In a recent article for Southern California Public Radio online titled States to consider financial literacy requirements for K-12 students, Education Reporter Vanessa Romo wrote about how schools have long tried to impart money management skills to students through a variety of programs such as elective classes in partnership with banks and nonprofit groups, after-school programs that teach economic basics and “life-skills” to round out a student’s academic education.
If you’re not familiar with the psychology of consumerism, allow me to enlighten you. If you close your eyes, take a deep breath, and slow your mind down; there…all around you is the psychology of consumerism. It’s controlled by corporations, mega-stores, and marketers who know you better than you know yourself!
Can you see it? At any time it’s liable to play on your human emotions and even distort the view of how you think others perceive you! Think your fat, feel others see you that way; no problem – buy this treadmill with training video now and don’t worry about any payments; this baby is available interest free and with no payments for 12 months!
But wait; act now and get this money back guarantee to fight off that one brain cell that’s telling you about the fears of potential buyer’s remorse. But that one brain cell is about to get the living crap beat out of it because now there’s even more to consider; listen to these endless testimonials that may, or may not be real, as they reinforce how wonderful you will look if you buy this baby today!
Through the psychology of consumerism, you are convinced it’s perfectly normal and quite an everyday experience to purchase something from the television at 3am or on a Sunday afternoon infomercial that not 15 minutes ago, you had never even heard of – let alone realized that without this product, your life will suck!
Don’t Stand a Chance Against the Joneses
“Oh crap” your significant other says. The Joneses just bought a brand new Lexus ES; what are we going to do? “Our lease isn’t up for another 6 months but no way are they going to out-do us! “Call the dealership honey”, you say, and see if they have a program to get us into a GS; they’re not going to win this neighborhood battle!
What about Jimmy Jones at the office? That #*@* came to work this week with the new Samsung Galaxy S3 phone that makes my iPhone pale in comparison! Worse yet, Tammy and Tim have now upgraded too. Well they’re not going to show me up! Get on the phone and call Sprint. I saw an ad in the paper this morning where I can get the phone from them for free with a 2 year contract and a monthly data plan for $104 dollars. Let’s do this!
So you have 6 months left on your lease with a car that, for the moment, fits your budget. You also have an iPhone 4s that you paid cash for from Virgin Mobile and only pay 40 dollars a month for unlimited data and suddenly none of this works for you anymore? Why not?
The answer is; the psychology of consumerism has provided you with the necessary motivation and drive that will make you want to keep up with the Joneses; but at what costs? You are about to create a “manufactured crisis” in your personal and financial life that could start you down the path of a serious crash and burn!
Stop Being an Amateur Consumer
If you read my post Titled Financial Literacy versus Financial Life Building Skills, you would know that through my journey of blogging at the Amateur Consumer, becoming frugal by necessity, and being a member of the Underbanked for so many years have taught me that no matter how financially literate I thought I was, without learning the 3 pillars of financial life building skills, we are all vulnerable to a crash and burn, at any time regardless of profession, income level, or race!
If you read another recent post titled The Cause and the Cure for Debt and Bad Credit, you would have found out that you can’t change a problem with the same mindset that helped get you there in the first place! It means nothing to accelerate the process of credit and financial recovery if you don’t understand the concept of “An ounce of prevention is worth a pound of cure”!
A New Direction for the Amateur Consumer
In the coming weeks, the Amateur Consumer Blog will undergo a transformation from my template, to content creation, to my overall mission. This blog used to be about helping people accelerate the process of credit and financial recovery and for sure, I will continue to write about credit and finances.
But moving forward and beginning in April 2013, this blog will reflect and mirror my own paradigm shift of beating the psychology of consumerism, learning the necessary and critical decision making skills that without, led to my own crash and burn, and passing on the fact that by learning the art of frugality, your life will simplify and improve!
In short, the Amateur Consumer will start teaching you to stop living the dream and start living the plan. It will also teach you to say, as I have through my own crash and burn; Never Again!
What do you think? Is there such a thing as the psychology of consumerism or am I full of crap? Oh, and one more thing; do you know the Joneses? Have you ever seen them? Leave your comments below
Am·a·teur; noun 1. One lacking in experience and competence. Con·sum·er; noun 1. One that utilizes economic goods. Cred·it; noun 1. The provision of money, goods, or services with the expectation of future payment.
Those 3 words, when combined, are a toxic combination because we all utilize goods and services and most of you obtain these goods and services via credit! But what really makes this combination toxic is the fact that most people lack experience and competence, or as I like to refer to it, a “money consciousness” when it comes to what we need and want, in order to live a simpler and more sustainable life!
Make no mistake about it; you are an Amateur Consumer. Don’t think so? Did you take any comprehensive financial literacy courses in elementary, middle, high school, or even college about the differences between buying something with plastic – versus cash? Well, not only do most high schools not require any kind of financial literacy education, but according to the Council for Economic Education, only 16 states require testing of student knowledge in economics. Scarier yet; that’s 3 fewer than in 2009 so we’re actually going backwards. Is it any wonder why we’re a nation of amateur consumers?
Financially Illiterate Society
Before you purchase anything on credit, as a matter of habit and mindset, do you ever think to yourself, “How will I pay this back if I lose my job, take a pay cut, or if my business closes?” Most of us don’t ask the “what if” question and I was guilty of this as well before my crash and burn. How many of you even stop and think for one second, “is this a need or want, or do I really need this anyway?”
[Quick side-note]: buying with cash is buying with money you actually have. Buying with plastic makes you believe you purchased something with money you have – when you actually don’t! And even if you buy something with cash, with the right “money consciousness” that decision would be made thoughtfully and correctly…in the beginning, where it needs to happen, in order to avoid credit and financial troubles and to live a happy and more fulfilling life! I have found this out the hard way! Listen to this excellent interview on Surviving the Credit Crisis on Web Talk Radio where I touch on this subject here.
Did You Go To Harvard?
In a recent blog post in the Huffington Post, Elizabeth Warren who is now a U.S. Senator and was the driving force behind the creation of the Consumer Financial Protection Agency said that when she was a professor at Harvard, one of the classes she taught was contract law (for sure – no dummies there) and she asked her students to read a credit card agreement — either an offer that they’d received in the mail or the actual agreement they’d signed onto — and answer some basic questions. She said some were easy like; when is your bill is due? Do you get points? She said her students always answered those.
However, the next questions she’d ask were; does your credit card have an arbitration clause, preventing you from suing in court if the company cheats you? No one knew the answer. How long it would take you to pay off a $1000 purchase with interest if you paid the minimum monthly payment? They didn’t have the answer to that either. She went on to say that when she assigned that basic question as homework, almost all of her students spent hour’s knee deep in fine print without finding the answer. These were Harvard Law Students in a Harvard contract law class who couldn’t answer these questions; can you? As amateur consumers, we need to educate ourselves better, before life happens to us!
Negative Credit Events An Outcome
Most people, and I’m talking from experience, think of the negative credit event that happened in their life, like foreclosure or bankruptcy, as the crisis itself. For sure it’s a crisis and I have survived both, but you have to come to the realization that the foreclosure or bankruptcy is simply an outcome of whatever underlying crisis might have occurred in your life that either impacted your income – or caused expenses that you simply could not overcome financially. Lack of Comprehensive Financial Life Building Skills is one of those underlying root causes.
How can you begin to change your circumstances if you don’t correct the mindset that helped cause your financial crisis in the first place? If you want to regain your upward mobility, you need to identify the root causes of your financial crisis, and if those root causes are still going on, what steps are you taking toward fixing them? How are you creating a better ‘money consciousness’ moving forward? This must be addressed first, before you can move forward, and after all, isn’t that what you really want to do; move forward living a simpler and more enjoyable life?
Can’t Play If You Don’t Know How
Fact is; you need to learn, as amateur consumers, how to make to make the system work for you and learn how to function within it instead of becoming a slave to it, or worse; become devastated by it! No one is immune from credit and debt issues either. In my 20 plus years of dealing with credit and financing, I have seen doctors, lawyers, clergy, policeman, firefighters, teachers, and professors alike, all dealing with credit and debt problems! Without a doubt, credit and debt issues absolutely do not discriminate. But why do you think that is?
I believe this is due to the fact that without the missing components of comprehensive financial literacy, we are all amateur consumers or as the Council for Economic Education put it; a society of financial illiterates. If you’re looking to recover from credit and debt issues, there’s no way this can happen ‘long-term’ until you correct whatever mindset helped cause your credit and financial woes in the first place. I call this process ‘thought disruption”.
Even the Most Financially Literate Can Get in Trouble
Recently, in one of my LinkedIn group discussions about the plastic versus cash argument, someone commented about me, “Of course the fact that you had such financial hardships in the past will skew your view of credit card use.” He went on to make his case about there being and obvious “distinction in profiles of the pay-in-fullers vs the debt carriers”, as if those that pay their balances in full are somehow more financially savvy than those who don’t.
I have two indisputable reasons why that thinking is wrong; First, I offer myself up as proof. I paid my balances in full every single month without fail before my crash and burn. The problem was it usually totaled somewhere between $5000 to as much as $10,000 a month in any given month; as a college educated credit and finance professional!
I spent it because I could, as do millions of others. The second is this report titled Do Payment Mechanisms Change the Way Consumers Perceive Products, which makes a clear distinction when using cash versus plastic. The report points out that the use of a credit card as a payment mechanism increases the propensity to spend as compared to cash in otherwise identical purchase situations…and I spent!
As amateur consumers, you should read the report to learn more about the psychology of consumerism in order to protect yourself moving forward!