CFO of Life #116: Purchasing with intent - how not to waste your money!

SELL, SELL, SELL!

Anything and everything is on sale for Black Friday and will be for Christmas.

This makes it the hardest time to budget and save money, as we tend to overspend anyway. We all get tempted by a thing or two or more around the festive periods as the prices seem extremely affordable. It is so affordable that we sometimes feel bad for missing out on a good deal, and this is all by design.

This is the exact design of all those sales, all those promotions and all those great deals that play into our psychology.

They play on our psychology and push us into fight-or-flight mode, which does not always allow us to think 100% rationally. We all have that one gadget, outfit or memory of an expensive meal that we regret buying. This is normal, but we should look at it as a lesson on how to become better and start purchasing things with intent.

As we put intent into our work, words, actions and goals, why not put intent into our purchases and how we spend our hard-earned cash?

In this week's newsletter, I will show you how I purchase with intent and the five guiding principles that I go by in order to make the most out of my money:

1. Psychology of shopping and why we overspend

2. Experience the one true choice when it comes to spending your money 

3. Time - the true cost of each purchase

4. My way of thinking and the boundaries I follow about my spending

5. My five rules to make purchasing a lot easier

If this is your first time reading this blog, my name is Simeon Ivanov (Si-Me-On). I write this weekly blog about personal finance called CFO of Life to bring you on the journey towards becoming the CFO of your Life! I hope you like it and stick around for the long term!

Now, let’s get into the thick of it!

One of the major reasons we can't save is our inherited inability to control and track our spending. Without that clear understanding or goal, it is extremely easy to fall for some sleek marketing and lose sight of how much we spend on Black Friday gifts and impulsive Christmas presents.

It is all because humans are innately set up to rely on emotions and psychological biases that can easily lead to overspending. From the thrill of the chase to the fear of missing out, these factors can cloud our judgement and lead to regrettable purchases.

That is why I want to highlight a few of the key psychological factors that influence us:

Anchoring Bias: 

This bias highlights that people tend to index heavily on the first price they hear for a certain product. In the sense of shopping, this means that a great discount can easily sway you if the previous price you saw was significantly higher.

Scarcity Principle:

This principle suggests that people are more likely to want something if it is perceived as scarce or limited. Marketers often use this to create a sense of urgency and encourage impulsive buying even if there is ample stock.

Emotional Shopping: 

Emotional factors like stress, boredom or sadness can trigger impulsive purchases. These factors play on your dopamine release and trigger the short-term reward at the price of your long-term goals.

Social Influence: 

Social media, advertisements and peer pressure can influence our shopping habits and lead to unnecessary spending, which is extremely easy to avoid if we have more control over our emotions.

The Pleasure of Acquisition: 

The anticipation and excitement of buying something new can be rewarding, even if the purchase is not truly needed. However, the shame of having to return items can make our lives extremely expensive for no reason!

But now you know the psychological fallacies that influence you so make sure not to fall for them and that you make the purchases you need, not the ones you are told to.

Buying physical goods is necessary; we need clothes, food, transportation, or a phone so we can call people. But we don’t need the latest one, we just need a good one, we don’t need to follow fashion and still can be fashionable!

But when it comes to the one thing you can buy and hardly regret, that is the money you spend on experiences. Focusing on the value of experiences over material possessions is a powerful way to shift your mindful spending towards achieving long-lasting happiness.

I am lucky and I started to get that when I was young! Going to the mountains to the cheap resorts and learning how to ski down the slopes didn’t cost more than $30-$40 + gas and food, but I still remember it more than 25 years later!

The two-week vacation I took to visit Taiwan opened my eyes to how different the world can be but how much similar we all are! Plus, I don’t know when I will be able to visit a tea farm again and see how tea is grown, try the first tea of the harvest and buy myself a box of it! Nor would I have the chance to have coffee on the 26th floor and see the whole of Taipei and the night lights!

I will also never forget the look on the border security guard's face when I told him that we were going to Serbia to have lunch and then would come back in 3 hours. It was definitely worth the 10-minute car search they did! 

Those are some of the great memories I have collected since I started focusing on spending money on experiences and travel rather than on a Gucci belt or LV bags! And to back this up, research has shown that experiences tend to bring more lasting happiness than material possessions.

At the end of the day, your watch will break, your bag will wear down, your shoes will rip. But your memories will stay with you forever, the pictures you take will evoke feelings for your whole life, and you will be able to inspire your kids and grandkids to follow in your footsteps and try that. Where material possessions only last for a bit and then fade away from your life!

“You can make money, but you can't buy time” - Simeon Ivanov

Beyond the price tag, each purchase costs us time. This is one of the most overlooked but extremely significant parts of each purchase, as in order to make money, we exchange our time for it.

That is why it is important to know the value of your time and use it as a lens when making any purchasing decision. Recognising the time cost of each purchase, we can make more intentional decisions about what we truly need and value the things we have. Ultimately, by considering the time investment of each purchase, we can make more informed choices that align with our long-term goals and priorities.

Hence, one of my money rules is that I will shop around if the item is more than $20 and I need more than one. If not, I buy the most reviewed one on Amazon or from the most reputable vendor on Google Shopping. That way, I save myself the time searching for a coupon that might save me $2 for the item but might need to be purchased from a dodgy website. 

All that is just in the spirit of my motto: “You can always make money, but you can’t buy time!”

I only ask myself one question: “Does buying this help me reach my goals, or does it distract me from them?” If it does the first, then my choice is easy. I would probably buy this as it helps me get to where I want to be, it helps me achieve my goals, and it makes me feel better. It is that simple; I use this as a boundary that keeps me honest and makes my decision-making easy!

If what I am considering buying does not help me reach my goals, it would be a hard battle to get me to buy it! It would need to show me the benefits I will have, which should outweigh the time I have to “pay” for it.

And it is that simple: Anything that distracts me from my goals is a “No Go”, whereas anything that gets me to my goals is on the fast track to “Yes!”.

Rules make your life easy when it comes to decision-making. When it comes to purchasing, they allow you to follow your plan and not overspend, but simultaneously, you get enough flexibility that when a great opportunity comes, you can ease the moment and run with it.

That is why, today, I will share with you my five rules for how, when and why to purchase anything:

Rule 1: If you need something, buy the best you can afford and use it for as long as you can.

Expensive things tend to last longer, are made from better materials and are supposed to be repaired to bring comfort, whereas cheap items are made to break quickly and easily so you can come back and buy more and more.

Rule 2: If unsure whether something is worth it, try it and only then commit! 

Don’t fear going and trying expensive things more than once; it is worth finding the one you want, the one you will love and the one you will take care of.

One example of doing this is when I was buying my last watch. I tried five different models of watches from three different brands. After all the testing, I came to the conclusion that the £240 Swatch x Omega was the best value I could get within my budget of £1,000. But if I hadn’t taken the time, I would have jumped on the bandwagon and gotten a Tag Heuer, which was super heavy and uncomfortable for work.

Rule 3: When buying something new, try to replace something old or something that is broken. 

 Don’t just buy things for the sake of it, as that leads to clutter and waste! It also leads to situations where you spend money just for the sake of it. But if you take one thing out and you put one thing in, it all balances out.

Rule 4: Use the 30-day rule to curb the dopamine rush from a new purchase.

 If you think you need something but it is on the expensive side or you are on the fence, add it to the cart in the shop and give yourself a 30-day period to decide. Once your calendar reminder comes back and tells you it is time to review the purchase, the choice is obvious if you are not rushing in with enthusiasm. The choice is obvious if you haven’t gone back and back to look and try the item. But, if you are super excited and happy that 30 days have passed and you look forward to the item 

Remember one thing: then go on and spend the money; it proved that you need it. If it is 30 days later and you are enthusiastic about spending the money, not that you are getting the item you had to wait for, then you are buying it for the wrong reason!

Rule 5: Don’t skimp money on things that bring you comfort.

 Comfort is the ultimate luxury in life, and having possessions that bring you comfort is the easiest way to make your life better. Let me demonstrate this with two examples:

 This might feel trivial, but the moment I started buying more comfortable socks, I started feeling significantly more comfortable. Unsurprisingly, it made me feel like I was stepping on clouds and that clouds hugged my legs. It made me want to keep walking and enjoy my journeys a lot more. And that was an idea I had immediately after I got my first suit tailored.

 While working for FDM Group , I needed to wear a suit to work (5 days a week). That was not a problem, but I didn't have the budget for made-to-measure suits, so I needed to rely on suits directly from the shop floor. But one time, I saw a great deal on a suit and decided to take the savings and add some money to get it tailored. This resulted in me having the most comfortable suit I have ever had; it felt like a suit of armour and made me feel extremely comfortable. That became my interviews and wearing a suit, which got me many compliments but also got me one of my favourite positions.

 The moral of the story is that if you want to feel like a million dollars, you need to invest in the things that will make you feel like a million dollars.

 At the end of the day, it is all about fulfilment and happiness. It is about why you buy things, what joy they bring you, and how they make your life better. It is about exchanging your time for money and the value you get from that!

 Don't forget, this is your journey, so anything that I advise you is something that works for me. It might not work for you or even be counterproductive. That is why you need to tailor any advice to your needs and way of life.

 Only then will you find ways to make your life easier, more pleasant, and more fulfilling!

Next week, I will share a list of the best things under $100 that you can buy and why!

Post #116 in the series CFO of Life #si #personalfinance #CFOofLife