The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.
Have you ever heard of the phrase, “Buy low, sell high?”
Typically, people only speak this phrase when they are referring to the stock market. Pretty much everyone knows that if you are going to buy shares of stock, you want to make your purchase when the shares are selling for a deal. Then, a few years later, you can eventually sell those shares at a much higher price and therefore earn a hefty profit from your investment.
“Buy low, sell high” only makes sense, so why not live out this phrase in every category of your financial life?
Buy Low Sell High Outside of the Stock Market
People absolutely love buying new things.
One of the most desired of all new things is a new car. For some, buying a new car is the epitome of the American dream. If they are able to drive that fresh smelling, absolutely mint vehicle from the car lot, then they believe that they have truly made it in life. However, from a financial perspective, they have just bought high and will eventually sell low.
Before they drive their new car off the lot, its value might be something like $30,000. Once you drive it off that lot, the value tanks immediately down to $26,000 or so (because it is now used). And, after approximately 4 years, you might be able to sell this car for $15,000. By purchasing this brand new car, you have just lost $15,000 (not to mention the steep cost of insurance on that sparkly new ride) in a short span of four years.
Now, I understand that it isn’t easy to earn money with a car, but I have made it my common practice to buy low and sell high with my vehicles. About 2 years ago, I purchased a car for $5,500 and sold it about a year later for $7,000. At that point, I purchased a truck for $4,500 and sold it 3 or 4 months later for $6,300. Rather than losing $15,000 over the course of four years, I have actually earned $3,300 over the last two years. I have been able to do this by keeping up with the values of a few different models of cars. When I see a deal, I am not shy to buy the vehicle (because I like to buy low), drive it for a short while, and then put it up for sale again. This way, I am able to buy low, sell high, and continue to add to my net worth.
This is obviously true with home purchases as well. Find homes that need a little fixing up and buy them for a deal. Put a little elbow grease into them and watch the value of your investment grow!
Think Outside the Box
By having a buy low sell high mentality, you tend to think outside the box a little.
Earlier this spring, I was thinking about what I might need to do to improve the value of my house. Two things came to mind: painting the exterior and landscaping. Rather than just heading out and hiring a painter and landscaper to do all the work, I have trained myself to buy low. Painting isn’t really all that difficult. It will take me about a week and will only cost about $500 vs. the $4,000 that the local painter would charge me. As for the landscape, I obviously don’t need a landscaper, but I actually don’t even need to buy any shrubs, flowers, or trees either. My girlfriend has a very large property and can easily find sprouts of different shrubs and flowers from her open field. My yard is going to look excellent (which will of course improve the value of my house) and my purchase price to do it is practically nothing.
Think “buy low, sell high” in all of your purchases. You won’t be sorry.
How about you all? Have you had a buy low, sell high experience lately?
Share your experiences by commenting below!
***Photo courtesy of http://pixabay.com/p-256312/?no_redirect
