At one time or another we’ve all been guilty of buying things that we didn’t really need. Sometimes it’s the newest smartphone on the market; at other times, it’s eating out when a home-cooked meal would have done the trick.
No matter the reason, haphazard spending is the direct result of not having a plan in place when it comes to making money decisions.
While on the surface these expenditures may seem insignificant, they can quickly add up and leave you with nothing for the things that are truly important. As your Financial Mom, I want you to take a timeout before this happens. Here are a few ways you can stay occupied and avoid spending yourself into debt.
Redirect Your Attention
The internet has forever changed the way shopping is done. These days it’s not uncommon to buy your electronics, groceries, and even cars online. And with sites like Amazon, Etsy, and more, it seems that impulse spending has been taken to new heights as well.
Did you know that impulse shopping accounts for nearly 40% of all shopping online? That means that nearly every other purchase made on the web was unplanned, and not fully thought out!
While the general belief that pricing was the driving factor in most online impulse shopping, an online study by User Interface Engineering found that only around 8% of impulse buying arises from special prices or promotions.
Instead, the study showed that shoppers who searched by category (instead of the specific item they sought to purchase initially) were three times more likely to get sidetracked and buy something in addition to what they originally planned to buy.
To avoid busting your budget on unnecessary items when buying online, redirect your attention and only search for exactly what you’re looking to buy.
For example, if you’re in the market for a new television and you want to compare prices among a few online competitors, don’t search by category (e.g., ‘electronics’) because the results will be too broad and you run the risk of being enticed to buy something else.
Instead, be as specific as possible and search by item (e.g., 47” LCD Television). This narrows your options and gives you fewer distractions.
Put Yourself in Timeout
Could you go a week without spending on anything but absolute necessities?
Of course you could – and every now and then, maybe you should!
While the holidays have passed, the expenses typically associated with the gifts and social obligations of the season are likely just beginning to rear their ugly head. That’s why this is the perfect time to begin a self-induced spending timeout.
You don't have to take extreme measures and live a life of complete deprivation when going off-the-consumer-spending-grid. In fact, entering a spending timeout only requires a moderate change in behavior.
For instance, consider implementing a mandatory waiting period before making a large purchase. Let’s say you are completely enamored with a brand new laptop that you just saw at one of those big box electronic stores. Technically you can afford it, but you choose to wait three days before pulling the trigger on the purchase. Plenty can happen within that window of time. And by allowing yourself the chance to really evaluate your decision, you may find that something you thought you couldn’t live without a few days prior, might actually be a luxury that can wait.
In his book, The Ultimate Cheapskate’s Road Map to True Riches, author Jeff Yeager describes this idea as a “fiscal fast" where you come to grips with the way you spend and probably waste money every day.
You can think of it as a sort of detox from hyper-consumerism. This type of exercise is not only fiscally responsible, but should also provide insight into the things that really add value in your life.
Bring Something In, Take Something Away
When buying things that are often replaced, like clothes or shoes, set a rule that in order to buy something new, you must replace a similar item that you already have.
As a practical example, let’s say you wear business suits to work, and at a minimum, you must have at least a week’s worth of suits. You would choose your favorite five or six suits (one extra – just to be safe) and find a new home for the rest.
Now, with your ‘budget’ of suits set, any time you want to buy a new suit you must first decide which of your current collection is being replaced. The idea is that they can’t all fit within your budget, so something has to give.
If you find that the decision of what to keep is too difficult, take it as a sign that you probably don’t need the new suit after all.
For many people, the thought of having to open your closet, make a decision on what to get rid of, and then physically donate or trash it is enough to curb impulse spending.
This type of psychological roadblock has two key benefits. First, you’ll have less drawers and closets packed full of stuff that you want to keep but never use. You’ve seen the show Hoarders, right? Don’t become that person!
Additionally, you’ll spend less money because you’re more conscious of what you already have and won’t see a need to unnecessarily add to it.
Just Say No
Without establishing parameters around how you spend money, you will continue to have difficulty eliminating bad habits. One way to get on track is by setting financial goals to determine your priorities and what your ideal
(financial) future looks like.
Goal setting puts you in charge of your money and your life.
So, when you are faced with a decision to make a purchase, go back and review your goals and decide if the purchase is one that will help you move closer to it. If not, maybe you just need to say no to that purchase.
When it comes to money, you have a choice. Make a plan for where it needs to go, or it will decide on its own. Life is a lot easier, though, if you take control – even if that means sitting in timeout for a while.
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.