The truth (in buying) shall set you (financially) freeBy Efren Ll. Cruz |Philippine Daily Inquirer
Question: I have time and again found myself buying stuff that I don’t really need because of sales offers and gimmicks, especially during the Christmas season. What is the best way to avoid unwanted spending?—Heavy holiday season shopper
Answer: I recently went to a trade exhibit to conduct a talk on the basics of money management. After the talk, I walked around the exhibit to get a glimpse of what was being sold.
From time to time, people would approach me offering their flyers. My usual reaction would be to smile and politely beg off. But there was this lady who was hurriedly going through the crowd of exhibit patrons giving away ordinary ball pens, not flyers.
My knee jerk reaction was to turn the offer down. But being the “El Cheapo” that I am, I decided to accept the free ball pens; after all, she was giving away not just one but two of them. I knew there was a catch. But I decided to play along.
She said she would need me to sign the attendance sheet at their exhibit booth. So I dutifully followed her to their booth. There she showed me a gadget that help kill the bacteria on foods that we eat raw like vegetables (for fresh garden salads) and fruits. While the gadget looked neat, I felt it was something I could do without.
The lady then proceeded to show me an induction stove. This got my attention a bit because it was something that would look nice in our kitchen; not that we have space for it. But it was so expensive that it would take nine long years before the cost of the stove would match the savings on doing away with LPG.
As I asked for the attendance sheet, the lady requested me to sit down inside the booth. The lady kept on asking me for the province where I came from. Having been born and raised in Metro Manila, I told her I was from Quezon City. On cue, the lady expressed amazement and hugged me just because I said I was from Quezon City. I am sure she would have expressed the same amazement no matter what my answer would have been. She said that because I was from Quezon City, I would be getting a 24” LED TV for free because it was a “sponsored” product.
She then asked me how long I had lived in Quezon City. When I said since birth, she hugged me again with this flabbergasted look on her face and said that because I had lived long in Quezon City, I would also be getting a stainless cookware set for free. She then introduced me to her supervisor who displayed the same excitement. This time, everybody in the booth joined in and sort of ganged up on me to ensure my interest.
When the supervisor found out that I was from Quezon City, he offered me another free “sponsored” product, a medium-sized washing machine. At this point, things resembled the show “the Price Is Right” because as they would announce a freebie, one of the staff would “wheel in” the item while the first lady I met would give me a hug.
So what was the catch? I had to buy the induction stove for tens of thousands of pesos. To further coax me into buying, the supervisor showed me, albeit unethically, the credit card charge slip of a previous customer. It was funny at that time because here I was, just after giving a talk on money management, and there they were inviting me to splurge on something that had not even entered my mind.
This was the time I decided to end the show by saying I already had many of the “sponsored” items they were offering. Moreover, I was not about to spend tens of thousands of pesos on something that was not programmed into my budget. I politely said I would think about their offer and proceeded to walk away. And don’t worry, I walked away with the two ball pens in hand.
Here’s the thing. I quickly checked the Internet for the price of the induction stove. I saw the exact same model being sold at half the price and with a stainless cookware set already bundled. That means I would still be paying for the supposed free “sponsored” products.
The people I met were trained to do hyped-up selling by the promoters of the product. They were just trying to earn a living.
Remember that a legitimate transaction can only happen between a willing seller and a willing buyer. Even if the sales pitch was not truly attractive, it would be the buyer’s responsibility to check on the facts.
So how should you approach hyped-up selling? Just answer the following simple questions before you buy:
1.) Does the product fall under “must spend” or “may spend”? The first category includes utilities, basic food, clothing, shelter, savings and investments. Things falling under “may spend” include entertainment expenses, vices and gadgets.
2.) If the product falls under must-spend, can it be postponed or not? If yes, provide for it in your budget for the future. If not, how do you expect to fund its purchase? Consider the outflow for principal and interest payments. The outflow should fit in your current budget. If not, you will need to cut down on the “must spends.”
3.) If the product falls under may-spend, see if you have extra funds after providing for all of your must-spends. If yes, go ahead and enjoy the product. If not, postpone the purchase until you have excess funds. Minimize, if not totally avoid, borrowings.
To help you become financially free, find out the truth behind a product, especially when promotion is hyped up.
(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, investment adviser and author. Questions about the article may be sent by SMS to 0917-5050709 or e-mailed to email@example.com. If you want to learn more about personal finance, attend the EnRich training program on Feb. 16, 2013.)