In spite of Dave and Linda’s high income, they are two paychecks away from insolvency. How can this be possible? Perhaps it has something to do with Linda’s collection of nearly 200 pairs of shoes all purchased on sale from a variety of upscale retailers. She insists that she saved thousands and thousands of dollars by buying these sale-priced items. Her husband is also a clothes horse. He has a closet full of suits all purchased at fall sales, winter sales, spring sales. . . . Many people who are Income Statement affluent like this couple are bargain shopping commandos. They are saving themselves so much money on purchases that they are nearly bankrupt!
It not only requires money to take advantage of all these “bargains” it takes time to plan and shop for these super discounts. Last year this couple purchased apparel from more than 30 different sources. Admittedly some of these purchases were made online, but in most cases Dave and/or Linda made a personal visit. They are relentless in searching for new purchasing opportunities.
Contrast this couple’s shopping orientation with the millionaire next door types profiled in Stop Acting Rich (see pages 18 and 19). During the year in which they first became millionaires they had 2.45 times [median] the expected level of net worth given their age and income. In a typical year, on average, these millionaires purchased apparel from only 4.7 stores. Those stores which were mentioned by at least 20% of these millionaires include: Costco, Dillard’s, “favorite independent store,” J.C. Penney, Kohl’s, Macy’s, Nordstrom [especially men’s shoes], Target, and Wal-Mart.
What are the chances that Dave and Linda can adopt the retail patronage habits of the millionaire next door types profiled?
4 thoughts on “So Many “Bargains” They’re Nearly Bankrupt”
I used to be this type of individual, buying everything on sale at many of these same names of stores as where the millionaires shop. Only problem is, regardless if it’s a wonderful “sale price,” if you don’t have the funds to spend, if you’re using a credit card to make your purchase, then it’s really never a good deal.
My wife and I have adapted the habits as these millionaires, and we’re working towards becoming millionaires. I’m also trying to share this information with friends who still think because they “save money” by shopping such deals that they’er doing their due diligence, especially with one couple who the wife loves to get these “deals” for their three boys before school starts.
I hope they catch on. I know she’s using a credit card when she shouldn’t. Because they don’t have the cash to cover the awesome deals she thinks she’s getting.
I suspect the real difference is in the thought process.
The millionaire next door thought process is: I need to get a new suit because I have a good enough reason to forgo investing my hard earned money. For example their old suit is worn out. They then go to a store they can reasonably expect to find that item at a reasonable price, buy one and are done.
The income statement affluent thought process: I have some money so I need to find a good way to spend it. They don’t consider investing it- that isn’t any fun. They like the shopping process, and will go to as many stores as they need to find sufficient bargains to spend all of their money. This leads to a closet full of suits and 200 pairs of shoes, but not much net worth.
I must admit that sometimes I do follow the income statement affluent thought process and end up with stuff I don’t really need, but I try to stick with the MND thought process as it is much better for my net worth.
Also, too many people assume a “sale” is really a bargain and believe the “numbers” they are given by the merchant. A little research (my wife calls it reconnaissance) demonstrates that a lot of deals, aren’t.
Right now I’m hanging onto my old cell phone (which was a smart phone from a past era) because it still does what I need it to do. I won’t buy a new one until it either breaks or I have a real reason to upgrade (solves an existing real problem) and there is a true sale on the phone I’m interested in. As a technology guy I always surprise folks by not having the latest and greatest toys. But from this they realize I’m not advocating technology for technologies sake, but for the real value in getting the right technology for the right price. This same philosophy applies to just about everything we purchase.
200 shoes aren’t a bargin. Really? 200? I have shoes from 15 years ago. High quality beats low prices.