We all know that we need to budget money and save, but sometimes we get in the dilemma of deciding whether or not to impulsively buy a certain item. For example, you might be thinking of buying a new TV, but deep down you might feel guilty for even thinking about it because it’s quite expensive and realistically you would be better off putting that money into an emergency fund.
Your brain might start telling you not to buy because you already have the internet and your current TV is big enough, but your emotions might be pushing you to start researching to buy because watching on a bigger screen is so much better (and more comfortable)! Everyone goes through this mental battle every now and then - so how do you mentally deal with impulse buying, and when should you let yourself splurge?
What is impulse buying?
Impulse buying may be defined as the tendency for consumers to compulsively purchase products or services that they have not planned for. As opposed to the discipline that goes into budgeting for an item in advance, research suggests that impulse spending is strongly driven by emotion, and is often provoked by seeing an advertisement or the presence of the product.
7 Tips on How to Mentally Deal with Impulse Buying
1. Set Savings Goals to Overcome Impulse Buying
Having a budget and a bigger goal can help you to remind yourself why you need to save. For example, you may want to get out of debt, provide for your kids’ education, start an emergency fund or boost your retirement savings. If there is something that you want to buy out of your savings, be resourceful and try to find a way of obtaining it without putting your more important financial goals at risk. Rather than spending your savings, you could look for pre-loved items, scope out recycle shops, or find another source of income in order to afford it. If you are not willing to hustle, then you probably don’t need it anyway.
2. Remember, Time = Money
Calculate the number of hours you would need to work for in order to pay for the item of your desire. For example, say you want to buy the latest TV model and it costs around $1000. If you are earning $25 per hour, then you would need to work an extra 40 hours or 5 business days in order to pay for it. When you consider purchases in terms of money as time, superfluous items don’t seem as appealing anymore, do they? Also, consider the opportunity costs of an expensive consumer goods purchase! If you were to invest that $1000 in an ETF index fund at an average return of 7% per year, you could enjoy the return on your investment AND buy what you want later without losing the initial $1000.
3. Comparison Shop
Rather than impulsively buying something, consider what else you could buy or pay for with that amount. For example, rather than purchasing a TV, $1000 could easily pay your internet instead for a year if not more. If you compare the value that you get out of the two options, you might rather have the internet connection than the latest TV model. Or with that $1000, you could buy 2 months’ worth of groceries, or put it towards an emergency fund (LINK EMERGENCY FUND ARTICLE).
4. Budget Money in Advance
In order to make a realistic budget and overcome impulse spending, you must set aside some budget money for “wants” as well as needs. Rather than using up your savings on the impulse buy, include this item in your budget and save up instead! With this money mindset, you might actually be able to take advantage when the item goes on sale, and you won’t feel bad when you finally do make the purchase. Also, if you budget in advance the itch to buy the item might go away, and you can then use these budgeted funds on other wanted items. Another money strategy is to set up a savings goal every month, and after you have met your goal, you can use the extra money to purchase what you want. Or in reverse, you can try to remove some discretionary items from your budget (save on expenses) to make some financial room for your wanted purchase. For example, if you have budgeted for travel but never go anywhere, erase this item out of your budget and replace it with a savings fund for the TV. Related: How to be Successful in Creating Budgets Using Zero-Based Method
5. Estimate how long the item will last and how much it will improve your life.
This applies, particularly to expensive purchases. For example, in the case of the TV, it may last for ten years, but if there is still life left in your current TV – is getting a new one really going to make that big a difference? If you can be realistic and weigh up the pros and cons of the item, you will be able to make a sound assessment of whether the item will really improve your life, or if in the long run there will be no change at all.
6. Consider how long it could postpone your retirement!
If your goal is to retire earlier, think how much the cost of an impulsive purchase will push your retirement back. For example, say you are thinking of buying the house of your dreams at a later stage in life. Buying property costs quite a lot, and when you are nearing retirement is likely to push that deadline back and add on monthly costs. If the property you are looking for is out of your price range, you won’t be able to afford the upkeep or the thought of it makes you stressed, make sure you put some serious thought into it and crunch the numbers to make sure the decision is financially sound.
Read More: Getting a home: Should I rent or buy a house
In another example, if you are thinking of buying an old car vs a new car, or model A vs model B, sometimes rather than the cost of the item, you also have to consider whether you would be happy with your purchase.
If you opted for a lower cost item (an unwanted model), but you really don’t like to drive it, then it will just end up not being used or not taken care of and will cost you a lot more in the long run. That being said, it doesn’t mean you should only buy pricey items just to be happy! You still need to consider if you will be able to pay for it in the long run. Go for the right balance between cost and preference, then consider your options well.
7. Pause and Find a Distraction
Most often what we need is to distract ourselves from the impulsive spending crime we may be about to commit! Find yourself a distraction like hanging out with your friends, or watching Netflix. After a while, the urge to buy will pass away and you might change your mind.
We hope you enjoyed our 7 tips on how to mentally deal with impulse buying. In the end, it still depends on what is a necessity for you, and what makes you happy. Some people are happy with living the basic life (no car, no house), while for others a car is a necessity! Just be sure that for whatever decision you make (impulse or not), that you are happy with it, you will still be able to save and you can manage the repayments should you get yourself into debt.
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