#53 Fast Decisions Can Make You and Break You

 

Savers looking for a great deal have only a few times every year to buy some big-ticket items. One of them is Boxing Day, another is Black Friday/Cyber Monday.

Black Friday is coming soon. This is one of the best opportunities for savers to come out of their holes and finally buy a thing or two. It's also a good time to find those perfect Christmas presents at discounted prices with only a month to go.

It Pays To Be Prepared

A little while ago, I read a story about a woman who bought some "liquidation priced" items from Sears, only to later find out that the original prices were inflated to make the final sale prices look like a deal. 

Facebook comments show similar situations: lower prices under the sticker price.

Don't get caught with your pants down when the deals are for a limited time only. The time crunch is one of the marketing tactics widely used to put pressure on consumers to make fast decisions. This can often lead to people paying more than they could otherwise pay elsewhere.

If you want to play in any fast pace environment you have to be prepared or you'll lose.

Think about it like professional hockey. Every player on the ice knows what they are doing, where they are supposed to be, and how to play. The game, therefore, moves extremely quickly. If an amateur stepped onto the ice, he would get thrown off balance by the speed of the game. 

The same thing happens with shopping. Those that know the regular price of the things they want to buy can make a fast and informed decision just by seeing the price. And those not prepared will end up feeling pressured to buy things not knowing the prices they can get the product elsewhere. These amateurs will likely end up paying more than they should for some items.

I've been looking into getting an espresso machine. The one I'm looking at is on sale at The Bay for $600 down from $800. At first glance, this seems like a great deal, and I was genuinely excited when I saw this "sale", that I sent it to my wife. However, a quick search on Google and Amazon showed that the same model of espresso machine is selling for $480. A remarkable $120 less or 20% less. 

You can't trust a retailer to offer the best price, even when it's "on sale". 

When you do your research, you know what is a good price, you know what brand and what model you want, this way you can make a split second decision when the opportunity arises.

Knowing what you want and researching the regular prices prepares you to make fast decisions when a deal is available. This preparation can save you hundreds of dollars or more. In the case of Black Friday deals, I could save a couple hundred dollars on an espresso machine if I play my cards right.

But let's look at an even bigger purchase. A House.

The winning bid for my former condo was $86k above the second highest bid. This is a case of someone overpaying because they didn't do their homework, they likely let emotions control their decision, and maybe trusted their realtor too much.

To be fair, we wouldn't have likely accepted the second highest offer without a strong counteroffer. If they had done their homework, they would have seen that similar units in our building recently sold for the equivalent of $65k-$85k lower than what they paid.

Did we have any influence on convincing them to put in such a strong offer? I like to believe so.

1. We spent over $2,000 to beautifully staged our home so that they could imagine themselves living in the space.

2. We made the 540 sqft look as big as possible leaving a lot of open space.

3. We offered gourmet chocolate covered almonds as a snack to provide some reciprocal influence.

4. We neatly laid out all the business cards from every realtor that visited the unit on the dining table. The 50 or so business cards were there to provide some data to the potential buyers as to the potential demand and competition for our unit.

5. We set an offer date 1 week from the first showing, putting a time pressure on potential buyers to make a decision. This resulted in 11 offers.

The lesson here is to be prepared when making any purchase, especially a major purchase like a home. You never know when your dream home comes up for sale, but also you don't want to overpay for it just because your emotions get involved. People selling things to you will use many of the same tactics to play to your emotions. Being aware of these tactics is important to make a rational decision not driven by emotions.

How can you do research?

By being indecisive at first. Being slow to make decisions early on can give you more time to check out the different brands and products available. When you first decide you want to buy something, don't get too gung-ho and buy the first espresso machine or first house you see. There will always be another opportunity, there will always be another perfect house. Instant gratification can end up costing you more than you need to pay.

Know what you are willing to pay. Look at all the options listed in that price range.  Then look at the price range above your price range and see what all the options are. If the espresso machine you like is $800 look at the $1200 espresso machines too. If you have a $750,000 house budget, then look at houses up to $1 million. The opportunity here is that if that espresso machine or house in the higher price range goes on sale or is suddenly in your price range, you'll know it's a good deal and can make a fast decision.

Sometimes you just aren't ready to buy

Last week when I was in Japan, I got an alert from a blog I follow saying flights from Toronto to Vancouver were on sale for about $250 round-trip. The most I've ever paid for this same trip is $700 during peak Christmas season. Having made the trip between Toronto and Vancouver many times I knew this was a great price. But I wasn't prepared to buy tickets at the time since I was travelling and enjoying the current trip I was on. By the time I had checked out the deal, there was no deal to be had. Prices are now in the $450 range. Still a good price, but now my mind is anchored to $250. 

Sometimes you just aren't in a position to make the purchase no matter how good the price. Don't kick yourself for it. Sometimes it was just not meant to be.

Save Money Retire Early is written by Jon Lo, a barely 30 something change optimist, and personal finance guy. I believe anyone can be rich or poor, it's what you save that makes the difference.

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