Stop Acting Like a Poor Person

Chest freezers are super-hard to get right now with the COVID pandemic. They are back ordered by manufacturers and the used market is dry. So when Teresa came across one on Facebook Marketplace, she jumped at the opportunity as she really wants one. It was a great deal and the seller was going above and beyond to save it for us. He assured me that it worked and I trusted him. He's a business person and had a solid story for why he was selling it. I'm usually a very good judge of trust.

We paid him $400 cash, no haggling. We got it home and I thoroughly disinfected it for over an hour. It was a lot of work and ended up costing me a full work day. But my wife was happy and that has a great value. I plugged it in overnight to make sure it worked. In the morning, the alarm sounded as it reached 26 degrees. The temperature never dropped below that. In fact, I lost more time throughout the week fiddling with it. Eventually, I spoke to an appliance repairman who diagnosed it over the phone. "It's leaking Freon and is junk." He went on to explain that it would cost way too much to repair and we could just wait to buy a new unit for $1,000 - $1,200. Darn! Teresa and I were upset that we had no freezer, lost $400, and had to pay to recycle our cold closet! Plus, the seller was not responding to us at all! I was duped!

Let's look at this story from an opportunity cost standpoint:

• The freezer cost $400 used. It was available immediately.We had no idea if it worked. There was no guarantee and no refund.
• It consumed a total of 1.5 work days in total to obtain this freezer, set it up, clean it, diagnose it, and recycle it. If I were to just clean at my current average rate of $55/hour, I could have earned $660. If I used my consulting rates, it would be well over $1,000. Plus, it costs $75 to recycle.
• The drive also caused wear-and-tear on our family van and cost another $10 in gas. We drove 38 miles total. The IRS currently gives $0.575/mile to cover all vehicle expenses. This amounts to $22.
• A brand new freezer would cost $1,000 - $1,200. It is not available for 3 months, but is delivered to our door with a 1-year warranty.

The analysis is simple. I chose to act like a poor man with Poor Man Mindset (as explained in Rich Dad Poor Dad). I only considered the $400 cost and availability. I did not account for inconvenience, lost work hours, and most of all... RISK of it being junk! My total cost from this Poor Man example is $1,157! I literally spent enough in actually cash and opportunity cost to buy a brand new unit and I didn't even get a freezer out of it! This makes me sick to see the numbers like this. 

If I had thought like a Rich Man, I would have said NO to any used, risky option to save me money as I would have known that the cost would have been more. It's the Bill Gates $100 bill story that I've told on this podcast. If I was thinking like a Rich Man, I would have told my wife to buy a new freezer and get the one that she wants for a decent price. Then have it delivered, setup, and get the warranty WHILE I worked in our family business on the 20% of work items that earns me 80% of my profits. If I were thinking like a Rich Man, these decisions would have earned me $2,000+ while my wife spent $1,200 on a freezer. I would have been $800 ahead instead of $1,157 behind. In this example, the Poor Man to Rich Man swing is $1,957! Imagine how big this opportunity cost gets when you look at big items and lost time in weeks or months!

So many of us make these Poor Man decisions because it's what we've been taught. I shared this story with my good friend John VanderMuelen and he TOTALLY related with Poor Man Mindset. He wants both of us to avoid this easy mistake so we can achieve our highest potential in business & life.

On a good note... The seller did get back to us and offered us a refund. He was trustworthy and felt bad. That made us feel a lot better!