive claims and their rates are higher than everyone else, they won't talk about that part.  The other good tactic is to talk about the one thing that they do better than others like reducing your auto deductible if you don't have an accident, that is all well and good but if the rates are higher than everyone else, then you are already paying for the savings.  As with just about everything, don't buy anything on impulse, research and compare then find the most cost-effective price.

The worse part is that some companies are tying their product to social conscience issues.  There is a water company that wants you to buy their product so children can experience the JOY of art at their school, what does school art have to do with the tastes or nutritonal value of water?  There is another water company that highlights a budding romance between two people that lock eyes across an airport as she drinks from a bottle of water.  Of course, he moves over to her only to find she has moved on but left the bottle of water with a note on the outside to meet in some distant location.  Seriously?  When was the last time anyone had a romantic relationship from a common desire for water?  Art and Romance have nothing to do with drinking water except for 1) the water is overpriced or 2) the water tastes bad, but they are selling you on the idea that you can be a better person by drinking their water.  Seriously?  Water has one purpose, to hydrate the body and if you eat a properly nutritionally balanced diet then you do not need any chemicals in the water but now your water has purpose.The point is that if you look, you find the flaw in every advertisement. 

Are they telling you about the product or are they telling you how good you will look in this product.  This tactic is often used in automobile advertising.  From a purely financial perspective, the most important concern with any vehicle is the long-term cost.  Ever notice how you are never told the reduction in value of the vehicle from the moment you sign the contract to the moment you trade it in?  Vehicles have very limited functions: 1) transport the driver (and passengers) from one location to another, 2) carry stuff from one location to another.  Seriously - this is all there is.  Many people throw the comfort of the ride into the mix: padded seats, air conditioning, shock absorbency, ease of handling, and these components can change the price dramatically so one of the options is the frequency that these items will make a difference.  Considering the paved roads then the shock absorbency is a reflection of driving skills not the vehicle.  Considering the duration of most rides, will the padded seats or air conditioning make that much of a difference?  Purely financial, the most important issue with a vehicle is the cost per mile over the life of the vehicle.  Remember, on special occasions, you can rent a vehicle so the issue is only on the every day activity.  Most important, unlike buying a house which goes up in value if maintained, a vehicle drops in price every year so everything relating to a vehicle is an expense, not an investment.

The other option is using scare tactics to get you to buy something like vaccines or medicine.  One advertisement says that the disease is only lethal to one in 100,000 but if you are subject to this disease, it can kill you in 24 hours.  Ever wonder if there is a cheap test you can take before putting a new vaccine in your system?  Of course not, they can't make money like that.  It is funny that we are supposed to get prescriptions from our doctor but now medicine companies want us to go in and tell the doctor what new medication we need.