Feng Shui Your Financial House

Here’s Why Your Gut Knows a Bad Deal from a Good One

Always get paid for the risk you’re taking on

If you’re in a hurry, the TLDR on today’s task:

Learn to tell if it’s a good deal.

You probably know in your gut whether something is too good to be true, not tempting at all, or a win-win for both parties.

If in doubt, here are two rules of thumb:

1. The normal discount for liquidity starts at 25%.

2. Know the risk factors that affect a deal’s price:

expiration date

transferability

agent vs. principal

fraud

headache

If you want the whole story, here you go:

I belong to a Facebook group of local foodies. We post requests for restaurant recommendations, pictures of impossibly complicated dishes we’ve cooked, and ask whether real bagels can be found outside of NYC.

Yesterday someone offered to sell on behalf of a friend a $400 gift certificate to the Umstead Hotel and Spa for $375.

“It’s just like cash!” he wrote.

First of all, that’s B.S. It’s not just like cash. Secondly, that is a TERRIBLE deal.

Granted, the Umstead is a 5-star hotel used for corporate retreats, weekend getaways, and fancy dinners, with the area’s best spa (closed for renovations until Spring). $400 would buy a lovely experience.

But $375 is only a 6.25% discount to face value.

As we would say on Planet Finance, that offer is WAY OFF MARKET.

Translation: “Are you f*cking kidding me?”