How to Overcome Impulse Spending for Good
Most households do not have an income problem, they have a spending problem. And spending problems usually involve impulse decisions and overspending. Overspending can result from any or all of the following:
-
Making a purchase on impulse, using cash or debit card, or more often, a credit card that leads to debt
-
Contracting with multiple service providers for a seemingly small monthly payment
-
Using debt to make a large purchase and then making large monthly payments over an extended period of time
What Money Fit counselors have found over the years of working with bankruptcy filers is that overwhelming debt rarely occurs in an instant. Rather, it accumulates over time. Such debts are more likely to include large car or truck payments, monthly payments on new phones for all family members, and maxed-out credit card accounts built through years of dining out, spending, shopping, vacationing, and buying stuff now to be paid back later.
Here are eight steps you can take today to minimize impulse spending and long-term overspending:
-
Keep a written copy of your financial goals in your wallet
-
Commit to the 24-hour cooling-off period before making a large purchase
-
Do not add a credit card to your online shopping accounts
-
Never use monthly payments as your buying guide
-
Go cash-only and ditch the plastic
-
Set gift-giving limits
-
Buy to improve your life not to impress others
-
Never accept a sales price as a good deal
Written Goals
If you have prioritized your upcoming major expenses (e.g. vehicle, vacation, school, home, appliance, etc.), write them down on a piece of paper as your financial goal. Then, place the paper inside your wallet next to your plastic cards or your cash. Doing so will force you to see (and acknowledge) your established financial priorities, leading to a quick evaluation of any current temptation to make an unplanned purchase. The top-of-mind question should be, “Is this purchase more important than my currently-planned priority?”
The 24-hour Cooling Off Commitment
Many consumers have benefited from the personal commitment to use a 24-hour cooling-off period when faced with large purchases. When deciding to make a purchase or not, such consumers have committed to going home, waiting at least overnight (“sleep on it”), and then making the purchase decision the next day when the adrenaline of the previous day’s experience has subsided.
If you are in a store and 24 hours seems too long to have to wait, make yourself wait at least until you get to another aisle before making the decision. Then, delay the decision until you are at the front of the store. Next, tell yourself you can make the purchase decision once you climb into your car. Once seated comfortably in the vehicle, you will not find waiting another 24 hours to be such a burden. One small step at a time away from impulse purchase is the key.
Online Shopping
When shopping online at e-tailers such as Amazon or Walmart.com, your first line of defense against overspending should be to remove your credit card from your online profile. Do not save credit cards to your accounts. Even adding a debit card to your account can lead to impulse shopping, but at least it will not be an instrument of consumer debt.
Additionally, as you surf, you might come across “limited time” offers that may even show a countdown to when the offer will be withdrawn. There are two important points to remember: first, if you were not planning to make the purchase in the first place, few sales items will ever be worth the problems impulse purchases cause to your budget, and second, such offers are all marketing gimmicks. Think of yourself as a white mouse in a laboratory maze, with the marketers playing the part of the scientists. Do you want to play their game, or do you want to make choices based upon your own time frame and not that of the game master?
Without a plan, limits or simply waiting on a purchase, our impulses can keep us going, deep into the red.
Shopping by Monthly Payment
The first question you will get from car salespeople will not likely be “what type of car are you looking for?” or even “what is your price range?” but instead, “How much are you looking to spend each month?” If you shop by monthly payment rather than overall price, you allow the salesperson to sell you a vehicle, refrigerator, or even a home that may be hundreds or even tens of thousands of dollars more than you had hoped to spend overall.
Instead, set a fixed maximum price you will pay. If you have to finance the purchase, stick to the maximum price, even if the salesperson tries to explain how you can make a “bigger” purchase and pay less each month. What they really mean is that you can pay the lease each month but that you will be paying for many years longer than if you had stuck with the original purchase.
Go Cash Only
Taking a plastic card into a consumer spending scenario is asking for trouble in many cases. Unless you are extraordinarily disciplined, you would do better to take into the store only the cash you have budgeted for the intended purchase. Leave your debit card, credit card, prepaid card, and even your checkbook at home to avoid the temptation. Studies show you will spend between 10% and 15% less with cash than you would with plastic.
Set Gift Giving Limits
Whether you are approaching a holiday or a family member’s birthday, overspending on gifts can ruin many household budgets for months, if not years, to come. The typical household that puts Christmas gift buying on a credit card will not pay off the debt for six months. That means all of the savings from sale shopping before Christmas are negated by the addition of interest paid on the carried balances for half a year.
Instead, create a list of people to whom you plan to give a gift (just like Santa would do), and set a maximum spending limit for each person on the list. Stick to the list and you’ll stick to your budget.
Buy to Improve, not Impress
Before making a purchase, ask yourself if you are buying the item or activity in order to impress others or to improve your life. As an example, are you going all out and purchasing Halloween decorations for your lawn and driveway to impress the neighbors (and their trick-or-treating kids) or are you purchasing the much-needed new mattress for your bed so you can sleep better?
Quote: “Taking care of your own needs is not selfishness, and wasting money on those who appreciate and need it least is not generosity.”
When tempted to spend money you know you have not planned for, ask if the purpose for the purchase is an internal one (improve your life or the life of a household family member) or an external one (impress others, attract the attention of others, give you bragging rights within your social circles, etc.). While unplanned expenses, in either case, is unwelcome, external purchases are harder to justify.
Sales Spending
So, you found something for sale with a tag on it that says, “50% off?” So what? What is 50% off actually mean? More often than not, it is 50% off some imaginary figure that might as well be pulled out of a magician’s hat.
If the main motivation behind a purchase is to take advantage of a sales price, your personal and household stability will be at stake in the long run. Marketers make sure that there is ALWAYS something you want at 50% off some pretend price. You can spend yourself poor by “saving” 50% off everything you see.
Quote: “Sales are not opportunities to save money but occasions to spend.”
Instead of accepting the sales sticker as a lower percentage of the seller’s make-believe original price, figure out how it compares to the amount you have planned for the purchase. If the sales item costs $10 and you budgeted $20, then it’s 50% of your original price. If you budgeted $10, then it’s full price. If you didn’t budget for it at all, then it is literacy “infinity” more than your original planned price. Nobody can afford infinity.
Effective spending behaviors (e.g moving away from unplanned overspending) are based upon habits that take months and years to develop. If you make unplanned purchases, recognize the mistake, ask yourself what you can do better next time temptation hits, and move on. Perfection is not the goal. Progressing to a place where you are spending your money and other resources on your top priorities is the goal. Progressing, not arriving.
