There is a very cool technique by which you can make almost any decision. Global corporations teach this technique to their staff and many decisions are made just by this technique. And it can help your personal budget!
Do you think this technique is applicable only in large corporations and cannot be applied in real life? Yes, it can be applied and it works especially well in personal (or family) finances!
We recommend applying it when you plan expenses and especially in situations where you or your family are trying to make spontaneous, unplanned purchases. This often happens during sales.
Recently, my spouse and I went to a sports hypermarket because we needed to make planned purchases before our trip. We usually buy everything online to save time, but here we needed to shop specifically in the store and needed a long fitting.
It turned out we hit a sale period and I had time to observe the shoppers. Many of them were making totally assorted purchases – from skis (of course, prepare your sled in summer) to new bicycle tires and mountain hiking clothing.
And it was clear that almost none of the buyers all this equipment and clothing will not be useful in the near future, many bought on emotion because of the 50% discounts and hoped that they would take up these sports, since there is the right equipment and clothing.
If they had applied the “5 why” technique, they would have saved some of their money.
The technique is very easy and I’ll explain it to you with an example:
For example, you also happen to be on sale, and now you’re deciding whether you need a new smartphone now that you weren’t going to buy, but now there’s a great discount on it. For example, 50% off the regular price.
For that price, you’ll get a great smartphone. What’s your decision?
Let’s try running this idea through the “5 whys.”
Why do you want to buy this smartphone?
Because I want to surprise my colleagues.
Why do you want to surprise your colleagues?
Because I want to draw attention to myself.
Why do you want to draw attention to yourself?
Because I have nothing to surprise them yet, I feel insecure.
Why do you feel insecure?
Because I want to realize myself in my profession.
Why do you want to realize yourself in your profession?
Because I don’t like what I do.
What does a new smartphone have to do with it? It has to do with the profession you’re in. By the 5th “why?” the real problem always comes out.
Let’s take another example. For example, you found yourself at the same sports sale as me and discovered 50% off skates. For example, the skates cost 150, but now they cost 75, and thanks to coupons, you can get them for 58. Awesome skates for a fraction of the market price. Let’s run it through “5 why?”
Why do you want to buy these skates?
Because I want to skate on them.
Why do you want to skate on them?
To get back in shape.
Why do you want to get back in shape?
To feel healthy and energetic.
On the 3rd why, I think we should wrap it up. If you know for sure that you will skate on these skates and this purchase will motivate you to get in shape and not just sit in the closet, you should make a positive decision. If you are not sure about this and you do not have extra money, and 4-5 why with weak answers will tell you that you should buy something else or it is best to put the money away. Read our blog about how to properly spend your money so that it will benefit your personal budget.
This was one simple technique that will help you make almost any financial decision, and most importantly, save your finances from spontaneous purchases.