Do you know what could be the most influential part of your finances? The thing that causes you to spend money and save money. The thing that can easily put you in debt. Possibly the most common marketing tactic in the world. It’s fear. Often, fear of the unknown and, more often, fear of things that never actually happen. Are you letting fear control your finances?
You may not even realize it.
It’s time to stop letting fear spend your money for you.
Let’s look at how fear can control your finances and how you can take control…
How Fear Causes You to Spend Money
“I’ve lived through some terrible things in my life, some of which actually happened. “- Mark Twain
Fear leads to blown budgets, piles of debt, and ridiculous expenses.
For many people, money means security, but it’s easy for that secure feeling to turn into fear. We call it convenience. If anything, it’s a fear of being inconvenienced, and it may be keeping you broke.
Things We Buy Out of Fear:
- New Cars – We all know that it’s a rip-off to buy a new car. So much of the value is lost when we drive it off the lot, and much more is lost within the first year. So why are new cars so popular? The new car smell is nice, but in actuality, fear is one of the main reasons people purchase new vehicles. Fear of breaking down on the side of the road or the fear of having to replace an expensive part.
- Warranties – New cars tend to come with warranties, but even used cars often have the option to purchase them. And it doesn’t end there. You can buy a warranty for almost anything. Sellers aren’t stupid. They will get their money. Warranties generally cost much more than you would ever spend in repairs on the vehicle or the product. Take a new car for example, in most cases you can rebuild the car several times for the price of a warranty. The warranty is never free. It’s part of the price.
- Unnecessary Insurance – Insurance is a necessary expense in most cases. However, don’t over-insure yourself out of fear. Make sure you’re covered, but don’t overdo it. Deductibles are a great example of spending more than we should out of fear. Just raise your deductible, take the difference that you save by having a high deductible, and put it into a savings account until you have enough to make up the difference if and when you need to pay it. It’s not worth paying an extra $80/month to get a $500 deductible instead of a $1,000 deductible. That really doesn’t make sense. Save the $80, and you can easily pay the $1,000 in the future.
- New Anything Else – You shouldn’t buy some things used. Underwear and toothbrushes are great examples of reasonable things to buy new. That being said, if you’re buying everything new, you may be buying yourself broke. When you can save upwards of 90% by buying certain things used, you should be buying used. The fear of something not working or someone else using the item keeps some people from buying used. You shouldn’t buy everything used, but if you only buy new, you should consider expanding your spending horizons. Don’t be afraid of used.
How Fear is Marketed
Fear is one of the strongest emotions. It causes us to do all kinds of crazy and stupid things. The problem is that salesmen, marketers, and advertising agencies know this. They will use fear against you to market just about anything. If you let fear control your finances, you let other people control your finances.
There is actually a marketing tactic called FUD (Fear, Uncertainty and Doubt). Yes, they’ve labeled it. This tactic usually relies on false information, but honestly, much of the fear we build up in our heads is based on false information. Not sure what I’m talking about? Refer to Mark Twain’s words above.
I recently stumbled upon an article on “fear marketing”. I’m not going to link to it, because I feel like that would be counterproductive (a simple Google search will reveal countless articles on fear marketing), but I do want you to see a few of their points on how to properly market based on fear:
- Make sure the portrayed consequence of not taking action is severe, but not exaggerated
- Make the audience feel that the problem is relevant to them
- Provide a specific action that the audience can take to prevent the portrayed consequence from happening
- Ensure that the audience believes that the proposed solution is effective in preventing the consequence
I’m not saying that fear marketing can’t be a “somewhat honest” sales tactic, but I am saying that you, as a financially savvy consumer, should be able to protect yourself against this type of marketing. So, let’s see just how to do that…
How to Protect Yourself From Fear Spending
Here are 4 ways to protect yourself against fear marketing and spending out of fear:
- Don’t be sold on fear alone. Fear will play a role in some of the things you purchase, but don’t let it be your only driving factor. And if it seems to be your only reason for buying, take some time to reconsider the purchase.
- Know how to spot fear marketing. From the explanation I gave above, you should now be able to point out fear marketing. Know when it’s being used against you and, most importantly, don’t be bullied by it.
- Plan as a means to avoid fear spending. One of the main reasons we spend out of fear is due to failure to plan. When we run into trouble or issues, we spend our way out of it. Planning ahead can usually solve that problem.
- Research your large purchases. It doesn’t make sense to spend hours researching every single purchase, but any large purchase is worth researching. Anything from a new television to a new car. Shop around and make sure you’re making the best decision.
Now that you have an understanding of fear marketing, fear spending and how to protect against it, you can be in control of your finances.
Don’t let fear control your finances. They are your finances after all. Keep a clear head and don’t let yourself become bound by fear.