You’ve heard about tracking your spending so you have a clear idea of where your hard earned money goes. But there are different approaches to buying depending on your consumer behaviour.
The Under-Buyer
With this consumer behaviour style, you delay making purchases to the last minute and/or you buy as little as possible. You wait to buy seasonal items like a winter coat or bathing suit until just before the point you need them – and then can’t find a suitable one. You consider buying an item, then decide to get it some other time or that you don’t really need it.
You rarely have backup supplies of common personal and household items and often feel stressed because you don’t have what you need when you need them. You have to shop more often and make a lot of late night runs to the store. You tend to cling to things that are past their usefulness and so are surrounded by things that are shabby and worn out, don’t work well or are not entirely suitable.
The Over-Buyer
Over-buyers on the other hand lay in huge supplies of items such as shampoo or paper goods. They love to shop at wholesale clubs like Costco. They throw things away – dairy products and medicine because they’ve hit their expiry dates before they can be used up. They buy things like tools or gadgets thinking that they will probably come in handy some day.
They buy items with the thought that they will make great gifts – without having a particular recipient in mind – or because the sale price can’t be beat. They often feel stressed by all the clutter in their homes and, especially, by the waste that’s often created by their over-buying consumer behaviour style.
The Satisfied Buyer
Some people make a decision, or take action as soon their criteria are met. They don’t necessarily settle for a mediocre product, but as soon as they find the item (hotel, shoes, auto) that has the qualities they want they are satisfied with their purchase. Men generally fall into this consumer behaviour category. They have a purchase in mind, enter the store, find what they want and then pull out their wallet – quick and efficient.
The Perfectionist
Perfectionists want to make the most optimal decision. Even if they see something that meets their requirements they can’t make a decision until they’ve examined every option so they can make the best choice possible. They spend a lot of time and energy to reach a decision and they’re often anxious about whether they did in fact make the best choice.
The Hoarder
Some people are hoarders in the sense that theybuy things and don’t use them. Either they don’t want to spoil the pristine appearance of the product, or they want to save it for a perfect occasion or for “good”. Or the item may be an expression of a desire to change something in their life – treadmill, sports equipment, craft supplies – but just making a purchase won’t accomplish the change until a plan of action is developed.
Your Consumer Behaviour Style
My consumer behaviour style tends to be an under-buyer with a touch of perfectionism. I squeeze out the very last bits of toothpaste or hand cream. My worn out or stained clothes are good enough for wearing around the house.
As long as my possessions look and work OK I don’t bother to replace them and when I do decide to go shopping I have to check out every store to find the best product – maybe I’ll find a better version, a cheaper price or a different colour. I tend to get stressed out if I can’t find exactly what I’m looking for when I need it right away.
Most people have a combination of purchasing styles and sometimes all of them are in evidence at different times.
What is your consumer behaviour style? Does it work for you?
Lately it seems like the stock market is more volatile than ever. Whether it’s a crisis in the Middle East, a Chinese asset bubble about to burst, a natural disaster or an environmental catastrophe, the stock market sits on pins and needles waiting for the next event to send it into a tailspin.
After the stock markets crashed in 2008, the Spring of 2009 provided us with one of the best buying opportunities of our life time. While that particular market crash lasted over 6 months and perhaps offered a more obvious time for investors to buy (with bank dividend yields approaching double-digits), other world events have been producing smaller stock market corrections that offer potential bargains for the opportunistic investor.
Time To Buy
Major world events often lead to panic in the stock markets, with a “sky-is-falling” type of fear that produces short term sell-off’s. Opportunistic investors have often been rewarded by purchasing out-of-favour stocks. Buyers who enjoy these market corrections will typically hold a cash reserve or a margin account to take advantage of potential bargains.
An example of a stock specific world event leading to a buying opportunity was the British Petroleum oil disaster in the Gulf Coast last year. BP stock reached a 52 week high of $60.98 on April 15th, 2010. On April 20th, an explosion at the Deepwater Horizon drilling rig caused a massive oil spill that lasted for months. BP obviously took a lot of heat over the incident and their stock was beaten up, falling to a low of $26.75 on June 28th. BP stock has recovered by about 70% since the late June lows.
Time To Sell
In some cases an event can lead to a justified decision to sell. Something may change in the fundamentals of a business you own, or you may not feel comfortable owning a certain asset class any longer. Selling in a panic is not a smart strategy, but if the investment no longer fits with your overall plan it might be a good idea to sell and move on.
When Manulife Financial slashed their dividend in half back in August 2009, dividend investors were shocked to say the least. A staple in many dividend growth investing portfolios prior to the recession, MFC was now a fire-sale in the stock market.
Time To Ignore
With stock specific market corrections investors have an opportunity to evaluate the individual situation and decide to buy, sell or ignore. This proves more difficult with a broad based market correction, where many economic factors are in play.
The recent events in the Middle East and in Japan have led to a small panic in the markets, but for an investor with a long term view this volatility will only be seen as a tiny blip on the radar. Ignoring these types of market corrections is likely the best approach because trying to time the market rarely works out in your favour.
Often the best strategy in most situations is to simply wait. It works for preventing impulse shopping and it will work to prevent you from making a hasty decision without learning all of the facts. Stick with your plan and don’t let the media noise and market volatility trick you into making a mistake.
Back in December I took advantage of a temporary sell-off and purchased some BMO shares after they fell 7% following a large acquisition. But I had some cash reserves and was already hunting for a stock to add to my portfolio.
How do you approach market corrections to individual stocks or to the market in general?
As a young adult I watched insurance company commercials that offered investment programs for “Freedom 55”. Of course, I didn’t pay much attention then – all those smiling, grey-haired people wandering around on the beach – but now that I’m at that retirement age it’s looking pretty good.
How Do You Choose Your Retirement Date?
The problem that many people face is that they don’t know if they have the resources to be able to retire at 55, or even at the standard retirement age of 65. What happened to the time?
Like many people my age I am ready for a life of leisure but I worry that 1) I won’t have enough income to support myself and 2) that I’ll use up all the money I have invested too quickly.
Related: Why Baby Boomers Aren’t Prepared For Retirement
I have never worried about the effects of market fluctuations on my, mainly stock, portfolio as I was always receiving dividends regardless of the share price and total value. The thought of having to deplete my portfolio by selling the shares, though, bothers me. But I also don’t want to keep working until I’m 70!
Money and health are the two biggest concerns when it comes to choosing your retirement age. Not having enough money means extending your working career. Not having good health often puts an end to the amount of work you are able to do.
Statistics show that in 2006 over 300,000 Canadians between the ages of 55 and 64 had an average income of less than $7,000 because of a disability. If you’ve been laid off or “down-sized” and either don’t want to, or are unable to get another job because of age discrimination (it happens) you are forced into retiring.
Understanding Your Retirement Age
If you want to be happy you have to have a sense of control over the whole process. First figure out how much you’ll need to live on. A common guideline is 70% of your current salary, but everyone is different.
People think their costs will immediately go down but many retirees have a list of experiences they want to get on with – travel, new hobbies, etc – at least in the early years that can prove more costly than anticipated and throw your budget out of whack. At least most of your larger expenses – kids, mortgage – should hopefully be gone by this time.
Also, don’t overlook additional expenses you may not have thought of. You will be responsible for remitting your own income tax now, either monthly or quarterly. You may not need as much life insurance, but you may need long-term care insurance. You will have to replace your health care benefits if they were covered by your employer.
Next, figure out how much you’ll receive in monthly income if you retire. Calculate the benefits you know you’re guaranteed to receive such as CPP, OAS and any pension you may receive from your employers (but only if the amount is guaranteed, such as in a Defined Benefit Pension).
Don’t just rely on the figures given in articles and publications. They usually quote the maximum benefits available and that may not apply to you. Go to Human Resources and Skills Development Canada and order your CPP statement of contributions so you can calculate the numbers (also on this site).
Make Your Retirement Plan Unique
Once you come up with a figure you’d actually have to live on, you can cut back where necessary. Impossible, you say? Now you will know how much extra you will need. How much can come from investment income? Can you purchase an annuity?
How long will your capital last if you have to start depleting it? Do you need to save more? Work longer? Work part-time to supplement your income? Do the groundwork now so you won’t be surprised.
Don’t wait until you’re heading out the office door clutching your gold watch to develop some interests you can carry into retirement.
We’ve all heard about the retired husband who follows his wife around, offering “suggestions” and trying to help out but only succeeding in disrupting her routine until she’s ready to throw him out of the house.
Have the foresight to develop a hobby, find a place to volunteer, or whatever makes you smile.
Get a clear sense of what life will be like so you can focus on making good decisions when you need to. If you’ve been saving and planning for some time you may just need to tweak the plan a bit as you get closer to the date.
Retiring boomers aren’t just going to go pack a suitcase and quietly head off to Retirement Village. They are a new breed of retirees – independent, self-directed and determined to create new experiences for themselves for as long as they can – just as they always have been.