Holiday Savings
Congratulations if you made it through the Thanksgiving break without making yourself broke (or sprayed with pepper spray). Check out how you can have more money for gifts next year (at the end).
The good news being celebrated in the markets today is that "Black Friday" sales were up about 6% over last year (not adjusted for inflation) and customer counts also improved at retailers. The data is skewed, though. Traditional holiday retailers did not do as well as the headline number would suggest (Read Daniel Gross's post on Black Friday Sales Figures).
More not-so-good news is that the personal savings rate in the United States is dropping quickly - and all that consumption in the stores may not be such a good thing in the long run for your pocketbook or the economic strength of our country.
Money Saving Tip
This is going to be for readers who actually want to get through this gift-giving season without going broke or in hock up to their eyeballs. I did a story on the local NBC TV affiliate about how to manage Black Friday sales. The video never posted on their site (we're working to get a copy up on YouTube), but here is a copy of the text from that story.
The one tip that THEY focused on is to Wait Five Minutes before making a purchase. Here's why this trick works. When you anticipate getting a reward (like buying something new), your brain releases a feel-good drug called dopamine. That dopamine feeds your emotional circuits and blocks any rational feedback against making that purchase. Taking a 5-10 minute break allows the dopamine to wear off so your brain can process that feedback.
Anybody who has ever "enjoyed" Buyer's Remorse knows what I'm talking about here. Buyer's Remorse happens when the rational feedback (2nd thoughts) is allowed to seep through only after the purchase has been made.
More Tips
There are other tips for improving your Holiday Savings (pun intended). Most of these were covered in my interview with the reporter, but didn't make it into the 90 second news story.
--- Have Your List ... and Stick To It - Do anything you can to short circuit the effects of that dopamine release. Operate off a shopping list. Write out the list at a time when you are calm, quiet and stress-free rather than allowing your emotions in the store (and all the tricks they use to get you excited) to dictate who gets what.
--- Avoid Stressful Sales - Black Friday is a perfect example of an environment created to help you make poor choices. You are stressed out from being up when you would normally be sleeping. There are crowds of other stressed out people and there are time limits on the sale prices. These all add to stress ... and human beings make especially poor decisions when they are stressed out.
--- Know Your Resources - Another common mistake people make is to not be aware of how much money they really have to spend. It is really easy to swipe that credit card and make the purchase without taking the time to think about how much money is involved ... or if you even have that money to spend. Remember, a dollar spent on something today is a dollar that cannot be spent to buy food, pay the electric bill or your mortgage tomorrow. That money is gone for good.
--- Anchor Yourself, Don't Sink Yourself - The human brain bases almost all decisions on comparatives. You compare the data of the moment (sound, sight, smell, touch, etc) to a storage bank of historical data - a sum of all of your experiences in your life. That storage bank colors how you perceive the moment. That perception is also affected by what is going on around your right now. If you are buying a $300 item, an additional $20 purchase will seem small ... almost insignificant. If you were in a dollar store surrounded by $1 items, that $20 would look more like the rip-off it is.
An Extra $1000 to Spend
Had you worked through your cash flow at the beginning of this year (our Cash Flow process takes a couple of hours to go through and costs $397 - call 805-476-0333 for more information), I know you would have an extra $500-1000 available this gift-giving season (after the fee). That is the amount of money we find (at a minimum) that people are throwing away on stuff that doesn't matter to them.
There is likely to be several hundred more dollars that will go out in the next several weeks if you don't follow these tips. It's your choice, though. After all, it's your money.
John