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As someone with a long history in marketing, I’ve seen plenty of situations in which companies will actually trick you into spending money with them. Now don’t take my use of the word “trick” too seriously. At the end of the day we’re all in charge of our own spending habits.L These “tricks” are universal tactics that you can easily dodge to avoid spending money. Below is our list of how companies trick you into spending money…and how to avoid it.
Being able to pay small installments for an expensive purchase may sound like a good deal. How else were you going to afford that new car? However, one of the biggest money wasters of all time is credit card interest. Interest fees are how credit card companies and banks make money. The credit card company allows you to pay in installments because you are paying them a fee every month in the form of interest. For example, the average credit card interest rate for existing card holders is about 15%. If you purchase a new bag for $1,000, paying a minimum balance of $50 a month, it will take you upwards of two years to pay off that purchase with an additional $158 in interest. The credit card company allowed you to stay in debt for two years to earn an additional $158. This $158 may not seem like much, but magnified by purchases made each month over several years can amount to thousands of dollars in interest paid to credit card companies. Car dealerships use this tactic quite often. They lure you in with zero down financing but hit you with a crazy double digit interest rate. The solution-just stop. Stop buying things you cannot afford. If you cannot pay cash for that time (with few exceptions), you cannot afford it. It’s better to buy a cheaper option of what you want and remain debt-free. If you don’t trust yourself with a credit card, simply don’t use one. You can get by just fine with a debit card in most situations (or cash). I am not anti-credit card and think you can get a lot of use out of a good card with hefty rewards. However, this is only for those with enough discipline to manage their spending wisely and pay the balance in full each month.
Every brand will convince you that you have to upgrade to the latest technology/version. The truth is you don’t really have to do this. Yes technology does change and upgrade and sometimes it is necessary to upgrade in order to improve speed and efficiency. However, I’ve gone multiple years with the same phone without issue. The upgrades are often minor improvements wrapped with smart marketing. Often, companies offer deals like trade-ins and extended warranties to sweeten the deal. Unless you really need a new phone or gadget, skip the upgrade. The warranties come with so many provisions it takes a phD to understand it all and often don’t cover all issues. Instead of spending that money on an upgrade, invest or save it for the future. Acorns is a great app I personally use to save and invest. With acorns you can take your spare change from every day purchases and invest in a portfolio.
A very common tactic companies use to trick you into spending money is the use of a decoy. Companies will often create a decoy version of what they really want you to buy to encourage you to trade up. For example, a movie theater may offer popcorn in a small, medium, and large at respective prices of $5, $7, and $8. The medium is the decoy-the movie theater doesn’t actually want you to buy that item. The movie theater priced the medium at an undesirable price. For only an extra dollar, you can upgrade and buy a large, completely overlooking the small, thinking you are getting a good deal. Next time you go shopping and encounter multiple options like this, think about the pricing structure and how they could be “tricking” you into an upgrade.
In one of my earlier articles on ways to save, I encourage readers to unsubscribe from those promotional emails. Constantly being bombarded with offers to save money will actually encourage you to spend more money. The idea of getting a good deal certainly does encourage us to spend more. Additionally, those emails keep brands top of mind. Once you unsubscribe from those emails you’d be shocked to find how much you DON’T think about those brands.
With the rise of social media, there is a big pressure to keep up. We see influencers and celebrities show off high end cars and home, luxury bags and lavish vacations. Brands often use these influencers as a way to show off their products. However, the reality is that these images are just seconds int time and never tell the full picture of someone’s life. That influencer who is showing off the latest LV purse may be dead broke. That celebrity partying on the yacht could be filing chapter 7 bankruptcy. There are so many unknowns when we compare ourselves to strangers that the attempt is futile. We have also become a society of consumption where we can’t tell the difference between a need and a want. You may want those new shoes, but you need to pay your electric bill. Separate your needs and your wants so you can better understand what you can afford and how to spend. Remember, it is better to be rich than to look rich.
One thing I preach heavily on this blog is accountability-at the end of the day we’re all responsible for our own financial choices. However, you may learn to be a little smarter with your money if you can uncover the tricks of the trade that are putting you in that spending mindset.