Here’s some sage and simple advice; never purchase anything just because it’s a “bargain”. The simple, unavoidable truth is that if you don’t actually need something it isn’t a bargain but instead a cost, and if you purchase it then it’s a waste as well.
If you need a good example let’s take a new laptop computer. For the sake of our example, let’s say that you already have a laptop computer that works just fine. Now let’s also say that you’re at Walmart and you see a new computer that’s $1000 new but at a 25% “discount”.
Most people would say “Wow, what a bargain!” because they would be able to save $250 but, since you already have a computer that works just fine, that “bargain” would, if you purchase it, actually simply be a $750 expense. Since you don’t need a new computer, it’s even worse because it’s money gone that could have been used to purchase something you actually need or, even better, to put into a savings account.
The only way to truly benefit from a price that’s been discounted is if you actually need the item, will use it regularly and will keep it for a long time.
The unfortunate truth about modern life is that, between all of the catalogs we receive in our “snail mail”, and the barrage of online advertisements from the likes of eBay, Amazon and hundreds of other online retailers, we’re literally awash in temptation to spend money almost every moment of the day.
Herbert Simon, the Nobel prize-winning economist, says that “a wealth of information creates a poverty of attention,” and goes on to say that “our busy, busy brains have been on overload for eons, and [they are] still being constantly bombarded with enticements to believe anew that we need more possessions to make us happy.”
If you’re a shopaholic, you probably now hate Herbert Simon.
Whatever the case may be, here are 2 extremely important questions that you must be able to answer before purchasing anything. If you can’t, the item you’re considering buying should be left on the store shelf (real-world or virtual).
Question 1: Do I actually, truly need this item? If you can’t say with all certainty “yes”, the item isn’t an actual necessity like food, or you already have something similar sitting at home, making that purchase is not the smart financial move.
Question 2: How will this purchase affect my financial plans? If you’re ready to make a purchase but already wondering to yourself how you’re going to pay the utility bills, buy food for the week or put money into your savings account, you should put your credit card back in your wallet or purse.
If you’re struggling to get out of debt or don’t want to find yourself in deep debt sometime in the future, keep those two questions in mind every time you purchase anything that’s not essential, and keep in mind that very few things actually are essential.
In other words, you can hate Herbert Simon if you want to, but at least keep his words about “possessions making us happy” in mind, especially if you want to stay debt free.