Finance

5 MAD BAD PURCHASES

One of the reasons why so many of us are short of money is because we waste it. Often. Sometimes spectacularly. Usually the sums are not ginormous, but on occasions they can be truly embarrassing – when looked at in the cold light of day.

The key to having money to invest in property, or anything else, is (a) to acquire it and (b) to conserve it.

Conserving money means spending as little as possible as infrequently as possible. It means avoiding mad bad purchases!

What we earn is really important; the more the better. But more important is what we keep. It is all about what we have left to get us out of those financial holes we always seem to find ourselves in.

This blog takes a blunt and unforgiving but slightly mischievous look at those crazy purchases we are all too prone to make from time to time; purchases in a moment of insanity or vanity, or both.

THOSE ARE OCCASIONS WHEN WE MIGHT AS WELL THROW OUR MONEY DOWN THE DRAIN.

1. Pricey high fashion clothing

What’s to like

So you like a bit of haute couture? Great. Who doesn’t – especially if it is something you don’t have to wear on the catwalk to avoid ridicule.

Yes, fashionable clothing is great for looking good, but it is probably better when it makes your colleagues and friends go green with envy, right?

Isn’t that why someone would spend as much on a suit as it costs to buy a small car in an up and coming country, once the exchange rate is taken into consideration?

What’s not to like

The price tag for one. Is high fashion ever good value? Occasionally some items will increase in value with time (probably when you’re a pensioner!), but more likely their value will fall like a stone as soon as you take them out of their fancy packaging.

And of course they don’t exactly have a long shelf-life. The clue is in “fashion.” Not only are they bad value, you need to keep making the same mistake to keep getting that look.

Mad-Bad rating 

High. 7 out of 10.

If you’ve got the money to do this sort of thing without regret, I am happy for you. For the rest of us, is the everyday regular stuff on the high street or online really that bad?

2. A very expensive holiday

What’s to like

Fabulous experience, perhaps the experience of a lifetime. Fab food, lots of sun and fun no doubt.

GREAT FOR YOUR FACEBOOK AND INSTAGRAM PROFILE AND ALL YOUR OTHER SOCIAL MEDIA STUFF. MAKES SOME PEOPLE SIT UP AND TAKE NOTICE FOR SURE.

And of course you can’t forget the memories. Priceless, yes? Well actually, no – check your bill to see the exact amount you paid. On the matter of memories; sorry, they fade with time; no matter how amazing.

What’s not to like

Of course the bill. How many thousands? Horrors on horrors if you actually bought the holiday using a credit card. Surely all that interest will snatch back most of your unbridled holiday joy?

Mad-Bad rating

Very high. 8 out of 10.

What’s wrong with a B & B weekend in Bognor, Brighton or Blackpool?

3. A designer kitchen

What’s to like

 They say the kitchen is the new living room so it makes sense for it have style and class as well as functionality.

Of course it is great when you have visitors. You can show them the clever gizmos, the smart storage and the supersize fridge with enough food to feed your street.

Then there is the pleasure of being able to tell everyone it is “made from real wood” and “will last forever.”

What’s not to like

Do you actually want a kitchen that’s going to last forever? Are you planning on being around to use it in 3030? Will we still be cooking then?

The reality is that bespoke kitchens are way more expensive than they need to be. So expensive, most people can only really afford them on credit.

SO THEY GET FLEECED TWICE: FIRST ON THE PRICE, THEN ON THE INTEREST.

Mad-bad rating

Very high. 9 out of 10.

The swankier your kitchen, the more money you’re wasting. Is it really the case that an omelette made in a £50,000 kitchen tastes better than one made in a £5,000 kitchen?

4. Image-conscious accommodation

What’s to like

Who can resist that bright airy loft apartment in that trendy part of town where all the cool people hang out. Yes the river views from that new upmarket block are to die for.

If you can afford high-class accommodation, great. But if it’s just for show, to keep up with the in-crowd, is it really worth it?

What’s not to like

DO YOU REALLY WANT TO SPEND THE VAST MAJORITY OF WHAT YOU EARN ON A PROPERTY THAT DOESN’T BELONG TO YOU?

If you get a deposit together and buy your own place in a down-at-heel but up-and-coming part of town, the value of future house price growth will flow into your pocket, not your landlord’s.

Mad-bad rating

Very high. 9 out of 10.

What would you do? Rent a luxury apartment for £2,000 per month on your own in a trendy part of town or share with a friend in a cheaper area paying say £750 per month each?

5. The new car on credit

What’s to like

 It’s hard to resist the allure of a new car – the new number plate, the sparkling new paintwork, the snazzy new dashboard and the fresh-smelling interior with all the latest features, accessories and gadgets.

It’s a sort of status symbol, isn’t it?

There may be substance as well as style – a new car could be more economical to run.

Then of course there is the thinly disguised envy of your friends and colleagues.

What’s not to like

Money is again the issue. New cars are legendary for not keeping their value. Depending on the model, a new car can lose 10-40% of its value after the first year.

BY BUYING YOUR NEW CAR ON CREDIT, YOU ARE LOSING OUT FURTHER IN TERMS OF THE ADDITIONAL CHARGES APPLICABLE WITH CREDIT PURCHASES.

You are buying a fast-depreciating asset using one of the most expensive purchase methods around. That is a serious double whammy of insanity.

Mad-bad rating

Perfect score. 10 out of 10.

Buying a new car on credit must be the maddest baddest purchase there is. But, before I go, a confession; this crime against money is something I have actually committed myself!

The sparkling exterior and the brand new interior were just too hard to resist. I was thinking with my eyes, not my head.

If I was tempted again, would I cave? Goodness, no – not after researching and writing this blog!

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Dalton Barrett
Rebel Property Coach

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4 replies »

  1. Great and blunt advice. The issue is that when someone is that invested in spending on ‘stuff’ they can’t really afford, they are probably compensating for things in their life they believe they are stuck with such as a bad boss, rotten job or failing relationship. It takes a really big look inside to get to the truth of what isn’t working and embark on the journey of change.

    • Hi Maria, thanks really perceptive comments. I can see that you have been here and got the t-shirt. Totally agree that there is a lot of “compensating” going on. For many people looking inside to get the truth is really scary and difficult. I am not giving up though, this is a topic I intend to revisit soon.

  2. I had to laugh when I read this list! I have been guilty of at least two of these sins so far in my life. Thankfully, I no longer have an appetite for designer clothes and I avoid car dealerships like the plague!

    • Hi Arnold, your comments really made me laugh – in the best way possible of course. I think you are doing well. Only two? Most people I know are guilty on all five counts! If you enjoyed the article there are a few more in the same vein coming soon.

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