Have you ever noticed how difficult it is to walk into a store and come back out without buying something? Or maybe you find yourself endlessly browsing shopping sites like Amazon, eBay, or your favorite retailer even though there’s nothing you really need.
These situations are completely normal. Studies have shown that over 95 percent of Americans make in-store impulse purchases and 88.6 percent do the same thing online. However, as commonplace as they are, they’re not at all healthy for you or your budget. All it takes is a few innocent purchases here and there to add up to thousands of unplanned dollars spent.
That’s why in this post, I’d like to give you five strategies for how to avoid impulse spending.
Re-Calibrate Your Standards
When you go on social media or turn on the TV, what do you notice? If you’re like me, then you’ve probably observed lots of people wearing expensive clothes, eating at fancy restaurants, and enjoying themselves at much more luxurious places than I typically go.
None of that is by accident. It’s a well-known and old marketing tactic that to sell a product, you must invoke a need or “feeling” behind it. In other words, it’s all scripted to make you believe that you too can have this lifestyle if you buy more products and spend more money.
This is where you need to take a step back and realize what’s going on. Just because someone on Instagram looks like they’re traveling every weekend doesn’t necessarily mean that you can or even should.
Instead, recalibrate your standard of living by talking with family and friends that make you comfortable. Chances are, they lead very similar lifestyles to you, and that’s perfectly okay. Don’t let clever marketing get inside your head and make you believe that buying some product or service is somehow going to change all of that.
Assign a Purpose to Every Dollar
Have you ever said to yourself, “I just got paid and now my money is all gone? How did I let it slip through my fingers?”
This is such a common phenomenon for so many people. Typically the main reason for this is because there’s no plan in advance of what to do with that money once you have it. Humans are really bad at over-estimating their own financial security, and we tend to mentally think we can handle a purchase even though the reality is that we’ve already spent that money on something else.
This is why budgeting is so critical. When you budget, you make a plan for what you’ll do with every dollar you earn and put it to work.
You can make a budget with nothing more than paper and pencil. However, it’s the digital age, so why not let technology help you go the extra mile with your money? For instance, you could use the Buxfer app to make a budget and monitor your progress.
Buxfer lets you assign limits to your major spending categories. Then as you use your bank and credit card accounts, it will import these transactions and condense them into a report. That way you’ll always know how your budget is doing and if you’ve exceeded any of your spending categories.
Max Out Your Retirement Plans
Sometimes the best way to prevent yourself from making impulse purchases is to use the old “out of sight, out of mind” mantra. An easy way to do this is to take money out of your paycheck before it ever hits your bank account.
How? By contributing more to your retirement plans such as your 401k and IRA. Not only will doing this leave you with less money to spend on frivolous purchases, but it will also help you to build long-term sustainable wealth. This is because the money that gets contributed to your retirement plans will be invested in securities that have the power to grow and compound several times over.
Contributing to a 401k account is as simple as signing up for one with your employer. IRAs can be opened at any financial institution of your choice and funded by making monthly automated transfers direct from your bank account.
What works really well is to increase your contributions little by little. For instance, start off with 10% one year, then 12% the second year followed by 15% the third year, and so on. Since the additional amount will be so small, you’ll have an easier time adjusting your budget to accommodate it. This will naturally force you to focus on higher priority expenses over non-essentials.
Don’t Spend Extra Earned Income
When you get your income tax refund from the IRS or a profit-sharing bonus from your employer, what do you do with it? Like most people, your first instinct might be to spend it on something big. However, fight the urge!
Even though it can be tempting to take that money and take the family to Disney World, remember that this money is income just like the paycheck you receive every two weeks. It should be considered as part of your overall budget and put towards those expenses that will give you the most value.
For instance, consider using your windfall to:
- Pay off a debt
- Make an extra mortgage payment
- Contribute it to your retirement account
Like we said before, every dollar needs to have a purpose. Otherwise, it will slip through your fingers. So, give some thought as to what job you’d like to give this extra income.
Avoid Loans as Much as Possible
Sometimes a sneaky way that vendors will get you to make a big-ticket purchase is to offer to break it down into several smaller payments. For instance, Amazon has the BNPL (buy now pay later) program that they’ve been using to entice people to spend more … and it’s working!
BNPL lets shoppers split their purchases up into five relatively equal payments. According to Lending Tree, nearly 70 percent of users admit to spending more than they would if they had to pay for everything upfront.
Additionally, 42 percent of consumers who’ve used BNPL have made at least one late payment. Not only does that result in your debt piling up, but it can also mean having your Amazon account suspended and possibly being reported to the credit bureaus.
Even if your payments are on time, they will still add up if you make too many purchases. That’s why you’ll want to resist the temptation to break it up into smaller payments. Generally speaking, if you can’t pay for something up front that costs less than a major household appliance, then don’t buy it at all. That will be a good way to stay out of debt and avoid making impulse purchases.
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