The Costs of Consumer Consumption

by Lionel Shipman

Part One

A couple of weeks ago, I heard a news segment around the subject of consumer consumption. The program talked about the many things we as consumers are consuming, from automobiles, homes, vacation destinations, and mobile devices to insurance, education, sports, and school activities. Every day, consumers are bombarded constantly to purchase things and spend money. While listening to the program, a question immediately came to my mind. Why is it so hard for us (consumers) to say no? Why do we make purchases knowing that we cannot afford to pay for them? Why do we allow sales people talk us into making purchases of things that we do not need or even really want? Why do we continue to throw good money after bad things? Why do we subscribe to things we do not read, watch or use? Why do we allow our wants to exceed our necessities and income levels? Why do we allow peer pressure or societal influence dictate our spending and purchasing ability? Why do we risk our future retirement for purchases made today? Granted, some purchases are legitimate and required, meaning that those items are essential to living. However, in a number of cases, there are a number of things purchased that will go by the wayside, be under-utilized and sometimes never utilized. Even though some people can afford some purchases, why can’t we just say no?

Have you ever watched those late night infomercials showcasing the most ridiculous products? Somewhere within the infomercial, the spokesperson almost always try to entice people to buy the products by saying that they will double the offer if they act now. I have always stated that regardless of the product itself, someone is going to buy it. It may not make sense to me or you, but somebody is going to purchase the product. Regardless of the cost of the products, consumers are willing to pay even though many cannot afford the products or may never use them. Some purchases are worthy of the dollar amount. But some purchases are just plain ridiculous. Why can’t we just say no?

Part Two

In a past article, I wrote about a person that often expressed the need and urgency of paying down debt and becoming debt free; however her actions proved otherwise. Here is the scenario. Over the years, my friend had accumulated a lot of debt. Often she would ask me to share my “What would you do?” tips of paying down and eliminating debt. On one occurrence, she was debating whether or not to purchase a new electronic gadget of which she already owned a less expensive one that worked well and by the way was given to her as a gift. She stated that the new gadget was on sale and appeared to be a good purchase. However, she desperately needed some brake repairs for her car. My recommendation was clear and to the point. I told her to use her cash reserves to get the brake repairs done. Do not purchase the new gadget. Well, she purchased the electronic gadget with her cash reserves and used her credit card for the brake repairs. She chose to satisfy her wants and acquire more debt, which was the opposite action of becoming debt free. Even to this day, her actions are still proving that she does not want to become debt free. She recently purchased a new car even though the existing automobile was sufficient. She just had to buy that new car. There are times when we must delay purchasing the things to satisfy our wants. We must move beyond our wants especially when we are not in a favorable financial position. Your wants could delay or detour your financial goals and ruin your financial outlook.

Part Three

Have you ever had that “I got to have it” attitude or mindset? Have you ever walked into a clothing store and heard a skirt or sports coat scream your name? Have you ever walked into an electronics store and heard the sound effects of the newest television and surround sound system call you? All of sudden, blaring from the intercom system of the store, the announcement goes like…“Shoppers, all men’s and women’s clothing are 50% off or all electronics are 25% off with free delivery and a $200 mail-in rebate”. Some consumers go absolutely crazy after hearing the announcement. Not only do they purchase the items that are on sale, they are convinced by the salesperson that the additional accessories, which come with a price, are needed or required. Are you one of those consumers? Are you easily influenced to spend money? Is it hard for you to resist the urge to spend? You are not alone. People do it every day. Because of this type of consumer consumption, many people are still in debt with no light appearing at the end of their financial tunnel. According to the Federal Reserve Statistical Report dated July 8, 2013, consumer credit outstanding (borrowing) increased $19.6B compared to the previous month (June 2013). Consumers spent more using credit cards and acquiring loans. The news is not necessarily bad for everyone especially for those who can afford it. However, for the people who cannot afford it, the news may not be so good. There are plenty of people who are still living paycheck to paycheck. They are one paycheck away from being in foreclosure, having their automobiles repossessed or their utilities disconnected. Spending money is not a bad thing. However, consumers must discipline themselves by spending within the constraints of their household budgets. There are times when spending is necessary. But when consumers are spending without constraint, the ability of improving one’s financial outlook fades away. Consumers must learn to say no and slam the brakes on their spending.

Lionel Shipman is the owner of Shipman Consulting, a personal and business finance-consulting firm specializing in helping individuals and businesses improve their financial outlooks. The primary focus of the firm is facilitating seminars and classes to educate, motivate, and empower people to take charge of their financial lives. The firm also offers one-on-one consulting services. Please visit the firm's website for information at www.ShipmanConsulting.com. Email address: Contact@ShipmanConsulting.com
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