This is a guest post by Jeffrey Strain who is a digital nomad and writes on a wide variety of personal finance topics (one of which is how to avoid the timeshare trap)
In these trying economic times, most of us are doing what we can to limit spending. Thanks to clever marketing, we also have a tendency to buy certain items when we see them displayed or have them suggested by a salesperson or agent. Convenience stores, for instance, make at least 60 percent of their profits on items that customers purchase on sight. In other markets, airports, rental agencies and other service industries increase their profit margins by “upselling” at the counter or online.
While there are sometimes valid reasons to buy these items, the sad truth is that many are simply a waste of money and they are purchased because you haven’t thoroughly thought through the purchase. Here are 5 terrible impulse buys that you’d be better off saying no to .
Rental Car Insurance: Here’s a great “upsale” example that’s often unnecessary. Sales associates at rental car agencies, and even the online rental applications, always offer insurance for the vehicle at what appears to be a reasonable price because they have an incentive to do so. The fact is that the “small” fee you pay for this coverage is usually as much as or more than a typical monthly auto insurance premium, for just a single day of coverage. Before you go to the rental counter or rent online, take the time to make a call to your current auto insurance provider. Chances are you’re already covered in the rental car, too and if not, adding the additional coverage for it will cost you a fraction of what you’ll pay when renting.
Timeshares: This is an especially terrible impulse purchase because it can end up costing you tens of thousands of dollars. Think about it — would you ever consider purchasing a timeshare except when being presented with this “opportunity” while on vacation? High pressure sales tactics are employed so that you don’t have time to thoroughly research the pros and cons to owning a timeshare, and many people find out that they can’t get rid of their timeshare after paying tens of thousands of dollars for it. As with all impulse items, if you haven’t thought the purchase through so that you know it’s exactly what you want, you are better off passing.
Any Gadgets in TV Commercials: If the guy on TV says you gotta’ have it, it must be true, right? Wrong. “Call in the next hour, and get a second one FREE!” How many times per day do we hear that sales pitch? Or my all-time favorite, “But wait, there’s more!” It’s easy to convince yourself that you need what they’re selling. In fact, that’s exactly what the commercial is designed to do — convince you that you can’t possibly live through another day without it. Take a deep breath, put down the phone and wait. If this item is worth buying, it will show up in the stores and then, you can at least judge the quality of the merchandise up close before you buy another gizmo that will sit in a drawer or end up in your next garage sale.
Car Upgrades: Cars are depreciating assets and as such, you should purchase only what you need. It’s going to go down in value the second you drive it off the lot so you want to keep your losses to a minimum. The car sales staff don’t make this easy for you to do this, however, because the good profit margins for them is selling you on upgrades. While the special alloy wheels, upgraded gadgets and other upgrades that you had not considered may seem appealing, they are costly and usually unnecessary. In fact, they can cost you even more down the road — special tires cost more to replace than standard ones when they wear out.
Items on the Shelves beside the Checkout Line: Candy bars, gum, soda, magazines — all these items and more are strategically placed within sight of those poor souls waiting to check out at the grocery store. Each has its own special way of screaming “Buy Me!” and most are unnecessary. Many are even bad for you and we know it when we purchase them, but the temptation is just too great. Don’t give in. You can grab a snack when you get home that won’t add inches to your waistline. The recipes in the magazine are probably available in the online version, too — for free. Do you really need more lip balm, or is there still a tube in your purse?
The basic rule to avoid impulse purchases is to have everything written down on a list of what you’re going to buy when entering a store. If it isn’t on the list or it is something that you hadn’t considered, chances are that it’s an unnecessary impulse buy. If you have any doubt, the best course of action is to delay the purchase until you are sure rather than paying out the cash.