Please take 30 seconds (or more) to stare at the ad below.
Did you notice a toaster?
Did you notice the red wall clock?
Did you notice that the couple is getting ready for the dinner, that there is a wok on the gas range – yet there is no sign of any food or fruit anywhere?
Did you see the use of word ‘desire’ for the kitchen?
Such a great marketing plan, no? I mean if this kitchen can make me look like a supermodel and its shiny surfaces reflect my beautiful life, then I got to have it all. Yes, even that $230 tea kettle that I don’t see in the ad.
Ok, some of you may not be mesmerized by all the red in the ad above, but you will be surprised to know how this whole setup of a fancy space with fancy words can make quite a few people spend unwarranted money on fancy objects they don’t need or have time for.
Not too long ago, I spoke of how
a martian can become a human we can take baby steps to spruce up our ‘wealth creation’ habits. And, if you were my good student, you would eagerly raise your hand and mention that spending smart was second in those set of baby steps.
What is spending smart? I mean, this is a blog about wealth creation, so why talk about spending at all?
Good questions, financial freedom fighters™ !!
But, before I explain, can I just lay out something very clearly? I am not of the mentality that one should stifle their needs just to save 10 cents. The word ‘frugal’ comes to mind, and makes me want to itch – it’s as if the word is made of a wooly material and has hair on it.
Frugality is not the state of mind I am asking of you because that stems from the acceptance that you don’t have enough. To grow your wealth, you have to know (and accept) that you have enough to start with and that instead you need to be mindful of your spending.
Pinching cents is so 2003.
One of the most unconventional way to save money is when you get into a habit of spending mindfully. Humans have wants and needs and when we sit down to carefully analyze our wants vs. our needs, we make buying decisions that are at the core of our savings goals. This is a concept that not a lot of people talk about, because clearly, not everyone get this secret sauce of how we humans actually function.
Two important questions to ask when spending smart (memorize them or write them down):
- Does the object or experience provide long term value, and pays for itself over and over again (for example: buying a Macbook over a PC because it has a powerful processor, does not reboot on auto and carries a strong antivirus framework. One Macbook can last 2-3 years longer than PC, which means less recurring expenses to fix or get it cleaned up for viruses. Plus, Apple stores have a great service/trade-in policy for their products)
- Does the purchase conflict with the value of my time, and hence make the cost of purchase higher. In other words, do I know the total end-to-end purchase price of the object? (if you have to drive 10 miles for Costco to buy toilet paper, then you are not only paying for the TP but also for the gas used, and most importantly, your precious time. The savings in this case are actually costing you money. Weird but true! )
Please know that we cannot live a rich meaningful life if we are not indulging in things or experiences that bring us joy, fulfilment and a sense of achievement every now and then. Trust me, nothing wrong with rewarding yourself with that designer handbag, albeit you know the entire cost and benefit of the purchase (note: the good quality of the handbag can save you from making multiple handbag purchases over the course of 2-3 years. win win!). Additionally, the cost of purchase has to be backed up by funds that leave your financial current state unchanged.
Next time, the demi-gods in an ad are seducing you to buy things that you don’t need, stop the hypnotic foreplay right away and ask yourself a very simple yet powerful question, “Do I really need this?” The internal dialogue around this shall put you on the correct path.
But, pray, can someone please explain why there is a need for a $230 tea kettle? It only heats up water, right?