I’m on a cruise this week, yay! So the following is a guest post from Stuart Laing of Daily Money Bucket, where he aims to help you fill up your money bucket and reduce the leaks. Check it out if you want to take control of your personal finances and move towards financial independence.
Impulse spending can ruin your life. It can destroy your budget, lead you into debt and take you further away from your financial goals. And to make things worse, most impulse purchases aren’t even necessary. They’re just items bought on a whim to provide a brief moment of retail euphoria before being thrown into the back of a drawer/wardrobe/closet.
Yet it’s a problem that affects millions of people around the world.
So I was interested to read Stop making impulse purchases in 4 easy steps by Jen from TheHappyHomeOwner.net over at LifeAndMyFinances.com.
Once you’ve read Jen’s article, I’ve got a couple of additional ideas which may help you to curb your spending impulses.
1. Know Your Goals
If you want to achieve anything that’s important to you with your money, it’s crucial to set some financial goals.
So before you spend another penny, spend time working out what you want to achieve with your personal finances.
- Do you want to buy your own home?
- Do you want to save for a secure retirement?
- Do you want to travel the world?
Unless you have a few medium to long-term savings goals your money will continue to dribble through your fingers on short-term impulse spending. You’ll have nothing to show for it except a series of quick consumer spending fixes.
And that’s fine if that’s how you specifically choose to spend your money. In that situation you won’t be disappointed by the outcome. But once you know your financial goals they will provide another anchor to help you reign in your impulse spending.
Whenever an impulse purchase looms, get into the habit of pausing and asking yourself “Do I really need this item? And will it take me closer to or further away from my financial goals?”
- If the purchase is necessary, buy it.
- If you don’t need the item, but it will take you closer to your financial goals, buy it.
- If you don’t need the item and it will take you further away from your financial goals, return it to the shelf and back away slowly.
2. Cooling Off Period
In addition to setting financial goals, consider imposing a cooling off period before you buy anything.
For example, you can buy items up to $10 immediately.
If the item costs $10-200 make yourself wait for 24 hours before you buy. It’s important to include lower cost items in this safety net as it’s often the little items that destroy your budget. Buying low cost items frequently will dent your bank account just as much as infrequent large purchases.
Items priced $200-1000 must wait one week and items above $1,000 have to wait at least one month.
Just adjust the figures and time periods according to your circumstances. More often than not, avoiding the immediate purchase will dampen your desire to spend. And even if you do buy the item you can be more certain that it’s something you really need.
Even if you impose these rules to prevent impulse buying, what’s to stop you disregarding them?
The answer is willpower. I wrote about this recently in 4 Powerful Ways To Improve Your Willpower - it’s like a muscle. The more you use it, the stronger it becomes. However, recent use of your willpower will make the muscle tired, leaving your temporarily vulnerable to impulse buys. So as Jen mentioned in her article, stay away from potential spending situations if you’re sad, angry, stressed or tired.
And finally, if all else fails the only option is to make it a physical impossibility for you to spend. When you go out, carry just enough cash for the essentials that are within your budget. Leave your credit cards at home and resort to good old hard cash.
For example, if you go out to refuel your car, take just enough cash for the amount of fuel that you need to buy. Over time you will develop a bias towards not spending on non-essential items, especially when you realize two things. First, most of the impulses will pass quickly, leaving you glad that you didn’t waste your money on them, and second, you won’t have to wait as long to reach your financial goals.
So on that note, tell us about your impulse buying history. What is the most expensive item you have bought on impulse? What item have you most regretted buying? And how have you attempted to control your impulse spending?