Did You Know?
Debt is one of America's
biggest problems.
And yet companies still
create new ways to get
people to bury
themselves into even
more debt.
They are often only
looking out for
themselves.
biggest problems.
And yet companies still
create new ways to get
people to bury
themselves into even
more debt.
They are often only
looking out for
themselves.
The "Best" Deals
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The best advice I could ever give you about your purchases is this: “The deal of a lifetime comes once
every seven days.” I want you to think long and hard about that statement. I first heard it from a real
estate agent when I was looking to buy a house. His wisdom has stuck with me.
I bought my first motorcycle for $300.00. Sure, it smoked a little bit, but it cruised down the highway at 65
mph with no problems. This was actually my only mode of transportation at the time, and I used it to go
everywhere! I had found the best bike.
Well, that was until a year later when I found another motorcycle for $525.00. It was quite a bit newer,
about twice the size, and it ran like a champ. I rode this one until I found another motorcycle...good price,
only a few years old...
The story goes on and on. When I was searching for a truck to buy, my dad would repeatedly say to me,
“There are always trucks for sale.” It’s a good point. And it would be a fine point to remember anytime
you or I go to a store. There are always cell phones, couches, rugs, flowers, plasma TV’s, candy bars,
and MP3 players for sale.
They will be for sale when we are at the store, and they will also be for sale when we leave the store and
go home. They will be for sale when we want to make an impulse buy, and that same item will be for
sale when we fight the urge, go home, see if we can actually afford it, and think it over for a day or two.
But the companies know that we have people that like to buy things. And they know just how the human
mind operates. At least in America, people want bigger, faster, newer, or customized. So companies
spend millions of dollars each year on advertisements with slogans like... “new and improved,” “4GB
instead of 2GB,” “increased legroom,” “more horsepower,” “advanced formula,” “choose your own color,”
and on and on. Go ahead, next time you go to the store or look at Sunday’s advertisements, check out
just how many companies use terms like that. They are only trying to create a sense of disappointment in
you.
If you have a 2GB MP3 player (which is not even full of songs yet, but that is besides the point), and a 4GB
MP3 player comes out, the companies try to get you to think that your “old” (maybe a few months) MP3
player is out-of-date. They do it everyday with everything from laundry detergent to automobiles. It is far
easier to create a sense of disappointment than to create a new sense of longing. As long as they can
create a sense of disappointment, though, the “want” will always follow.
I challenge you to ask yourself why you are shopping for a new couch, a new car, a new pair of jeans, a
new cell phone. It may very well be that you “need” (I use this term very loosely) these items, but if you are
shopping for a cell phone with one already in your purse, just do me a favor and ask yourself why. Or if
you find yourself in the furniture store calling your husband who is at home on your couch, just do me a
favor and ask yourself why.
The problems of impulse-buying are too deep for one article, and what I really want to address is the
strategic but very dangerous tactics that companies use to get you to buy their products. I hope to give
you the knowledge to prevent yourself from getting caught in what thousands of Americans fall prey to
every day. Companies know that they have to be smart in order to get you to buy their products, and so
they create clever systems that I will discuss below. PLEASE read through each of these systems in
detail. They are not difficult to understand, but they are very easy to accept. But when you see what is
actually happening (they often don’t proudly disclose these details...they are always what you find in small-
print at the bottom of the page or at the bottom of the commercial or what you hear the speed-talker say at
the end of a radio advertisement), you will be better-equipped to take advantage or not take advantage of
the offers. And in most cases listed below, it is best to not take advantage of these offers.
See if you recognize any of these...
LOW MONTHLY PAYMENTS
This is without a doubt the best offer used by companies. And if you get nothing else out of this article,
then please just remember this: Whenever you see the term “low monthly payments,” put up your guard
and be VERY careful. This should raise yellow flags for you. Why is this a problem? I mean, after all, don’
t I want to have low monthly payments?!
Maybe. But most likely not. Depending upon the offer, low monthly payments simply means that you pay
more in the long run. It’s a simple fact...if you pay less, then your loan is longer. If you make payments of
$5 on a $100 loan, it will take you 20 payment terms to pay off that loan. If you make $10 payments, your
loan time will be cut in half with only 10 payment terms. If you make $50 payments, you will be done in
two payment terms. This is a no-brainer.
So I absolutely love to go car-shopping with my dad. It seriously rivals any sporting event. The
excitement, the intensity, and the humor is more than enjoyable. I guess you can say that my dad “knows”
the system. So here’s the scenario that is as predictable as the morning sunrise. I have seen it
numerous times in one single day, and I have seen it repeated over the course of years...
My dad figures out what he can afford for a car. He takes that figure with him. Let’s say $20,000. That is
the top price he can pay for a car. He has punched the numbers at home, and he can’t go over that. So
he heads to a dealership. He tells the person that he wants a car for $20,000, and we often are shown
cars for $24,000-$25,000. Of course, we are often not told that at the time. Sometimes they have the
price in the window, other times not. When the price is there, my dad will look at the guy funny, try to figure
out why he doesn’t understand English, and then adamantly tell him that he wants a car within the
$20,000 price range.
“Well, how much can you afford? What are your monthly payments on your car now?”
(Did your yellow flag meter go up?!)
And my dad responds, “Sir, I have already figured out what I can afford. I told you I need a car for $20,000
or less.”
“Well, what monthly payments are you looking for?”
(Your flags should be flapping in the wind now!)
And so he continues his sales tactic. He has been taught, trained, and become rather successful at
selling monthly payments (even moreso than cars). He could be selling a house for all he cares. All he
needs to do is sell the low monthly payment to the customer, and he has a buyer.
Unless you are my dad.
Let me show you what is actually happening “behind the scenes.” The car salesman is trying to sell the
low monthly payment, because that is how people are taught to think. Our society has trained us to get by
with payments. As long as we can pay the bills this month, then we are secure. And so every year,
millions of people live month-to-month, paying off whatever monthly payments they have (house, car,
boat, motorcycle, etc.). And yet they know not what they are doing.
So let’s say my dad has a monthly car payment of $350.00. Let’s say he owns a 2004 car that he bought
brand new for $15,000 with a four-year loan. He shops for a car in 2007, so he is three years into his
loan, still owing $4000.00 on the car.
He then goes to the dealer, and he says he wants to buy a car. The salesman only wants to know what
you can afford each month, and he will tailor a loan to fit your monthly payment. How does this work?
Well, let’s say that my dad goes to the dealer and actually answers the salesman’s question. “What are
your current monthly payments?”
“I am paying $350.00 a month.”
“Ok, great, we can get you into a very nice car for $350.00 a month...” And the salesman shows my dad a
whole section of brand new cars, all with prices of $25,000. How is this possible to have a $10,000
difference between my dad’s 2004 car and a new car yet still have the same payment?! Simple. Change
the length of the loan, but keep the same “low” monthly payment.
Let’s watch what happens. Let’s say my dad finds a $25,000 car he really likes. Ok, let’s make a deal,
the salesman says. And they go inside and he shows my dad that his monthly payment will be $350.00.
He simply does this by adding more payment terms to the loan. In this situation, the $25,000 loan would
be a 7-year loan at a 5% interest rate. This would give a monthly payment of $353.35. My dad’s previous
loan was at the same interest rate of 5%, but it was only for four years. His monthly payment was
$345.44.
And so every day, car salesman sell “low monthly payments.” Yet what are they really doing? Or better
yet, what is the customer actually doing? The customer is still paying for that car. Just because you have
low monthly payments does not mean that you pay less. It’s actually the opposite, but often consumers
simply do not understand.
If you have low monthly payments on a $25,000 car, you will still pay for the entire amount of that car (plus
interest). Over the seven-year loan, your final payment will be $29,681.22. And that is with your low
monthly payments!!!
This same tactic is used for nearly all large items that businesses sell (be sure to see the article on
“Buying a House” for the same story but with larger numbers and bigger consequences). Motorcycles are
advertised for $79/month. Televisions are advertised for $50/month.
The best thing you can do when you are offered a low monthly payment is to respond: “How much will I
pay in the end for this item?” Not only will that show the salesman that you know what you are talking
about, but it will also give you the most important answer that you need! And when you hear that you
actually pay $2000 for the $1000 computer, you simply refuse the special offer and turn around and walk
away. It’s that simple.
NO MONEY DOWN, NO PAYMENTS, NO INTEREST FOR 12 MONTHS!
Too good to be true? Perhaps. Well, the fact is that this statement is very true. This is often used with
companies that sell furniture or electronics. They paint this slogan in bright neon letters on their
storefront windows, and it’s hard to drive by without stopping. I mean, who wouldn’t want to buy a new
kitchen table and chairs and pay nothing for them, right?!
And thousands of people do just that. They buy a beautiful new living room on January 1, 2007, and they
invite guests over to watch football on their new micro-suede furniture. And they smile the whole time
because they still haven’t paid a penny for the items!
Then January 1, 2008, comes around, and they start making their payments. Except they realize one thing
that they must have overlooked one year ago. Not only are they responsible for their monthly payments in
2008, but they are actually responsible for their payments in 2007, as well!
How does that work? Well, if you read the fine print (let it be known that anytime there is fine print, there is
a catch. This is almost a 100% accurate statement. So just remember this handy little slogan... “If it’s
fine, it’s not fine.” In other words, if there is fine print, there is a dangerous catch wrapped up in pretty little
wrapping paper. Buyer beware.), you’ll find out that this is how this particular system works. Here is an
example from an ad taken from *************
************
Now, please understand that I am saying the following words cautiously. I will rarely use a blanket
statement for everyone when dealing with money issues, as every situation is different. And the following
advice is meant for money-saavy people, for people who have had years of experience of handling money
well. If this does not apply to you, then the risk far outweighs the reward. I do not recommend what I
suggest. First get a handle on your finances, then start taking advantage of offers like this.
Here is how this offer can be advantageous. As I mentioned earlier, the fact of the matter is that this offer
really does require no down payment, no interest, and no payments for a full year! But a smart purchaser
can actually make payments during this first year and acquire items that they may have not been able to
otherwise.
Let’s say Jim and Diane want to buy some new furniture soon. Their reclining sofa finally gave out after
10 years. But after all of their expenses, they only have $50.00 left over each month for such a purchase.
They found a sofa that they love, but it costs $500.00, much more than they have available. They have two
options here: they can put away that $50.00 each month and wait 10 months until they have the $500.00,
or they can go ahead and buy the sofa now (with the above offer included) and being making payments
the first month (though it is not required).
And voila! They have a new sofa, and after 10 months, it is completely paid off with absolutely no interest
charges! They even had two months to spare.
This is a beneficial way to purchase some items (do you really need them?!), but let me say that it can be
dangerous, too. Let’s say that an unexpected expense came up in month 5. The transmission went out
in the car, the refrigerator stopped working, or a relative died far away and plane tickets had to be
purchased. Anything can happen, and if the couple doesn’t have substantial money set aside for
emergencies (transmissions alone cost over $1000), then their plan to buy the sofa could backfire. They
would need to tap into that $50.00 each month to cover the emergency expense, and this would force
them to enter into the monthly payments with interest that come 12 months after purchase. Only having a
“two-month” buffer time can be risky. If the sofa cost $300.00, they situation could be better. If it cost
$600.00 (all 12 months of $50.00 payments would be required), that is quite a gamble.
So this offer can be advantageous to saavy money users, but it still has its risks.
every seven days.” I want you to think long and hard about that statement. I first heard it from a real
estate agent when I was looking to buy a house. His wisdom has stuck with me.
I bought my first motorcycle for $300.00. Sure, it smoked a little bit, but it cruised down the highway at 65
mph with no problems. This was actually my only mode of transportation at the time, and I used it to go
everywhere! I had found the best bike.
Well, that was until a year later when I found another motorcycle for $525.00. It was quite a bit newer,
about twice the size, and it ran like a champ. I rode this one until I found another motorcycle...good price,
only a few years old...
The story goes on and on. When I was searching for a truck to buy, my dad would repeatedly say to me,
“There are always trucks for sale.” It’s a good point. And it would be a fine point to remember anytime
you or I go to a store. There are always cell phones, couches, rugs, flowers, plasma TV’s, candy bars,
and MP3 players for sale.
They will be for sale when we are at the store, and they will also be for sale when we leave the store and
go home. They will be for sale when we want to make an impulse buy, and that same item will be for
sale when we fight the urge, go home, see if we can actually afford it, and think it over for a day or two.
But the companies know that we have people that like to buy things. And they know just how the human
mind operates. At least in America, people want bigger, faster, newer, or customized. So companies
spend millions of dollars each year on advertisements with slogans like... “new and improved,” “4GB
instead of 2GB,” “increased legroom,” “more horsepower,” “advanced formula,” “choose your own color,”
and on and on. Go ahead, next time you go to the store or look at Sunday’s advertisements, check out
just how many companies use terms like that. They are only trying to create a sense of disappointment in
you.
If you have a 2GB MP3 player (which is not even full of songs yet, but that is besides the point), and a 4GB
MP3 player comes out, the companies try to get you to think that your “old” (maybe a few months) MP3
player is out-of-date. They do it everyday with everything from laundry detergent to automobiles. It is far
easier to create a sense of disappointment than to create a new sense of longing. As long as they can
create a sense of disappointment, though, the “want” will always follow.
I challenge you to ask yourself why you are shopping for a new couch, a new car, a new pair of jeans, a
new cell phone. It may very well be that you “need” (I use this term very loosely) these items, but if you are
shopping for a cell phone with one already in your purse, just do me a favor and ask yourself why. Or if
you find yourself in the furniture store calling your husband who is at home on your couch, just do me a
favor and ask yourself why.
The problems of impulse-buying are too deep for one article, and what I really want to address is the
strategic but very dangerous tactics that companies use to get you to buy their products. I hope to give
you the knowledge to prevent yourself from getting caught in what thousands of Americans fall prey to
every day. Companies know that they have to be smart in order to get you to buy their products, and so
they create clever systems that I will discuss below. PLEASE read through each of these systems in
detail. They are not difficult to understand, but they are very easy to accept. But when you see what is
actually happening (they often don’t proudly disclose these details...they are always what you find in small-
print at the bottom of the page or at the bottom of the commercial or what you hear the speed-talker say at
the end of a radio advertisement), you will be better-equipped to take advantage or not take advantage of
the offers. And in most cases listed below, it is best to not take advantage of these offers.
See if you recognize any of these...
LOW MONTHLY PAYMENTS
This is without a doubt the best offer used by companies. And if you get nothing else out of this article,
then please just remember this: Whenever you see the term “low monthly payments,” put up your guard
and be VERY careful. This should raise yellow flags for you. Why is this a problem? I mean, after all, don’
t I want to have low monthly payments?!
Maybe. But most likely not. Depending upon the offer, low monthly payments simply means that you pay
more in the long run. It’s a simple fact...if you pay less, then your loan is longer. If you make payments of
$5 on a $100 loan, it will take you 20 payment terms to pay off that loan. If you make $10 payments, your
loan time will be cut in half with only 10 payment terms. If you make $50 payments, you will be done in
two payment terms. This is a no-brainer.
So I absolutely love to go car-shopping with my dad. It seriously rivals any sporting event. The
excitement, the intensity, and the humor is more than enjoyable. I guess you can say that my dad “knows”
the system. So here’s the scenario that is as predictable as the morning sunrise. I have seen it
numerous times in one single day, and I have seen it repeated over the course of years...
My dad figures out what he can afford for a car. He takes that figure with him. Let’s say $20,000. That is
the top price he can pay for a car. He has punched the numbers at home, and he can’t go over that. So
he heads to a dealership. He tells the person that he wants a car for $20,000, and we often are shown
cars for $24,000-$25,000. Of course, we are often not told that at the time. Sometimes they have the
price in the window, other times not. When the price is there, my dad will look at the guy funny, try to figure
out why he doesn’t understand English, and then adamantly tell him that he wants a car within the
$20,000 price range.
“Well, how much can you afford? What are your monthly payments on your car now?”
(Did your yellow flag meter go up?!)
And my dad responds, “Sir, I have already figured out what I can afford. I told you I need a car for $20,000
or less.”
“Well, what monthly payments are you looking for?”
(Your flags should be flapping in the wind now!)
And so he continues his sales tactic. He has been taught, trained, and become rather successful at
selling monthly payments (even moreso than cars). He could be selling a house for all he cares. All he
needs to do is sell the low monthly payment to the customer, and he has a buyer.
Unless you are my dad.
Let me show you what is actually happening “behind the scenes.” The car salesman is trying to sell the
low monthly payment, because that is how people are taught to think. Our society has trained us to get by
with payments. As long as we can pay the bills this month, then we are secure. And so every year,
millions of people live month-to-month, paying off whatever monthly payments they have (house, car,
boat, motorcycle, etc.). And yet they know not what they are doing.
So let’s say my dad has a monthly car payment of $350.00. Let’s say he owns a 2004 car that he bought
brand new for $15,000 with a four-year loan. He shops for a car in 2007, so he is three years into his
loan, still owing $4000.00 on the car.
He then goes to the dealer, and he says he wants to buy a car. The salesman only wants to know what
you can afford each month, and he will tailor a loan to fit your monthly payment. How does this work?
Well, let’s say that my dad goes to the dealer and actually answers the salesman’s question. “What are
your current monthly payments?”
“I am paying $350.00 a month.”
“Ok, great, we can get you into a very nice car for $350.00 a month...” And the salesman shows my dad a
whole section of brand new cars, all with prices of $25,000. How is this possible to have a $10,000
difference between my dad’s 2004 car and a new car yet still have the same payment?! Simple. Change
the length of the loan, but keep the same “low” monthly payment.
Let’s watch what happens. Let’s say my dad finds a $25,000 car he really likes. Ok, let’s make a deal,
the salesman says. And they go inside and he shows my dad that his monthly payment will be $350.00.
He simply does this by adding more payment terms to the loan. In this situation, the $25,000 loan would
be a 7-year loan at a 5% interest rate. This would give a monthly payment of $353.35. My dad’s previous
loan was at the same interest rate of 5%, but it was only for four years. His monthly payment was
$345.44.
And so every day, car salesman sell “low monthly payments.” Yet what are they really doing? Or better
yet, what is the customer actually doing? The customer is still paying for that car. Just because you have
low monthly payments does not mean that you pay less. It’s actually the opposite, but often consumers
simply do not understand.
If you have low monthly payments on a $25,000 car, you will still pay for the entire amount of that car (plus
interest). Over the seven-year loan, your final payment will be $29,681.22. And that is with your low
monthly payments!!!
This same tactic is used for nearly all large items that businesses sell (be sure to see the article on
“Buying a House” for the same story but with larger numbers and bigger consequences). Motorcycles are
advertised for $79/month. Televisions are advertised for $50/month.
The best thing you can do when you are offered a low monthly payment is to respond: “How much will I
pay in the end for this item?” Not only will that show the salesman that you know what you are talking
about, but it will also give you the most important answer that you need! And when you hear that you
actually pay $2000 for the $1000 computer, you simply refuse the special offer and turn around and walk
away. It’s that simple.
NO MONEY DOWN, NO PAYMENTS, NO INTEREST FOR 12 MONTHS!
Too good to be true? Perhaps. Well, the fact is that this statement is very true. This is often used with
companies that sell furniture or electronics. They paint this slogan in bright neon letters on their
storefront windows, and it’s hard to drive by without stopping. I mean, who wouldn’t want to buy a new
kitchen table and chairs and pay nothing for them, right?!
And thousands of people do just that. They buy a beautiful new living room on January 1, 2007, and they
invite guests over to watch football on their new micro-suede furniture. And they smile the whole time
because they still haven’t paid a penny for the items!
Then January 1, 2008, comes around, and they start making their payments. Except they realize one thing
that they must have overlooked one year ago. Not only are they responsible for their monthly payments in
2008, but they are actually responsible for their payments in 2007, as well!
How does that work? Well, if you read the fine print (let it be known that anytime there is fine print, there is
a catch. This is almost a 100% accurate statement. So just remember this handy little slogan... “If it’s
fine, it’s not fine.” In other words, if there is fine print, there is a dangerous catch wrapped up in pretty little
wrapping paper. Buyer beware.), you’ll find out that this is how this particular system works. Here is an
example from an ad taken from *************
************
Now, please understand that I am saying the following words cautiously. I will rarely use a blanket
statement for everyone when dealing with money issues, as every situation is different. And the following
advice is meant for money-saavy people, for people who have had years of experience of handling money
well. If this does not apply to you, then the risk far outweighs the reward. I do not recommend what I
suggest. First get a handle on your finances, then start taking advantage of offers like this.
Here is how this offer can be advantageous. As I mentioned earlier, the fact of the matter is that this offer
really does require no down payment, no interest, and no payments for a full year! But a smart purchaser
can actually make payments during this first year and acquire items that they may have not been able to
otherwise.
Let’s say Jim and Diane want to buy some new furniture soon. Their reclining sofa finally gave out after
10 years. But after all of their expenses, they only have $50.00 left over each month for such a purchase.
They found a sofa that they love, but it costs $500.00, much more than they have available. They have two
options here: they can put away that $50.00 each month and wait 10 months until they have the $500.00,
or they can go ahead and buy the sofa now (with the above offer included) and being making payments
the first month (though it is not required).
And voila! They have a new sofa, and after 10 months, it is completely paid off with absolutely no interest
charges! They even had two months to spare.
This is a beneficial way to purchase some items (do you really need them?!), but let me say that it can be
dangerous, too. Let’s say that an unexpected expense came up in month 5. The transmission went out
in the car, the refrigerator stopped working, or a relative died far away and plane tickets had to be
purchased. Anything can happen, and if the couple doesn’t have substantial money set aside for
emergencies (transmissions alone cost over $1000), then their plan to buy the sofa could backfire. They
would need to tap into that $50.00 each month to cover the emergency expense, and this would force
them to enter into the monthly payments with interest that come 12 months after purchase. Only having a
“two-month” buffer time can be risky. If the sofa cost $300.00, they situation could be better. If it cost
$600.00 (all 12 months of $50.00 payments would be required), that is quite a gamble.
So this offer can be advantageous to saavy money users, but it still has its risks.