While I was talking to my friend the other day, he was telling me about all these promotions going on with clothes. He was talking about how everything's a bargain right now and it's true. I've noticed this trend a few months ago with more and more businesses trying to lure consumers into spending by lowering their prices. With a lot of big tech companies laying off thousands of employees and stores filing for bankruptcy, it's a rough time for businesses. In the business world, it's a battle of the fittest and who ever comes up with a best strategy always wins-at least with direct competitions. Due to an economic turmoil we're experiencing, the fact of the matter is, consumers are in the charge of this current market.
What I meant by in charge is that, consumers are the ones that dictates the market. Without the demand of the consumers, the businesses are going no where and this is an economic fact that's the basis of supply and demand. Since the unemployment rate keeps increasing every month, the consumer spending goes down along with it. If you haven't heard, Bank of America also decides to suddenly increase the interest rates for credit card accounts. So why would anyone want to spend money when everything is not going well for us, the consumers? As much as you hate to admit it, it's difficult-but not as much difficulty as businesses are experiencing. Banks like BOFA who tries to take advantage of the consumers should pay for increasing their rates.
So what should consumers do about it? Do you just sit there, wait and do something when the market comes back up? Statistically speaking, the current market condition won't be like this forever and what we're experiencing is a cycle. Do you really expect that the real estate will just go up and up forever? I think this is really a poor misconception because nothing goes up forever (read up on Newton's law of gravity). Stupidly enough, consumers have been taught that the real estate is the greatest investment available. A lot of people might disagree on me with this one but do you still think that it is true even after the prices of the real estate plummeted? Sure the prices might go up later but if you average it out over a span of 10-20 years, the return on investment is very little. Unless you're paying in cash to eliminate interest rates which majority of the population don't do, it is rather an OK investment (not the greatest).
Since businesses are getting desperate due to lower consumer spending, the plan here is to spend but to a minimum. At least give back to the businesses who are trying to stay alive by lowering their prices. But to those stores, services who aren't doing any promotions, just let them suffer and don't do business with them. I know that some people still buys brand stuff regardless of its prices (it's a hard habit to break) but we need to get off that cycle. Pay attention to ongoing sales but just don't buy things for the sake of buying things just because the prices are suddenly "cheap". These are referred to as impulsive spending or making unnecessary, unplanned purchases. Stay reasonable about your spending and make sure that each purchase that you make, makes sense and has value. For example, just don't buy a shirt just because it's $10 but rather purchase it because it fits your budget and you really like the shirt (not just for its price). In this economic time, we need to be intelligent in our finances and have total control of where it's going.
If you want to control the market, I'll outline a few strategies that makes sense. First is to plan out a budget that is specific as to the allocation of your spending. The most important thing here is to know your limitation as far as how much can you spend on miscellaneous things after paying your bills and adding funds to your investments (each month). Call up your credit card and ask them for a few things-reduce your interest rate or threaten them to close your account. If they don't give you what you want, who cares? Lend your business to a company who wishes to accommodate to your needs, not someone who doesn't. Second thing is to ask for any ongoing promotions such as 5% cash backs or 5 points for every dollar purchases, things that can help you rack up some points quickly if you're on a rewards program. Also find out your billing cycle and make sure that you pay it off by the end of the billing cycle.
Another strategy is to cut down any unnecessary bills that you don't need. As a matter of fact, I'm going to discontinue my Netflix account by the end of this month since I don't really have time to watch movies at the moment. A subscription of $20 of Netflix per month (approximately) amounts to $240/year and that's only for a $20 cost. Think about the other ones that costs beyond that such as cable bills, cell phone add-ons, Warcraft subscriptions (LOL @ this because I know some people who has this), but the list can go on and on. $240 a year can go along way and I can even invest this money on my retirement fund. My point being is to carefully watch your finance carefully and know exactly where it's going and especially during this economic time. It's probably a wake up call for some people but sometimes, you have to make some adjustments in order to survive during economic down times. You have to learn how to play the game and don't let the businesses control you (they've been doing it for many years). Pick and choose your weapon wisely and get ready to hunt them down.
- Dennis