Up-selling at the Carwash

Up-selling, as I’m sure you know, is a little game that is played by sales people to persuade you to either buy a little bit extra, or to buy something a little more expensive.  If you’ve ever worked retail or worked in the food industry, your employer has probably persuaded you that up-selling is a good idea to increase your sales.  And, it is.

Personally, I hate it when someone tries to up-sell me.  Especially when it’s just so freaking obvious that they are trying to get me to buy more or buy something more expensive.  Actually, it kind of comes from some deep, dark place inside of  me, I feel this gurgling, rumbling indignation begin to rise from some place I didn’t know existed and I just want to scream, “I just want what I came in here for!  Leave me alone!”

Last weekend, on a very pretty Saturday afternoon, my daughter and I went to the “professional” car wash.  You know, the kind where they do all the work for you while you go inside and wait and watch them do all of the work.  My daughter likes to watch the car actually going through the wash, how it gets all soapy and goes through the “woogie-woogies,” those big long pieces of fabric or rubber that hang down and move back and forth over the car.  It’s a little treat we enjoy – she digs the watching, I dig a really clean car.

As we drive up, there’s a fairly long line.  Actually there are three lines of three cars.  We are waved in to one of the lines.  Within moments, one gentleman walks up to the window and welcomes us and let’s us know that a young man named James will be with us in just a moment.  He says something nice about the weather, and then thanks us for coming in today.  He then moves on to the car behind us that has just arrived.

I can see James.  James is a tall, gangly young man who is wearing a baseball hat ever so slightly turned to the side: he is two cars away from us.  He doesn’t seem to be in much of a hurry, but he also doesn’t look like he’s loafing.

When he arrives at our car, I wait for him to provide me the “menu” of options from which I can choose.  This particular car wash has about 10 different ways that they offer to clean your car.  I think the first option is that they just spit on it and use an old dirty rag to knock off the dirt, and they will do that for $2.99.  And then there is the “Diamond Deluxe with Express Wax” wash, the top of the line wash.  For $29.99 they’ll wash and clean the inside and outside of my car, they’ll wax and vacuum, spritz and spray, dust and dry, shine and polish everything, so that by the time I leave, I’ll feel like a new man, somehow.  Then there is a host of options somewhere in between those two, prices going up as they offer more services.

When I arrived, I knew how much I wanted to pay.  I couldn’t remember the name of the wash I wanted, but I knew how much I wanted to spend.  Let me reiterate, when I arrived, I knew how much I wanted to spend to clean my car.  Then James started talking to me.

He welcomed me to the car wash and then asked me if I would like to participate in their special.  He launched into what their special was, but I am not an amateur at these up-selling efforts and I deflected his attempt with a quick, but cursory reply letting him know that I was not interested in the special.  He did not seem taken aback at all and politely moved on, offering me the “menu.”  I opted for the “Ruby” wash.  He asked me if I knew what the “express wax” option was?  I say no.  He proceeded to describe it to me.  At the time, it sounded pretty cool.  I remember thinking to myself, ‘that sounds pretty cool,’ even though I can’t remember now what it meant.  But I recognized that he has just trying to up-sell and I quickly came back to my senses and replied that I don’t think I’ll need the “express wax” today.  He nodded, totally unaffected.

And then with machine like precision, he started running through the list of add-on options that they had for me today.  Would I like my tires cleaned, my trunk vacuumed, my exterior vinyl cleaned (that I don’t have), my plastic floor mats (that I don’t have)?  Would I like the single foam, double foam, triple foam?  How about the clear coat or the spray wax, white walls or rims?  Would I like the ‘Express Service number one’, or the ‘Express Service number two?’

As he started rattling off options, my brain felt like it was starting to scramble just a bit.  Then, when he was finished with his list and I had successfully rebuffed the options I was not interested in; he started with a series of options he could provide at discounts.  And that’s how he got me.  I resisted until he threw in the tire and rim cleaning with the next higher priced car wash on the menu.

For a moment, I felt pretty good that I had struck this deal with James, the car wash guy. Then, after a few moments passed, I thought about it some more and realized that I had completely blown the budget I had set for myself.  Upon arrival, I was set on how much I would spend.  By the time James was done with me, I had spent $5 more on the wash than I had planned – and somehow felt like I had made a great deal in the process.

Most of the time that James was talking to me, I knew what he was trying to do.  Yet, in his incessant efforts, I got sucked into the process, he found a weak spot in me, exposed the weak spot and I finally caved. Perhaps this is what causes me to want to scream, “Leave me alone!” when someone starts up-selling to me, because I spent the next few hours replaying the event and justifying to myself how the tire and rim cleaning really was a good use of the extra $5 I had spent.

 

 

Upselling – Part 1 – Before the Counter

Most of the time, when it comes to shopping for clothes, I would much rather buy books – and at many times in my life, I have gone into the mall with the purpose of buying clothes and come out having purchased books. Or, if there is not a bookstore available, I will talk myself out of buying clothes so that I can go buy books some other place.  There appears to be some wiring defect in my head that, when I begin looking at the price of clothing I begin to think about how good an investment books are. In order for me to buy clothes, I almost have to know exactly what I am going to buy, walk in, grab it, go to the counter, pay and leave.  If I don’t do it this way, the voices in my head can become very active.

Well, recently, I finally decided, after a long debate in my head, that it was time to go buy some clothes.  Specifically, I was in the market for some t-shirts.  The majority of mine had served their purpose and had become fairly well worn out.

Not that you could tell by looking at me, but I am pretty picky about my clothing.  I don’t like wearing logos.  Most of the time, when it comes to shirts, I’m actually not a big fan of pockets.  And, yeah, I’m picky about t-shirts, too – high maintenance, right?  And being that I’m picky, once I find a piece of clothing that I like, I am quite apt to stick with that item for a long time – and then when I am forced to shop again, I frequently return to the specific product I have used before.  It’s suppose it’s a little bit like brand loyalty, but maybe not exactly.  Or maybe so…

Now, I knew going into this shopping expedition that I could get exactly what I was looking for online. But instead of taking the tried and true path, I decided to listen to the people in my inner circle about where I should go for my purchase, perhaps to expand my horizons a bit.  So, I go to a specific store because I have been given a good recommendation about the specific t-shirt in which I am interested. Now, based on past experience, I know when I walk into that store, a whole series of weird behaviors are apt to begin.

I walk in. I do a good job of finding the specific product I am interested in buying and go straight to it.  As I am walking, it is almost as if I can feel the dopamine rush, I breathe in deeply, my eyes widen and I begin thinking, “Ah, Jeez! there are SO MANY OPTIONS, $16.50 for a t-shirt, that’s at least one book, maybe two, this is going to be exhausting, ooh, that fabric feels nice – wow, I wonder if I can pull off the yellow or purple shirts — I’m pretty sure those will look awful on me – no, I just need black, gray and blue — but I need to broaden my tastes — I swear they’re pumping in oxygen — the colors are so vivid — the air is crisp — it is really bright in here –I really do need a v-neck and a crew neck –-I know this song they’re playing — is my heart beating faster?”

Now, when I came into the store I was fairly certain of what I wanted to accomplish and had a set amount of money that I was willing to spend on said product.  But I notice that as I am perusing the products, my limit has somehow moved to another location in my mind – and I begin bargaining with myself.  “I’ll grab a bunch of different colors and I can bring some back” and then, “I never go shopping, I haven’t had new clothes in two years, just buy what you want.” And then,  “I know I could get this cheaper, but I want quality for a change. I’m tired of cheap-ing out.” And of course, “I earned this!” or “I deserve this!” – both of those messages growing louder and louder as the primary messages rattlin’ around in my noggin.

I make my way to the counter with 7 different t-shirts in my hand…(to be continued)

The Tyranny of the Moment Video Post

You might have read my blog on this, but here is a video of me talking about the tyranny of the moment over a year ago!  Enjoy…

Holidays (Easter) Under Control

I have a seminar that I started delivering two years ago titled “Holidays Under Control.”  The reason why I developed this seminar was because when I was teaching my other programs, people would always start talking about how incredibly stressful the holiday season is and how much more money they spent during the holiday season than at other times of the year.

Well, when people talk about the holiday season, they usually mean from Thanksgiving until the New Year – and that is the time frame on which my seminar primarily focuses.  However, this last weekend, the Easter Bunny made his annual visit.  My wife and I felt compelled to make the basket and fill it with goodies – and our daughter actually expected the Easter Bunny to appear and bring her some goodies.  She didn’t have a list prepared like she did at Christmas, but she had expectations nonetheless.

So, while I don’t typically include the Easter holiday in my seminar, I thought I’d go ahead and look up some statistics on Easter spending in the U.S. According to Statistic Brain (http://www.statisticbrain.com/easter-statistics/), we dropped about $14.6 Billion on Easter this year, of course only $2.6 Billion of that was on candy.  Yeah, $2.6 Billion on candy (turns out that’s 120 million pounds of candy).

So I have three questions for you, my friend:

1. Do you feel compelled to spend money at Easter the same way you do during the fall/winter holidays?

2. Do you feel like there are a lot of expectations around spending during the Easter holiday?

3. Does Easter make the “stress” in your life go up at all?

 

Does Easter stress you out?

 

A thought on “Saving”

If I had a dollar for every time I’ve heard someone say they’d like to save more money, I’d be a rich man. In all my years of teaching, I have never met anyone who wouldn’t like to have more money tucked away in savings.  So why don’t we save?  My students tell me it’s because they can’t save.  They don’t have enough money to save.  There’s never any money left over to save after they have paid all of their bills.  When encouraged to examine these responses more closely however, nearly everyone recognizes that he or she has saved for something at some point in his or her life, and, no matter what his or her income level, has at least one penny left over at the end each week that he or she could potentially be saving.  So, if it’s not that we can’t or we don’t have enough, then why don’t we save?

One of the barriers that often prevents people from saving has to do with a pervasive belief that saving is only worth doing if the amount being saved is a large number.  All humans, whether they are aware of it or not, have in their heads a dollar amount below which money holds no value for them.   A penny, a nickel, a dime, a quarter, even a dollar, although it could be saved isn’t hardly worth it in most people’s minds.  This is especially true of people who feel they must save a lot of money in a relatively short period of time.  Consider retirement, for example.  People who feel inclined to save for retirement typically believe they need to save a large amount of money in a relatively short period of time.  Even as much as a dollar per week in savings, in this particular example, seems to most people insignificant and hardly worth it.  So instead of saving a dollar per week, what do they do? They save nothing, because they don’t see the value in it.

When you are able to see that saving is more about implementing a behavior than it is about any particular dollar amount saved, you can perhaps begin to see value in doing it.  So pick an amount that you believe you can comfortably save over the next day, week, month, or whatever.  A penny, a dollar, ten dollars, twenty-five dollars, it doesn’t matter.  Pick an amount.  Start small.  Work it into your budget as a line item.  Start saving.  Start now.  And keep going.

 

Convenience and “The Tyranny of the Moment”

Often times, our hectic and busy lifestyles lead us to make financial decisions just so we don’t have to think or do any additional work.  It’s called convenience and it’s a big part of our cultural value system.  In fact, huge portions of our economy are based on our “need” for convenience.  Then, as we keep adding in more things to do and more places to see, we “need” more conveniences.

“The Tyranny of the Moment” is the idea that when you are so hectic and crazy in the current moment, you are unable to think about and plan for future moments. In these tyrannical moments, everything feels like an emergency and we begin living our life in a series of firefighting episodes.  And I don’t know about you, but when I’m firefighting, I begin to start using those justifications for the decisions I’m making.

So here’s a quick exercise to take a look at these two concepts:

 

1. Identify three of your most common convenience purchases.

2. Identify a time when you have felt so busy that you made a purchase just to keep things simple.

3. Identify a time when you acted out of alignment with your personal values just because you felt too busy or overwhelmed.

 

Being consistently caught up in “The Tyranny of the Moment” can lead to feeling stressed, anxious and tired, which causes poor decision-making and undermines our willpower.  It also typically leads us to rely heavily on convenient solutions – which are typically more expensive and less healthy for us – as opposed to those perfectly rational decisions. All told, this can be an incredible hindrance to people who are trying to develop economically or even those who are trying to live their lives in accordance with their values.

 

Rational Behavior Education and Your Budget

In the world of economics they have the concept of “Homo Econimicus” or “Economic Human.”   This concept indicates that humans are rational beings that act only in their best self-interest.  This is typically used to explain markets and economic theories but in most circles, especially the academic and professional/political circles, it is a quite predominant perception of how humans act in regards to their personal finances and economics.

Well, a lot of education on how people should behave has a very similar approach.  I call it the theory of “Rational Behavior Education.”  My theory on this is that most education is based on the idea that humans are totally rational and if provided with a good rationale as to why a behavior should be changed, the human will naturally see the benefit of such a change and quickly adapt the new behavior.

Let’s take smoking for instance.  We all know smoking is bad for human bodies.  But most education is focused on discussing the fact that it is bad for us, by telling us all of the negative side effects of smoking.  I was a pretty extreme smoker for over ten years and this is what people would tell me over and over, “Your lungs are black, your breath smells, it costs a lot of money, it makes your teeth yellow, it causes cancer, oh, and you could die.“  Now, I know at one point in time, people did need to be convinced that smoking did harm to their body, but that time is long gone.  We know it.  We have heard it for decades.  We know!  But if we were totally rational humans focused solely on our own best interest, we would see quite clearly that smoking is not good for our body, costs a lot of money, makes us smell (which could prevent potential mating possibilities, maybe), and make our teeth yellow, makes our clothes smell and so on.  We would see all of that and we would stop. But do you see the problem?  Yeah, we’re not rational.  Humans can be rational.  We can be unbelievably rational creatures.  We may be, perhaps, the most rational beings on this planet – maybe anywhere in the universe. But we are not ALWAYS rational.  And educational efforts about behaviors aimed solely at our rationality that neglects to touch on how irrationality and emotion plays a significant role in our behaviors will be minimally effective.

In the world of Rational Behavior Education, if we could just teach everyone how to create and manage a budget, a person’ personal financial life would be sunshine and happiness.  But telling people that smoking is bad for them and that they should budget their money is only occasionally, mildly effective.

 

Opportunity Cost

Opportunity Cost is a fancy schmancy term that is usually used in economics classes and it usually is applied to how people use their money.  But I have found that the concept applies equally as well to how we utilize our time, and in fact many people actually grasp the concept better by applying it to time.

The opportunity costs of a particular action are the benefits you could have received by taking an alternative action.  As I mentioned, opportunity cost is usually discussed in terms of money, so here’s what it might look like in an econ book. Imagine that you invest in a stock yielding 3% over the year.  By investing money in the stock, you give up the opportunity to invest in something else like, for instance, a risk-free government bond with a 7% return.  In this example, the opportunity costs are 4% (7% – 3%), the difference in return between the forgone investment and the chosen investment.  Blah, blah, blah – insert lots of additional economics jargon.  What does that mean to you?  Well it means that every time you make a decision to use your time or money one way, you can no longer use it for something else.  The cost is what you spent on the item; the opportunity cost is what you could no longer purchase with those funds. And I know you might be thinking, “Duh! That’s so obvious.” But believe me when I tell you that people often don’t really think about it this way – especially in their day-to-day decision-making.

Now, as I said, opportunity costs are usually discussed in terms of money, but I think the concept can be applied to our time and energy as well.  For example, if I work an 8-hour workday, take 30 minutes for lunch, and commute 30 minutes each way, that adds up to a total time cost of 9.5 hours.  Since that window of time is devoted to and taken up by work, the opportunity cost of working therefore includes everything else I am unable to do during those 9.5 hours.  Spending time with my children, preparing and eating a meal with my family, exercising or recreating with my friends, and watching a favorite television show with a loved one are all examples of the opportunity costs of working.  In order to work, I must give up the time that might otherwise be spent doing and benefitting from something else.  In either case, a choice between two options must be made and the benefits I could have achieved by choosing the alternative option, whether monetary or otherwise, are the opportunity costs.

For some people, this concept has a huge impact on how they see their resources flowing out of their possession. But even if this isn’t a big “Aha” moment, this little concept of opportunity cost, the fact that we have to give up one thing for another can cause us to squirm a little.  Let’s say that I really want that pizza, but I know I’m going to need that $15 for childcare in two days.  But I really want that pizza!  But I know I’m going to need to pay the childcare!  There is conflict, and that conflict leads to some squirming.  And in that squirming we find ourselves dealing with a little problem we discussed earlier.  This is where you might notice that we have Internal Inconsistencies with our time as well as our money.  I might justify what I have to give up by rationalizing my choice, like, “I’m just too tired to cook tonight.” Or maybe some mental bookkeeping, like “I’ll just pay a little less on my credit card bill this month.”

Opportunity Cost is something that is happening every time you make a choice.  It is not something to be eliminated, but rather to be aware  of to help you in your decision-making process.

 

Time Value of Expenses

How much time and energy, in terms of work hours, does it take you to pay for housing, transportation, food, health insurance, car insurance, or entertainment?  Do you know?  If you are like most people, you may have thought about this as it applies to some of your expenses.  Or not. In either case, I have found that when people begin to apply the following exercise to their expenses, they tend to see how or if their expenses are really in alignment with their values in an even deeper way than when they did the receipt exercise.

Here’s an example of how it works.  The other night I took my oldest son out to dinner and to see a movie.  We went to a nice little restaurant.  Not too expensive, but definitely not the “value meal” at the local fast food joint.  The total cost of the meal with tip was around $45.  Movie tickets for the two of us cost $24.  The “Value Package” snack we bought at the theater cost $15.  Total cost for the evening totaled $84.  Now if I’m making $10 per hour and the night out cost $84, then the time cost, in terms of work hours, for the evening out with my son was 8.4 hours.  Well, I know that I work approximately 8 hours each day and so the cost of the evening out was slightly over one of my work days.

In addition to being a good chunk of change, that’s a lot of time and energy. When we pay for rent, mortgage, dinner out, movies, or anything else for that matter, not only does money leave our possession, but so does the time and energy that money represents.  Whenever we spend money, we also spend our time and energy.  And like money, once that time and energy is spent, it cannot be used for anything else.

Of course, using the same example above, we could break out each expense separately as well.  The meal was $45.  If I divide that by $10 per hour I would see that the meal cost me 4.5 hours of work.  The movie was $24, divided by $10 per hour and I would see that the movie cost me 2.4 hours of work.

To calculate the time value of a particular expense, you take the amount of the expense and divide it by the hourly wage you listed above and you can figure out how many hours it takes to earn that expense.

Now, let’s take a different expense.  Say for example your food costs $250 per month and your hourly wage is $10/hour.  Divide $250 by $10 and you will see that it costs 25 hours of work time.  Of course, I’m using simple round numbers to demonstrate and your numbers might not be so simple and round.  No problem.  You can either do the exercise with your exact numbers using decimal points and all, or you can round up or down.  I’m not looking for perfect calculations – this is not a math class!  I just want you to get a better idea of how much of your work time is devoted to your expenses.

How Much Are We Really Spending

People typically think of rent or mortgages as monthly expenses since, after all, we pay those expenses on a monthly basis.  In actuality though, we are paying for every hour, every minute, every second, EVERY MOMENT, of every day. For example, if a typical month has 31 days and there are 24 hours in each day, then the number of hours in a typical month equals 744.  If my rent costs $1,000 per month, I accrue approximately $1.34 in rent per hour and approximately $32.26 per day.

Calculating rent, or mortgage, utilities, credit card bills, grocery bills, etc. down into an hourly or daily amount might not sound like a lot of fun, and my goal here is not to turn you into a human calculator or to persuade you to spend an exorbitant amount of time calculating every single one of your expenses in this way.  I simply want to raise awareness about how much money is really flowing out of your possession, so often without your awareness or knowledge, at any given hour or on any given day.

Time Value of Income

Attaching a monetary value to one’s time and energy, particularly in a work situation, is not uncommon.  Most people know how much money they earn per hour.  On several occasions in my life I have taken jobs that paid around $7.50 per hour.   That’s pretty black and white.  1 hour of my time and energy at work was worth $7.50.  On the other hand, salaried positions are slightly less black and white in terms of time value.  My first salaried position paid $28,000 per year.  The value of an hour of time in a salaried position depends on the number of hours worked during a particular year.  If, for example, in my salaried position, I worked 40 hours per week for 50 weeks, I would accrue 2,000 hours per year, and my hourly rate would be about $14 per hour.  In that case, 1 hour of my time and energy at work would be worth $14.  If however, I worked an extra hour per day for the same number of weeks, I would accrue 2,400 hours per year and my hourly rate would drop to $11.66.  In that case, 1 hour of my time and energy at work would be worth $11.66.

As I said, most people, even those who are salaried, have figured out how much money they earn per hour, but just in case you haven’t, or haven’t done it in a while, we’re going to take some time and go through this together.  But then, we are going to take it one step further.  I’m going to ask you to determine your wage by minute.  Most people have never done this exercise. However, the information that we learn by doing the wage by hour and the wage by minute exercise will be very useful in the exercises that will follow.

Please note, some of these figures that you come up with might not be totally accurate, don’t get hung up on that. The information will still be beneficial and the figures will be close enough for our purposes.  I’ll refer back to this exercise and some of the numbers we figure out here in later posts and exercises.

Okay, so here we go.

Wage by hour:

Begin by figuring out how much money you earn per hour.  For the purposes of this exercise, we will only use our “gross earnings.”

• If you earn an hourly wage, like $10 per hour, then this is easy.  Your time value for this exercise will be $10/hour.
• If you are salaried, then we recommend, for simplicity that you divide your yearly salary by 2 and then drop the zeros.  So it looks like this:

Example:

$24,000 per year divided by 2 = $12,000, then drop the last three numbers and you get $12.

Wage by minute:

This is a computation that very few people undertake.  But when we get ready to look at the time value of our  expenses, knowing our wage by minute can actually be very beneficial.

To figure out your Wage by minute, take your hourly wage and divide it by 60:

$10 per hour divided by 60 (minutes) = approx. 17 cents per minute.

 

So hang on to this information.  We’ll use it in some of the upcoming posts!