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6 Sales Traps You Need To Avoid If You Want To Get Rich

6 Sales Traps You Need To Avoid If You Want To Get Rich

Most of us have an inner desire to develop wealth, primarily because it affords us the type of financial security that makes life easier. There are a number of misconceptions that surround the accumulation of wealth, including the assertion that people can’t get rich simply because they earn too little. This is a consequence rather than a cause, and the fact remains that people struggle to accumulate wealth largely because they spend too much time and money on things that lack value.

A reckless approach to expenditure or a lack of focus will undermine any attempts to generate income, whereas frugality and hard work will drive success. In practical terms, those with a desire to build wealth must avoid prominent sales traps. These schemes are used by companies across multiple sectors to target those with a propensity to spend impulsively, although they rarely offer anything of tangible or long-term value. This is also an issue with short-term investment plans, so you must tread carefully when faced with the following examples:

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1. Marking down a marked up price

When companies or distributors hold sales events, you could be forgiven for thinking that any subsequent purchases represent far greater value than usual. It is not unusual for sales teams to inflate the price of a particular product in the weeks prior to a sale, however, before reducing this drastically and creating the false impression of value. Although huge reductions in excess of 50% are extremely enticing to customers, this means nothing if the original sale price was manipulated to mislead individuals about a particular product’s value. To avoid this, you need to take responsibility as a customer, recognize the dangers and shop around aggressively for the best possible deal. A specific percentage discount does not translate into pure savings, as it simply reduces either the manufacturer’s suggested retail price or the one initially set by the distributor. By comparing prices across the market, you can delve beyond individual deals and achieve value for your hard earned money.

2. The lure of exclusivity

Online price comparison technology has proved extremely challenging to retailers, as it creates an informed and motivated army of customers who are less susceptible to traditional sales techniques. This is where the concept of exclusivity comes into play, as this is a ploy used by stores to justify high price points and deter consumers from shopping around. By marketing goods as part of an “exclusive line” that is not available anywhere else, retailers can drive a far harder bargain and force the hand of impatient customers. This has proven to be a successful scheme, especially when it is aimed at impulsive spenders who are in the market for a specific product. Exclusivity deals are usually restricted to specific regions, meaning that you may be able to find your chosen product elsewhere. These deals are usually signed for a fixed period of time, and once this has passed the product will become available in other stores nationwide. Patience is therefore crucial, while more flexible customers can also shop around for a similar product that serves the same purpose.

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3. Persistence wins the day

The majority of successful salespeople are aggressive self-starters, meaning that they are generally self-reliant and persistent in the pursuit of their goals. This leads us to another common sales trap, through which customers are implored to make a purchase as a way of satisfying a relentless and driven sales effort. Although this is an obvious trap that relies more on direct communication and tenacity than psychology, customers can easily be influenced to buy if they feel pressured by the attentions of a sales representative. In this instance, the key is to remain grounded and communicate authoritatively with salespeople. If you have no need or desire for a specific product or service, remember that this is unlikely to change throughout the course of any dialogue. By focusing on this and communicating your stance clearly to a sales team, you can quickly discourage them from pursuing your custom. Time represents money to salespeople (especially those who rely on commission), so they are unlikely to chase leads where the customer shows a clear and unwavering lack of interest.

4. The art of accessorizing

Have you visited a furniture store recently? If so, you will have probably noticed perfectly standard centerpiece items, such as beds or sofas, adorned with a number of high end and visually engaging accessories. While the store will justify this by claiming that such a practice helps customers to visualize how their property will look in a fully decorated and accessorized room, it actually serves to enhance the appeal of ancillary products that are not included in the sale price of the core product. Not only does this make the core product itself look more enticing, but it also drives additional purchases. Awareness is crucial in this instance, as once you recognize this sales trap you can refocus on your needs as a consumer. The first step is to make a concise list of everything that you need prior to hitting the high street, while also establishing a fixed and viable budget for the trip. In order to ensure that the core product in question meets your needs, you should also look to strip it of any accessories or ancillary items before making a final decision. You could even bring in some of you own accessories from home, as this will present the product in a more realistic light.

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5. When insurance has no purpose

In addition to corporeal items, there are also a number of lucrative insurance products sold on an annual basis. As the ongoing controversy surrounding PPI claims proves, however, not all of these products offer value to the buyer or are sold in an ethical manner. There are two damaging sales traps to be wary of in this instance, as vendors will either sell erroneous policies that offer no discernible value or inadequate coverage that fails to deliver long-term, financial savings. The former policies tend to be sold aggressively by call center operatives, and they usually look to capitalize on client ignorance or gaps in knowledge. How do you avoid the insurance sales trap? The first step is to assume the role of aggressor when communicating with service providers, especially if you are in need of a specific product. More specifically, you will need to set out exactly what you are in the market for, detailing your need, budget and any additional data that helps to reduce risk. If you are contacted directly by a firm offering their products, you should also look to challenge their knowledge and ask them to clearly explain the terms, purpose and salient points of the policy.

6. The quest for high-yield, short-term investments

In the quest to build wealth, you may be tempted by any of a number of investment opportunities. You will need to be cautious, however, as the demand for instant, high returns has triggered a rise in the number of risk-laden schemes and ill-considered investment traps. While some of these investment opportunities may well have the capacity to trigger quick returns, they are primarily aimed at inexperienced investors who fail to understand the relationship between risk, return and long-term gains. To avoid this, you will need to research your chosen market and ensure that there is an opportunity to earn reliable, long-term gains that offer a suitable reward for your investment. The market for sustainable assets and green investment is particularly strong at present, for example, especially when you consider that there are now viable technologies that reduce carbon emissions and consumption in sectors such as fuel, energy, and even data storage. This trend is likely to continue for the future, making this a far more suitable investment option than those that revolve around real estate flipping and pyramid schemes.

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Featured photo credit: Wallet Credit Card Cash Money/Steve PB via pixabay.com

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Last Updated on August 20, 2019

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

5 Steps to Set Financial Goals

Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

1. Be Clear About the Objectives

Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

2. Keep Them Realistic

It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

4. Short Term vs Long Term

Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

More on this later when we talk about how to achieve financial goals.

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5. To Each to His Own

The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

11 Ways to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a 2 step process –

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

Ensuring Healthy Savings

Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

3. Make a Plan and Vow to Stick with It

Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Rise Again Even If You Fall

Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

5. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

If you are travelling buff, try to travel during off season. Your outlay will be much less.

If you go out for shopping, always look out for coupons and see where can you get the best deal.

So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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6. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

7. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

Making Smart Investments

Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

8. Consult a Financial Advisor

Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

9. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

Do you remember we talked about bifurcating financial goals in short term and long term?

It is here where that classification will help.

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So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

10. Compounding Is the Eighth Wonder

Einstein once remarked about compounding,

Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

Start investing early so that time is on your side to help you bear the fruits of compounding.

11. Measure, Measure, Measure

All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

The Bottom Line

This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

As you can see, all it requires is discipline. But guess that’s the most difficult part!

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