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Thrift is a payrise

“Thrift is Half thy store” is a quote from Ali Muhammed, the son in law of Muhammed from the 7th century. That advice is 1,400 years old and still as valid today as it was then. But today I would put it as, “Thrift is actually money you can spend twice, thus a tax free pay rise for you for no extra work!”

Most people go out to earn money, which is then highly taxed , to buy the products they want (not necessarily need). If they want a Television set worth a thousand dollars retail they have to earn at least $1,300 spare income before tax to afford that item. Otherwise they have to borrow that money from a hire purchase company and actually end up paying at least $1,500 (which equates to $1,950 before tax!) So obviously, this is a vicious cycle. To get into the virtuous cycle we have to start saving up and using thrift in combination.

Know that most businesses only make a profit for 7 out of 12 months of the year. The months that they have trouble making profits In New Zealand areJanuary and February – because everyone is broke after the Christmas splurge. The other two months are August  and September because NZ is an agricultural country and all the farm workers have no work because this is the middle of winter, beginning of spring. The agricultural workers basically live hand to mouth and spend when they’ve got money. No Money means reduced spending, so all the big sales are in August/September in New Zealand. So the months to buy are January/February and August/September. I buy all my Christmas presents in August/September as they are all cheap and Christmas is only 12-16  weeks away! It is also good to do your Christmas shopping away from the commercial pressures of the season!

Back to your $1,000 Television set. Assume you have $1,000 and want to buy that set. Even if it isn’t on sale in these 4 months (and expect it to be dropped to around $700) you can always offer them $700 and they will either say yes or no. If they say no go to their opposition (there is always opposition!). Cashflow is very important to these stores and it is very tight in these months, so don’t expect too much opposition to your offer! You are the sale the dream about!!! Remember, “nothing is worth nothing until it is sold!” The buyer has far more power in the “down” months, if the buyer just knew it and organised their buying trips  for these months! (notice the word organise!)

What it means is you’ll get your $1,000 television for $700 and you still have $300 left. So your actual $1,000 is actually worth $1,300! And you’ve already paid the tax on it, so you have increased you income by $300 whilst reducing the tax on that money to 0%! This is the power of thrift.

There are also two secondary steps to thrift that is even more powerful, which i won’t discuss today! 

Think about your buying habits and start organising around your “sales seasons” in your country!