Sunday, November 3, 2019

How to protect your downside.

Hello people,

welcome to today's post on how to protect your downside.

I can almost hear you say: "What do you mean by that?"

Well, what I mean is how to protect yourself from either paying too much for something, say a car or a TV or that guitar amp you like.

But it also means that when you buy something, you will always be able to sell it for at least the same amount.

For instance: Say you want a new car and you go to the next dealership to look at a brand new car. While it's probably an amazing feeling to drive off in your brand new vehicle it is also true that as soon as you drive off the yard, you've lost somewhere between 10-20% of the buyprice!
To keep things simple, let's say you buy a $50.000 car.
You're happy as Larry and drive off the yard. On your way home you change your mind and turn around to drive back to the dealer who now offers to pay you only $40.000 because it's a used vehicle now.
Instant loss of 20% that is! In other words you haven't protected your downside!

Next example:

Let's assume there was a demo vehicle parked next to the new one you were going to buy, same model same features for only $40.000 instead of the $50.000. Why not buy the cheaper one  and protect your downside?

In fact, you could even sell it to a private buyer and make a gain on it...

This is how you protect your downside.

I often call myself 'the second hand guy' because I buy the majority of the things I would  like to buy second hand, be it clothes to computers, music instrument and equipment, cars and other things.

Matter of fact I even pick up stuff off the side of the road, fix it up and sell it or keep it myself.

As the saying goes "one man trash is another man's treasure"

How to effectively protect your downside in three easy steps:

1: Do your Homework:

When you decide you want to buy something like a car, do you research and don't rush it. Thorough research will pay it value in gold! Before just buying any car find out what the weaknesses and potential faults of the car are. Find out how much fuel it consumes and how much it costs to run it.
Talk to people who know what their talking about. In other words, do your homework.

2: Be flexible:

Don't get caught up with little things. When buying anything really, there are always details that are 'nice to have' but rarely a make or break. Think about the thing most crucial to you and be prepared to make a compromise. After all, you don't always get all the bells and whistles for cheap.

3: Make sure you don't buy overpriced:

When you buy anything you want to make sure that you don't pay more than what it's worth.
Sure that sounds pretty obvious but we often do exactly that. Sticking with my example car purchase, you must know exactly what it is worth and do not pay any more than that. You want to be able to sell the car, guitar, (fill in the gap) for more than what you've paid for it.
That is important as it is the mentality of WINNING.

4: Resist your emotion:

Do not let your emotions get the better of you. You must crunch the numbers and know exactly what you can afford and what is too much.
You know you've paid too much when you can't sell the XXX at least for what you've paid for it.

5: Be patient:

I have found patience to be the ultimate winning strategy. If you are bound by a deadline you tend to overstretch your financial ability or budget. If have found that the ability to postpone gratification does wonders. It's almost like putting your desires into the universe and the universe somehow receives it and eventually delivers on your wishes. I know it sounds cheesy but it works for me. Bargain pop up as if they are there just for you.

So there you have it.

I hope you get a ton of value out of this post and would love to read your feedback.

Until then - stay awesome!

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