Can Self-Persuasion Be A Recipe For Financial Disaster?

Can Self-Persuasion Be A Recipe For Financial Disaster?

pearlmanjpGUEST POST TODAY! I did a radio interview with financial consultant Marc Pearlman a few months back, and today, I’m giving him the microphone on my blog!  His show is Money Matters, and you’ll find it on the internets at

Marc is going to tell you how to protect yourself from self-persuasion when it comes to financial decisions. Without further ado, here’s Marc! —

So Mr. Smith, do you like the blue one, or do you prefer the red?  The smile illuminates Mr. Smiths face as he climbs out of the automobile in the show room.  The new car aroma is still percolating his senses.   Mr. Smith answers the salesperson with a direct response, “This one!”  as he points to the shiny red convertible.  “Fair enough,” says the salesperson. “Let’s go talk some numbers”.

Perhaps the best salesperson here is Mr. Smith himself.  Let’s take a journey into how we are all vulnerable to the money traps we setup for ourselves and how we often persuade our common sense.

The well dressed salesperson from the luxury car dealer comes back from his short trip to the sales manager’s office and eases back into his chair.  “We would be looking at $689 per month with a small down payment of $8000.”  Smith has a slightly startled look in his eyes as he objects to the figures he hears and retorts that the amount is a bit more than he can afford per month.

“Well Mr. Smith, how much can you afford per month?”  I can swing $629, but no more he replies.  Our car salesperson makes another trip back to his manager while he leaves our friend Mr. Smith alone to persuade himself.

After spending several minutes in the manager’s office talking about last night’s basketball game, our salesperson reappears.  “We can help you out a bit here, but we don’t have too much wiggle room since these cars are in high demand, but we could let it go for $664 per month.”  Smith feels a bit of fear as the prospect of his dream car slipping through his hands resonates, but is still too much of a monthly nut for him.  Smith counters, well, I could come up another $20 or so per month, but I am already over my limit.

“How about this Mr. Smith, we came down $25 per month, and we are only $15 dollars apart to make a deal.   For less than the price of two lunches per month you can have this beautiful car.  We are talking peanuts; certainly you could afford that right?  Well, if it is only $15 per month, then why doesn’t your mega dealership swallow the $15?  “Well you do drive a hard bargain, but we will come down another $10 per month.  Surely, you can afford $5 more per month?  The salesperson says inquisitively.

Smith feels like a cheapskate balking about $5 and extends his hand.  “I think we have a deal”

There are many lessons to be learned here, but for the sake of brevity let’s center in on the classic money mistake made here and how we often persuade ourselves to bite off more than we can chew.

Not having clear cut rules when it comes to making large purchases leaves one vulnerable to the wants and emotions that often lead people astray.   We often rationalize our purchasing decisions by making the common mistake of minimizing small amounts in the shadows of larger ones.

When we begin to rationalize, we are setting the foreground for our own persuasive abilities to persuade ourselves into paying more for goods or services

In our example of Mr. Smith, continues to creep up his maximum price that he is willing to pay for a car.  $25 per month seems inconsequential when you are looking at a $46,000 car or a $689 monthly payment.  The reality of the situation is that he increased what he was willing to pay by $1500.00.

Our self talk and our own persuasive abilities can often turn against us and we become susceptible to the money traps that can chip away at our wealth.

To guard against making this common money mistake, do your research and have a hard fast number you will not breach before entering into negotiations.

This strategy will help you from “talking yourself” into paying more for a product or service.

Marc Pearlman specializes in asset management and behavioral finance.  He is the host of the Radio show Your Money Matters!

If you have come into some money recently, you can get a copy of his audio program on how to deal with a windfall here.

Your comments are welcome!

Be well,



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