S.M.A.R.T Purchases

Foreign money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money Podcast. I'm Jessie Edge and I'm joined as always by our CEO and absolute superstar, Scott Barry.

Jesse Lee.

What's up, buddy?

Not as good as you, but better than people.

I love that. All right, we've got something really cool today. You found a pretty awesome video where a gentleman talks about how he approaches a purchase, any big purchase in his life. And here is quite a simple process with a little nifty little acronym that goes with it. So we thought we would run that through with our listeners today. And it's pretty simple. It's called a smart purchase. S M A R T. All right, take it away, Scar.

So you guys have heard of the smart way of setting goals, right? Specific, measurable pay for.

I can't even remember.

Realistic time. Yeah, time based. So I guess it's a really good way to set goals. Making sure, okay, those goals are smart, measurable, et cetera. And so this guy's done a similar sort of thing using smart, but for purchases rather than for goal setting, which a lot of big purchases are goals, in fact. So where it sits is we're going to run through each letters and to start to expand on a little bit more. So self awareness, Jesse.

Yeah, so self awareness is just really understanding. Does this purchase have a purpose? Like, am I, am I buying this? You know, do I have a need for this product in my life? And just being really self aware of the product and not just. We're going to find out through a lot of this. This whole process is just about being aware of the purchase and doing it consciously. So making sure you're not making those impulse purchases without really thinking about it. So first step, does this purchase have a purpose?

Second step, M, the motive. What's the motive behind buying this?

And this is a really interesting one because I think, you know, I'm definitely guilty of this. Where, you know, they call it retail therapy. We bind things from an emotional place. We're buying it to make ourselves, you know, feel better, get a little bit of an endorphin rush. And, you know, there is definitely a really great feeling about adding to cart. And if you hit that purchase button, don't ask my husband how many Amazon boxes rock up at my door every week.

Yeah, I think you definitely know the person by first name. It's a problem in terms of a. That's for affordability. So this is really plain and simple. I Mean, can you afford it? Is it in your budget? Are you going to be going into debt for this? These are all key focuses. I mean, like, if you're going into debt for a liability that's going to go down in value, is that the smartest move at this point in time, can it be prolonged, etc. Those affordability questions, I could some other people say if you can't afford to buy it twice, you can't afford to buy it once. There's just different ways of looking at affordability, but you know your cash flow position, you know roughly what's coming in, what's going out, is this going to put strain on you and can you afford it? Have you budgeted for this type of expense at this level? And so the affordability is a clutch question which everyone needs to ask themselves because so often we just jump into it, push the button, add to, cart hits the PayPal. There's no pain associated in any way, shape or form. You don't feel like you've lost anything. The next minute the parcel walks up from Postman Pat and oh, that sounds great. Feels great for a few seconds and it goes back in the shelf with the rest of the stuff.

I think, I think ultimately, if you are looking at a purchase that you know is going to have to go on a credit card, a, a buy now, pay later service, a personal loan, anything like that, you cannot afford it. It's as simple as that. You cannot afford it. The only time you should be paying for it is if you've got the savings or you've built up enough redraw in your home loan to be able to pay for it and afford it accordingly.

Yeah, you don't want to go into debt for things that aren't going to produce incomes for you, be tax deductible for the interest, et cetera, just bad debt. And so that there's all sorts of bad debt. Like believe it or not, your home loan is bad debt. It's not income producing, it's not tax deductible. And then there's horrific debt, which is credit cards, where they're sitting at sort of 16, 18%, car loans, personal loans at 10, 12%. So there's all these different types of debt, but good debt is where you're actually taking out money and borrowing it, but being able to claim a percentage of the interest you pay as a tax deduction because that money you borrowed has gone towards an investment which produces an income stream. No problems with that in terms of the affordability. If you've got to go into debt to invest. That's actually okay. Over the long term, with leverage, it's going to work out just fine. But that affordability, I don't think enough people sort of take, stand back, can I actually afford this or do I just want it justified of myself that I can afford it?

Yeah, absolutely. And yet it's taking that moment, taking that breath and going, really? And I afford it. And most of the time the answer is no. All right, the next one, R R is for research. I love this one. I'm a big researcher when it comes to purchasing. So this is just asking the question, is this the right version of this product? Can I buy it somewhere else for cheaper? Can I buy it somewhere else that's better? Can I get, you know, better additional features with it, whatever it may be? So doing your research, don't go to a shop and do an impulse buy in the moment because they happen to have a sales sticker on and you're like, oh, well, that must be the cheapest option. I'll go for it. Have a quick jump online, go on to Google. And the shopping option on Google is unreal. Just look for the exact model number. Go to shopping, find the cheapest brand I can guarantee you'll find somewhere else that's cheaper, will get delivered to your door for free and away you go.

So that shopping tab is really cool because you can click the button to just only show me the sale. So only show me the discounted version, which is cool. And what do you guys use? Is that Temu or Temu that I don't.

But yeah, there's a lot of those platforms. But I think, yeah, for me personally, Google Shop is the best. But also just, okay, I want to buy a new tv, right? This is, this might be a question. I want to buy a new tv, ask around, ask for the most reliable products and then wait for the sales to come up. You know, speak to local shops and say, when do you have your sales? Yeah, just do, just take an extra couple of steps to make sure if you're going to be spending the money on this product and you know that, you know, you're selling where the product, it's, you know, filling a need. The motive is right. It's within your affordability, then making sure you've done your research so it's the right product to buy.

I, I love like buying secondhand shit on Facebook. Marketplace.

Gord.

Yes. And I don't know what it is. I just feel I'm getting such a great deal and I'm so like thrifty tv, prime example. I think I've had my TV for maybe seven, eight, nine years. It does. It's not that smart actually. My smart tv, it's still stuck in kindy. I was looking for a, a tv and I'm not looking to buy, but just more curious as to what TV price. I just haven't kept up with them. And I jumped on a Facebook Marketplace and was just looking at the TVs and I was like, holy, wow. Like there's Some great value TVs on Facebook Marketplace and there's no way I'm going to a shop to buy a brand new TV.

People turn over TVs quite quickly, like two years down the track. Oh, I need, I need a new tv. It's like you don't like, you think you do, but you don't. And so they're, they're selling these perfectly good TVs that are up to date with technology. It's great. When we came back from Perth, moved into our house, we gotten rid of half our furniture. I bought an entire living room set. Like we're talking couch, coffee table, this chest of drawers, like buffet thing that we put the TV on everything for like $300. What? All secondhand on Facebook markets. The. But the buffet, I like painted it and in this like really cool chalk paint, it looks really funky. And I'm like so proud of that room because I know I spent so little.

Wow, that is impressive. That's thrifty. That is thrifty. Well played. Timing. T for timing.

Yep. Taper timing.

I really feel that everyone doesn't ask themselves, is this the right time to be making this purchase? Can I Prolong this for 6 months? Can I maybe push it out for 12 months? It happens a lot when we've got clients wanting to grab a car, buy a brand new car, which we all know clients related by brand new cars, unless they're moving theirs. So everyone's buying secondhand cars three to four years of age. So someone has thrown off the car room show floor and taken a 50 hit on that car price over the last four years. So years. So you're not going to have a dramatic drop when you do pick it up. But that, that timing thing is I always say to clients, it's not a no, it's just a not now. I had a client say, oh, I want to, want to grab a 70,000 Prado or like a four wheel drive was like, man, you should never drive a car that's worth more than Half your income. This is a rule of thumb. So this comes on about 100,000 a year. It's like I want a 70,000 price and yeah, we all want $70,000 product. Yeah, you bought his cash and chips and so I just said like we can't afford the Prado right here, right now. However, when we have the debt down at this point and we don't have to go into debt for that period and you've created the equity, then we're going to push the button. And so in timing's just not right. It's not saying we'll never be able to get the Prado, it's just not.

Now that delay gratification is such a difficult thing in our society because we've been taught you can have everything you need to have it now. So that actually takes a lot of self control to go. Hang in a second. I know I want this, I've met all the other criteria. But if I buy this now, it means I've got less money to invest or you know, interest rates are really high. So I'm going to be paying a lot of interest on it right now. If I wait two years, interest will start, interest rates will start dumping back down and you know, it's a much makes a lot more sense to buy then. So yeah, timing is a really important one. I actually do this quite a bit where because I have a terrible habit of impulse buying, I think I need something and I don't. So I've gotten into the habit of I find something I really want, I will copy a link of it because I always do online buying because I never go to shops. I don't know why but I'll grab the link of it and I'll put it in my calendar in a month's time. And so in a month time it'll pop up in my calendar, I'll click on the link and I will be reminded of this thing at nine times out of ten I'll go, I can't believe I thought I was going to buy that.

Really?

Yeah, I completely have my, you know, I've changed what I thought I needed but the one time out of ten I go, yes, I really like that. I've been thinking about it for the last month and that's when I will buy it.

Wow.

Spend. And I've held off, I'm sure it's what I want. I've met all the other criteria and now is the time.

Yeah, that's, that's incredible. You're like a 90% savings rate like you're saving yourself 90% of the time.

Yeah.

You're saving yourself from yourself. Which is I think the art. And one thing which we've been able to master here with our clients is just helping them save themselves from themselves. Which where I have been worse enemies. So I had another client last week where she's a. She self confessed. She goes, I'm very, very impulsive. Like I just, I buy as soon as the money hits the account. I'm always looking at, how can we spend this? Where can we spend this? And so she was saying that when she goes shopping, if she sees something 30% off, she buys it just for the. Not that she even needed it or wanted it, but in her mind, she's getting the deal. And so she comes home, I saved 30%, feels great about herself. But then I reframe and said, no, no, you actually lost 70%. Yeah, yeah, 70%. You didn't gain 30%, you lost 70%. She would never going to buy that. You never wanted to buy that. Just that you thought you're getting a deal so you justified it. She's over. I'm getting a deal as well do this. And so that's a big, big factor for a lot of people. Just because it's on sale doesn't mean it's a good deal.

That's motive. Right? That's going back to M. Motive. Why am I doing this? I'm doing this because I've told myself I have to buy things on sale because I think I'm saving money. And a lot of this comes to down to our money psychology.

Right.

And how we've been brought up and what our parents do and what we've seen and what we've modeled. That's a lot of that. And that's where you've got to really ask the question and motive.

Why?

Like why am I buying this? So, yeah, but yeah, so what do we got there? So an S for self awareness, M for motive, A for affordability, R for do your research and T for timing. If you can meet all those criteria and go, tick, tick, tick, tick, tick, then you know you're making a purchase for the right reasons at the right time, within your budget. It's the right product and it's going to serve a purpose.

Push the button, push the button, push the button. Awesome. Thank you very much for your pearls of wisdom, Jesse. They are always able to help so many of our crew out there, our listeners, our Crownies and just helping move forward financially. You just can continue to bring the a game. So we appreciate you. We appreciate everything that you bring to the table. And, yeah, looking forward to having a chat very soon.

Sounds good. Right back at you, mate. Right back at you. See you later. Bye.