Friend and freelance writer Les O’Dell shares this diary entry from the sixth session of Financial Peace University, a 13-week course from national talk-show host Dave Ramsey.
“Caveat emptor”
It’s a Latin expression meaning let the buyer beware. I had always heard it and thought it meant be careful to not get ripped off, but in tonight’s Financial Peace University lesson, Dave Ramsey taught how the phrase should be a caution to consumers about spending and giving into marketing pressures as well as fads.
Ramsey shared how companies use every conceivable angle to convince us to purchase their products and services. He described the techniques and persuasions involved in personal selling, as well as the use of financing (including 90 days same-as-cash offers) as a marketing tool.
We also explored the use of advertising and marketing messages, sponsorships and product positioning in enticing consumers to spend money.
Five Steps For Purchasing Power
Ramsey shared that our bodies go through some physiological changes when we make what he called a “significant” purchase. For most people, he explained, a significant purchase is one of $300 or more. He suggested that anytime we’re facing a potential big purchase to do work through five steps in considering the purchase. It’s important, he says because we have the ability to spend more than we make.
The keys Ramsey gives to have power over purchases are:
- Wait overnight before making a major purchase.
- Carefully consider your buying motives. He reminds people that buying stuff doesn’t equate happiness in the long run (quite often it is the opposite).
- Never buy anything you don’t understand. Ramsey said this includes intangible products and services such as investments and insurance.
- Keep in mind opportunity cost. Opportunity cost is common knowledge to economic students, but a foreign concept to many of the rest of us. Basically, what he is saying is that people should consider what else the money you are preparing to spend could be doing or going towards.
- Finally, for people who are married, make sure that you get your spouse’s input before making any major buying decisions. Basically, he suggested using your spouse (or someone else if you’re single) as a spending accountability partner.
Reminders
Of course, Ramsey urged FPU students to make sure major purchases fit into their budget and cautioned (although that is not a strong enough word) to never borrow in order to buy something and to avoid put purchases of any size on a credit card or payment plan.
Les O’Dell is a freelance writer living in Carbondale, Ill. His work can be seen in a number of newspapers, magazines, publications and websites. He is co-author of the popular “He Said, She Said” newspaper column. He can be found on the web at www.lesodell.net. Les is not affiliated or endorsed by LPL Financial.
