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The 5 stages of spending

An interesting fact is that we make buying decisions based on emotion and then use our power of logical thinking to create a rational reason to justify the purchase. If we took the time to indulge in logical, rational thinking before we made the purchase I am sure that we would feel a lot better about ourselves and what we've spent our money on.

Now it has been said that "Knowledge is power" so the more we know about how we spend the better our chances are of controlling what we buy. So let's learn about the 5 Stages of spending.

Stage 1. Spend to help us do what we do. Here the focus is on function.

Stage 2. Spend to help us be comfortable while we do what we do. Here the focus is on style.

Stage 3. Spend to help us cope with the time we are not doing what we do. Here the focus is on entertainment.

Stage 4. Spend to reward ourselves for having done what we do. Here the focus is on gratification.

Stage 5. Spend to show others how well we are doing at what we do. Here the focus is on status.

As you are comfortable that you have fulfilled the needs of each stage so you can move into the next stage. Unfortunately too many people spend their money the wrong way round.

Not only do they spend their money the wrong way round starting with status rather than function they also combine all the stages in order to justify an irrational purchase.

Let me give you an example.

You need a car. Stage 1 spending. The car will help you do what you do because now you can get to work. Now any car will do you just need transport but here is where the problems start because we bring in the other stages.

Stage 2 is spending for comfort. So now we do not want any car we want a comfortable car. Aircon, Power steering, etc. etc so the price goes up. But perhaps this is justified because if the car is not comfortable you won't be in a fit state to do your work properly. But, now we involve Stage 3

Stage 3 is spending for entertainment. Now we look at our leisure activities and we want a car that we can go camping in. (or whatever your preference is) So our focus has moved away from just getting to work and back but to something we can play in. OK. Now that we've got this far we might as well bring in Stage 4.

Stage 4 is spending for gratification. Here's where you forget about what you need and focus on what you want and you justify it by convincing yourself that you deserve it. The real question is, can you really afford what you believe you deserve?

However, the biggest problem comes from activating Stage 5 spending.

Stage 5 is when your spending is based on STATUS (Still To Stupid To Understand Success). Now what we want is a car that will impress others so that they can see how well we are doing. We want to flaunt our "success"

This leads to the situation where you started off needing a VW Chico but you end up with a Porsche Cayenne and the super sized price tag that goes with it.

Now I am not saying that you are not allowed to spend your money on what you want. I am suggesting that you evaluate your spending and ask yourself which stage you are spending in and is that the correct stage for this purchase.

Calculate the real cost of this purchase and ask yourself if you are prepared to use up so much of your life to pay for it.

And remember that money committed is money unavailable for any other use.

We'll continue with this subject in the next mail in the mean time apply the Triple S program

Spend Less - Spend Wisely - Save More.

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