As part of our strategy for economic and financial preparedness, we’d be well advised to hone up on some tactics that can help us preserve our hard earned wealth. After all, the tactics we employ will be key in determining whether we can successfully achieve our strategic goals. In part 1 of Preserve Wealth by Avoiding Bad Influences, we looked mainly at people as bad influences, so let’s continue with that theme but place more emphasis on influences that most of us need to deal with every day but aren’t necessarily presented to us in the form of an individual.
As you can see in the photo to the left, people will go to great lengths and expense to catch your attention and interest in the hope that you’ll part with some of your wealth so they can build up their own. It’s to be expected because it’s in their best interest. There isn’t anything wrong with this, it’s just something we need to be aware of because the words and actions of others can influence our behavior in a way that isn’t always in our best interest.
As you read through examples below, keep in mind: Was it your idea or did someone else suggest it? It’s an important distinction between your will and interest and that of others.
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When ideas and suggestions come from others, especially those who don’t have your best interest in mind, that’s when we need to be especially careful about how we respond.
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To stay on track, let’s review the general advice in this arena from the introductory article about preserving wealth:
Avoid bad influences – there are many bad influences all around us that we might be best off simply avoiding. Whether it’s advertising, American popular culture, an irresponsible friend or neighbor, or something else that sets an example of acceptance when it comes to financial irresponsibility, it’s best to avoid immersing ourselves in this type of culture and thinking, lest we lose sight of our own goals and interest in personal achievement.
And, as we did in part one, let’s spend a little time looking at some good influences we might use as role models or catalysts for our own ideas.
Bad Influences
Here’s a quick look at six bad influences that we would be well advised to recognize and have a programmed defensive action for.
Advertising – there can be no doubt that advertising is one of the most powerful influences among us. Billions of dollars are spend on advertising each year, and it’s all for one reason; advertising has been proven to help influence the thinking and behavior of people. And, when it comes to gaining market share, spending money on advertising helps get people to spend money on certain products and services. As an associate of mine says, “A lot of times we don’t have better products, we just have better hype.”
Here’s a story that helps support the idea that advertising works. One day I was attending a party where people were discussing Dodge trucks and the Hemi engine that is often mentioned in their advertising. One gent was tossing around the term “Hemi engine” as if it were something new and special. I asked him, “What is a Hemi engine?” With a bit of embarrassment, he admitted, “I don’t know, but they have them.” If this doesn’t demonstrate that people repeat what they hear and people repeat what they learn from advertising, then I don’t know what does. The gent who was parroting back the information wasn’t a dummy by any stretch of the imagination, he was just caught up in the hype about an engine technology that has been in use for decades and was widely promoted by the Chrysler Corporation back in the 1960s, only he hadn’t been born yet, so to him the Hemi engine was something new and exciting…just what the advertising campaign intended it to be.
Addictions – be it gambling, smoking, drinking, prescription pain killers, marijuana, chocolate, shopping, or any other number of addictions, it might be surprising to find out just how much we’re spending on products, services and activities we can’t seem to live without…but most likely could. There isn’t anything wrong with people enjoying what they enjoy, but if we’re sacrificing our financial state of well being, then we probably ought to take another look at our activities to see if they’re really in our long term interest. What I find generally to be true is when we limit ourselves in terms of wealth, then we start to limit the “degrees of freedom” we might have, and that can help limit our choices in terms of our position in the economy. As an example, if we’re gambling our money away, we’ll have little choice in terms of our future source of income, we’ll likely remain the employee of another because we don’t have any reserve funds of our own with which to start up our own enterprise…no matter how talented or passionate we might be about being our own boss and directing our own future, we’ve let something else take control over our destiny.
Crowds – often the influence of crowds can overtake us if we’re not on guard against it. My father used to acquire new things for himself right around the time most folks do their Christmas shopping. It was evident to me that the shopping frenzy affected his normal reluctance to make discretionary purchases. Everyone likes a good deal, but just because something is “on sale” doesn’t mean it’s a meaningful purchase for you, no matter how many people are buying it. When you think about it, everything at a retail outlet is always for sale, therefore it’s always on sale but not necessarily at a great price. If you don’t really need it, it might be a poor purchase at any price.
When your normal behavior shifts, that’s a good time to make an assessment about why it shifted…was it a considered choice or a reaction to external influences?
Under the external influence of the casino crowd and environment (and alcohol), a friend of mine in Texas maxed out his credit card to get cash for gambling. Thankfully a couple of his other friends grabbed and pocketed most of the $10,000 cash advance for safe keeping and left him with only $3,000 for gambling. Of course, he promptly lost all of that at the gaming tables. It’s common for us to think “everyone else is doing it, so why shouldn’t I?” It’s also common for us to feel uncomfortable not partaking in activities that others are enjoying. When my friends in Texas ask me to go gambling, I always decline politely, and now they don’t ask me along anymore because they know that’s a bad influence that I deliberately avoid.
Clubs – this might sound a bit odd, but I’m not talking about a ski club, a bridge club, a nightclub or another organization that one might join and partake in their activities. What I’m talking about is closely related to the discussion of crowds above. No matter what “club” you’re in, it’s always a good feeling with someone else figuratively joins your club. Let’s look at some examples to see where joining a club, formally or otherwise, can put a serious dent in your ability to be financially prepared. One can get started in amateur astronomy for $100, but if you move up to something more than a telescope for kids, it can start costing you many thousands of dollars. If having tattoos is your thing, I imagine you could spend many thousands of dollars on ink and still not have much of your body canvas covered. At $50 to $150 an hour, getting more than just a single, small tattoo can be an expensive proposition. When I see small pickup trucks with visor shades, special paint, special wheels, chrome accents, roll bars, special mufflers that change the characteristic of the exhaust and many other features, I am reminded of that type of club where the appearance and sound of the vehicle is much more important than its utility. Quite often it’s young men driving those small pickups and I often think that a lot of discretionary spending has gone into those vehicles simply because that’s the club they’d like to be part of.
The main point is that there is a price of admission to being part of any club, and quite often there’s ongoing costs as well. Sometimes the cost is much more than what appears on the surface, so it would be prudent to take a long view of the situation before signing up.
Fashion, trends and product promotions – whether it’s new clothes, a new car, a new cell phone or a new gadget, there are many who must have the latest of everything. If you hang around people like that, don’t be surprised if you adopt similar attitudes about having the latest gadget, technology or article of clothing. I am reminded of a story of a young gal who just had to have the latest fashions — when her mother was buying them for her — but opted for an entirely different line of clothing when it was her own money that was going to be used for making the purchases. Fashion and trends come and go, and sometimes something that is “all the go” is best let go so others can “go with it.”
In another example, years ago I owned a Timeport flip phone from Motorola. I thought the phone had plenty of features and worked quite well. Nevertheless, anytime I interacted with the phone service company, someone would bring up the subject of upgrading my phone. At one point I was told that I had “an old phone.” To be sure, it didn’t have a camera or video recorder, and it didn’t have a colorful display with graphics, but those features weren’t of interest to me and still aren’t. I’m just interested in having a phone for making and receiving the occasional call. I suppose it’s a great thing to play games on a cell phone, but oddly enough, that’s not why I have a cell phone.
You – yes, even you can be a bad influence on yourself. As the group Counting Crows sings, “How am I gonna keep myself away from me?” It’s a tough job, but sometimes that’s just what we need to do. A few years back I met a man while looking to buy some land. There were quite a few drawbacks and challenges to owning the land, and I was trying to work a few angles so I could make it happen. He told me, “Be careful, because you can talk yourself into just about anything.” He certainly had a good point, because if you really want something, but don’t really need it, it’s a simple matter of creating a rationalization in your own mind to justify the purchase.
I am reminded of a friend of mine who bought a new car with the idea that the new car wouldn’t have all of the repair bills associated with an older model. When I did the math, it was clear that the car payments for one year were far more than any reasonable estimation of repair bills for an older car over a course of several years…my friend simply wanted the new car and was very willing to rationalize the purchase based on the idea of saving money. Right, like an airline ticket is a good deal because you get free peanuts a soft drink and a seat of your own.
There are many dozens of reasons why we buy things: investment, prestige, usefulness, pleasure, time saver, quality, the list goes on and on. We would do well to examine and reexamine our reasoning to determine whether we’re acting in our own best interest when making purchases.
Good Influences
There are good influences in our lives too, so we ought to use these as role models or catalysts for our own ideas about how to preserve our wealth so we’re better positioned in terms of financial preparedness.
Minimalists – a good friend of mine fits the bill of a minimalist, at least he did back when he was quite young. He was constantly focused on needs instead of wants, he was careful to spend his money wisely, and was reluctant to make discretionary purchases. He largely did as Henry David Thoreau recommended, “…keep your accounts on your thumbnail….” He simplified his life such that it was all very manageable, and in doing so it was all very cost-efficient as well. I’m not saying we ought to live the life of a minimalist, but we most certainly can pick up a few tips and good ideas here and there if we’re paying attention.
Penny pinchers – closely related to the minimalists are those who pinch pennies. It’s good to get a glimpse into the lives of those who make penny pinching an art form, a hobby, a way of life. Again, it’s not that this approach is the best way to implement a strategy of economic and financial preparedness, but there are lots of things one might learn. I tried one idea, using coffee grounds over again, and I think it’s a great idea. It’s one way to cut the price of coffee just about in half.
Individuals in tough financial straights – as odd as it might sound, sometimes those in dire financial conditions can give us life lessons that just won’t be recognized or appreciated in any other way. When you see the meager existence of some individuals, and you learn how they came to be in such a tight spot, you might pick up on some ideas about how to avoid getting yourself in that same spot. You might see the consequences of bad decision-making and peculiar behavior, and then vow to avoid being in that same place or anywhere close to it. It’s a financial preparedness version of being “scared straight.”
Next Up
In the next edition of Economic and Financial Preparedness, let’s look at preserving wealth by avoiding scams. The world is full of those who run scams on others, and it’s best to be on your toes, for a scam isn’t so much a bad investment as it’s a way of stealing your money by obtaining your own willingness to participate in the scam.
photo credit, dealership advertisement
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Clair Schwan isn’t the ultimate authority on economic or financial preparedness, but what he knows and has learned through experience and observation, he’s happy to share with those who also believe it’s our #1 priority in terms of being prepared.