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When most people think about setting up a home budget, they think about depriving themselves of their all important needs and wants in order to reach a financial outcome. These people view all discretionary purchases with the same undiscerning eye and spend very little time measuring the true value of a good or service. In their eyes, it’s either discretionary or it’s a necessity. While that way of thinking may be true under a standard home budgeting system, we at 101MoneyTalk.com view budgeting differently. We begin with a simple idea: not all purchases give the same level of satisfaction to the recipient. One person, a die-hard sports fan for example, may view a new giant screen LCD flat panel highly, while another, an opera aficionado, may desire a new high technology sound system. The sports fan may like music and the opera fan may like television, but neither would rate the other form of entertainment in the same hemisphere as their own personal preference. When we define utility, we define a fancy word that means measuring how much something is worth to you. A utility value of 10 means it’s worth a lot, a utility value of one means it is worth very little. Most people view their possessions somewhere in between.
Marketers are masters at creating momentary high utility – the feeling that you absolutely have to have something right then and there. A good marketer knows how to manipulate his target’s emotions. They do this in many ways, most of which are beyond the scope of this article, but the most obvious ploy is the “buy it or lose it” method. Simply put, the marketer creates desire by telling you that if you don’t act now the opportunity will be gone. We’ve all seen car commercials that end with “act now before they’re gone. This offer ends on December 31st or while supplies last, whichever comes first.” Ironically on January first there is yet another deal – most of the time just as good last one.
Marketers know that if you wait the odds are very low that you will return to buy once the emotion is gone; the “level 10 utility” that you thought you felt almost always ends up being a level one, two or maybe three with the passage of time. The most insidious question a marketer asks themselves is “how do I create a level 10 utility once (that may wear off quickly) and generate recurring income for a very long time – even if the buyer has ‘lost the love?’” One acronym, EFT. EFT stands for electronic funds transfer. In English this means an automatic monthly deduction from your credit card or checking account that gets paid whether or not you use the product. Marketers know that the majority of people are too lazy to cancel their monthly subscription; they will let it go on for years!!! Think I’m wrong? For those of you who have joined a health-club, how often do you attend???
The first step is awareness, the next step is change
Once you know that each purchase is going to generate different Utility you will begin to value your purchase options differently. Next, you need to simply ask one question. On a scale of 1 to 10, how badly do I want this purchase and WHY. WHY is critical because if you really want something but can’t expand on why you want it, then you likely have fallen under the spell of a marketer, time will break the spell.
The final step – wait to 24 hours during which time look for the best deal on your item. Search the internet, call around, talk to friends – do the research. This final step gives you the needed time to break the marketer’s influence – if you are under their spell. If you still want it 24 hours later, you are more likely to enjoy it.
Look for Part 2 Coming Soon