Excerpted with permission from the publisher, John Wiley & Sons, from Financially Stupid People Are Everywhere, by Jason Kelly. © 2010 by Jason Kelly.
Killing Themselves for the JonesesEver look at what people spend their money on? I have relatives and friends chronically in debt, spending $12 for every $10 they earn instead of the $8 you know they should be spending. When I see them, they' re proud of their new whatever. Cars are high on the list. Electronics, too. A few boats have shown up. Designer clothing is popular. "What do you think of my new truck?" asked one from the driver's seat. "Do you like my new shoes?" asked another on stiletto heels. "Check out my new big screen," said a third while holding the remote in his living room. We've all heard people fishing for compliments on their new toys. Theirs?
First Save, Then BuyIf you ever want to know how predictably stupid most people are and how smart people are onto them, attend a product-and-marketing meeting. Companies that make and sell shiny objects know what they're doing, and they consider the average consumer to be a complete dope. I once joined a meeting at an electronics manufacturer where a manager asked if people would really buy a big-screen TV model as big and expensive as the one discussed that day. "Sure," said an executive, "just show a celebrity using it and break the price into 60 monthly payments that don't begin for six months, and they'll buy anything. "Everybody laughed and nodded, because he was right. The same meetings happen at car companies, clothing companies, furniture companies and jewelry companies. Most consumers are just walking debt dopes. Companies know that and have learned the language and images that trick the dopes into piling on more debt. "I deserve this," says one debt dope. "It fits my lifestyle," says another. "In today's world, your car is your home away from home," regurgitates a third. O First Rule of Finance, First Rule of Finance! Where art thou, First Rule of Finance? Here's a little secret: Most of the joy of buying is anticipation. Dreaming and saving for the car of your dreams is the best part. Once you buy it, it's just your car. Same with a pair of designer stilettos. Same with a big-screen TV. Life is long. When you buy everything you want immediately, there's nothing to look forward to anymore. Instead, get your life on the First Rule of Finance, save a foundation of money, and make purchases from it. If you see a big-screen TV you want that costs $5,000, break it down into 24 monthly payments of $ 210 into your own savings account before you buy, and enjoy counting the months and watching the cash pile up. On top of the joy you'll get anticipating the day you walk in and slap cash on the counter, four fringe benefits will emerge: 1. The money you save will generate interest until the day you use it. Keep that for yourself instead of paying it to bankers and corporate tycoons. You'll readlater how the Federal Reserve sometimes destroys this benefit by lowering interest rates to encourage spending, but for now just know that saving puts whatever interest is available into your pocket, instead of a corporation's.
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