Saving up for something? Buy the stock first!

by J. Money - Published January 20, 2020

stock market

Today’s a quickie but goodie for you ;)

I’ve heard of buying stocks from places you love and use every day (in fact, I did this myself back in the day!), but never thought of buying the stocks *instead* of the product before. Or at least while you’re saving up for it…

From Chandrashekhar on our post about controversial finance beliefs:

If you’re planning a large expense, buy shares worth that expense in that industry/company before making the spend.

For instance, if you’re looking to buy the latest iPhone, buy Apple shares worth that phone and see if you still want to buy the phone… That way, you tend to reduce unnecessary expenses while building a decent portfolio to rely on.

Love it! Not only does this make you WAIT and SAVE UP for the purchase first – a good thing to do on its own – but it also gets you into the habit of INVESTING more and probably holding onto the stocks at the end of the day as it’s never fun cashing out of stuff like that.

Now this wouldn’t work on things like cars or houses or other major purchases unless you’re a baller, but every day stuff $1,000-$2,000 or less? Sure! Most people don’t have that just laying around, so “saving up” by investing along the way would make for a great way to motivate yourself whether you end up pulling the trigger or not.

Delayed gratification is a great thing! And perhaps you even end up with both the product AND some extra stock by the time you have enough?

As my friend Mabel likes to say – “if you can afford the product, you can afford the stock!” Something to consider the next time you go to whip out that credit card :)

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{ 20 comments… read them below or add one }

1 Ryan Schlomer January 20, 2020 at 6:44 am

I am for buying index funds instead of individual stocks (because of risk), but if this strategy keeps people from buying crap and causes them to save more, then people should do it.

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2 J. Money January 20, 2020 at 7:35 am

It definitely spices it up a little bit :)

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3 Debt Free in RVA January 20, 2020 at 8:05 am

I see the merit in this! Thanks for posting.

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4 Chadnudj January 20, 2020 at 8:06 am

My variation on this theme:

Whenever we go on a family vacation (family of 4 — me, wife, and two boys 5 and almost 3), I buy a share of stock in something related to the vacation for each of the boys and then set dividends to reinvest.

So far, they each have 1+ shares of Disney (from a trip to Disney World), and 1+ shares of Royal Caribbean Cruises Ltd. We’re going to Disney in late September, so they’ll each get another share of Disney then. It was meant to be a gift in lieu of souvenirs, but who am I kidding — there’s no way to resist cool Mickey Mouse merchandise when you’re at Walt Disney World!

My hope is that by the time they grow up/move out, I can gift them each a nice little portfolio of stocks related to all the travels/family vacations we’ve went on, and urge them to keep the tradition alive by (a) continuing to buy shares as they go on family vacations, and (b) pay for those vacations using the dividends.

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5 J. Money January 20, 2020 at 9:10 am

Ahhh so cool!!!

This is great man, what a strategy!!

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6 COD January 20, 2020 at 9:34 am

Kids: Daddy, why can’t we go to Europe this year?

Dad: Airline stocks suck. Disney stock is still rolling so we are going to Disney for the 6th straight year. Now stop whining and get in the car.

:)

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7 J. Money January 20, 2020 at 9:43 am

Haha….

Yeah, there are some caveats here ;)

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8 Mr.FightToFIRE January 20, 2020 at 10:21 am

This is actually a very good idea. I already did the buying of shares of the company you buy goods or services from (I.e., Belgian cinema group Kinepolis) but taking a bit further and first but by share a before buying the good is also cool approach I should follow before I buy a MSFT Surface Pro 7 :D

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9 J. Money January 20, 2020 at 11:44 am

Haha, there you go…

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10 Mr.FightToFIRE January 20, 2020 at 10:22 am

Sorry for the typos. Autocorrect isn’t correcting properly.

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11 BC | FrugalWheels January 20, 2020 at 10:48 am

While I agree with saving for big purchases instead of charging it and figuring out later how to pay for it, this is not a great idea. For one, index funds are a much wiser choice to begin with, but if I were to pick individual stocks, my choices wouldn’t necessarily be done through the same principles as that inform my consumer choices. Sometimes they might – Apple is a good example of what is probably a pretty solid stock for some time to come. An early retired friend of mine had it as a portfolio of three major stocks. But another example: I bought a new lens for my camera last year from Sigma. They took a bold approach with their art series line and made some fantastic and well-regarded lenses. The lens I bought has gorgeous optics. Does that mean they will be successful as a company? No idea. Some lenses (including the one I bought) had poor early versions and I almost passed until I saw more recent reviews showed they fixed the problem. But those issues might stop people from buying them, and it might affect stock prices, regardless of the quality of the item I bought.

Beating the stock market on a consistent basis is like hitting a 98-mph fast ball: Only a select few can do it. Best to stick to index funds and forget these silly gimmicks.

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12 J. Money January 20, 2020 at 11:51 am

True true, but not everyone is as obsessed with index funds as we are OR even investing ;) If this gets them more excited about it then I’m all for it… Especially since it’s already money allocated to be *spent!*

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13 Shaun Stuart January 20, 2020 at 11:05 am

This is….stupid. This would double the cost of whatever item you want. Unless you are advocating buying the stock and holding it short term, then selling it to get your item. But then, stocks are incredibly volatile over the short term, so odds are good you’d lose money.

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14 J. Money January 20, 2020 at 11:56 am

Yeah, the idea is that once you’ve “saved” enough you’d then change your mind and hold onto the stocks in a perfect world, but even if you only did that half the time you’d still come away with extra assets in the end… regardless of how they performed (though you would have to deal with reporting it all on taxes at the end of the year which would be annoying…)

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15 SimplifiByTheBay January 20, 2020 at 1:26 pm

I do something similar. I’d love a Tesla but instead I bought stock and I’m bidding my time till I can buy one of their cars second hand. Can’t see myself spending 30-100k on a car.

Also lots of Apple and Amazon cause most of the tech products in our house are from there. I only wish I bought more stock:). They are the reason we could both RE.

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16 J. Money January 21, 2020 at 7:35 am

I’ll admit I’m tempted to pick up a Tesla too :) good thing they don’t come in minivan styles yet or I’d be in trouble!

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17 Papa Foxtrot January 20, 2020 at 9:09 pm

How would you handle buying healthcare stocks before buying the product?

All kidding aside, this is a great post to bring around delay of gratification, especially for vehicles and real estate.

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18 J. Money January 21, 2020 at 7:36 am

:)

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19 Andrea January 22, 2020 at 10:32 am

My dad did this for us back in the 70s…..and no, none of us got rich off of it. While it was neat to open the newspaper and read the stock prices, none of us kids really appreciated what he had done for us at the time. None of us wanted to fork over our hard-earned babysitting $$ for this either – there were records to buy! Ha!
I received one share each of:
– Standard Brands Paint – belly-up, now long gone
– American Airlines – split to 2 shares, and then the company cancelled my stock (bought out by….?)
– Abbott Labs – Now about 25 shares, courtesy of dividend reinvestment. I still own it. Since they’re a drug co, I guess this could be considered a “deferred purchase”? I’m not there yet! Ha! :-)

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20 J. Money January 24, 2020 at 3:19 pm

Your dad sounds like someone I’d be friends with :)

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