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10 Practical tips for overcoming Impulse Spending

Posted by admin | Personal Finance | Monday 16 February 2009 7:55 pm

 

 

 

 

1.     Set specific financial goals

       With a financial goal you always have big projects where your money needs to go-like a new home, a car, Investment and the like. With this in place you know that some things are at stake if you are unwise with your financial decisions.  So whenever you are tempted to spend, you would realise that you will be faced with a question like, “will buying what I want to buy now bring me closer to my goals or move me further away?” If you don’t have financial goals, it would be more difficult to resist the pressure to just spend.

 

2.     Have a monthly budget

       A monthly budget gets your spending into perspective. You are able to tell how much comes in and how much goes out. I’m personally surprised at the figures I see on my monthly budget sometimes. With a budget you come face to face with some facts that would confront your financial naivety. Try it out!

 

3.       Write a shopping list

        A shopping list keeps you focussed.

 

4.      Be mindful

       Don’t get carried away by the things you hear and see. Instead ask yourself such questions as, “why do I need this?”, “Can I wait a little longer to include it in my budget?”, “If I don’t buy this now is this going to mean the end of the world for me?”.

 

5.     Pay cash

      Consider leaving your credit card/s home. Always remember that every time you are swiping your credit card, you are borrowing money that you do not currently have. And it comes at an extra cost.  The thing about paying with credit cards instead of cash is that you don’t feel like you are spending real money. But if you have to count out paper money and hand them over…its just much more painful. That’s why most people tend to spend less when they have to pay by cash. And studies do exist that substantiate this assertion.

 

6.     Don’t fall for marketing gimmicks

      Beware of the insidious power of advertising and marketing. There are a lot of marketing tactics that almost arm-twist you into buying immediately. The promotions come in very appealing and enticing manners that make you feel like you are stupid if you don’t buy immediately. Or sometimes a scarcity element is introduced which suggest that the quantity of the product or service is limited and that demand is high. So it’s basically available only on a first-come, first-served basis so if you do not buy immediately, then that product might never be there again. When faced with this kind of situation, retreat first and make sure that the purchase is absolutely necessary. And if in doubt refer to 8 below.

 

7.     Learn to distinguish your needs from your wants

      A lot of people buy just because if feels good to do so. Others do because there is a sale going on. And if it’s at a good value, why not buy? But why spend on what you do not need just because it’s cheap? You must be able to draw a line and be able to distinguish between what counts and what doesn’t.

 

8.     Allow a cooling off period before you buy

      Resist the temptation to buy anything you have not planned for in advance, immediately-think through it first.

 

9.     Watch out for the traps

      By this I mean those items lined up on the side-ways just at the point where you queue up to make you payment at the till. The shop owners/managers understand the psychology of spending and that’s why they have lined up those things there. Impulse buyers are the main catch-they are usually more likely to pick up stuff here and frankly they do always.

 

10.  Tax yourself

      Whenever you make a hasty buying decision, tax yourself a percentage of that spend. Put that amount into your savings. And if you have avoided impulse buying for a month. Do the contrary-Reward yourself with something you love. The incentive method works. Reward yourself for good behaviour. What gets rewarded improves.

 

9 Signs that you might just be an impulse Spender

Posted by admin | Personal Finance | Monday 16 February 2009 7:47 pm

 

If you exhibit one or more of this signs, chances are that you are an impulsive spender.

1.     You are a “mega-spender”

       Your spouse and people around you [especially family] complain that you spend so much money

 

2.     You get unexpected charges regularly

       You always get charged more than you planned on your monthly credit card statement

 

3.     Your living space has now become a store

       You have stuff-gadgets, clothing and shoes that you rarely ever use lying all around the house

 

4.    You own stuff you really don’t need

      You always come home from the shop or mall with things you never planned to buy and you never get to use

 

5.    You wonder how people are able to save with their current earnings

      You realise you find it difficult to save for things that really matter to you like a new car, a house, your education, investment, savings etc

 

6.    You are the “credit merchants” best friend

      You buy most of the things you own on credit and realise that you are still caught up paying for those things even when they [the things you bought] have been used up

 

7.    You are remotely controlled by your pastic card

      You always feel a strong urge to use the “plastic card” even when you know its not necessary

 

8.    You cure your psychological problem with a card-swipe

      You resort to shopping whenever you are angry or in a bad mood. So it’s like a stress reliever or mood booster.

 

9.     You can initiate a boost by just spending-You love shopping so much that you could get ill if you were restrained from it

 

Understanding Impulse Spending

Posted by admin | Personal Finance | Monday 16 February 2009 7:38 pm

 

Impulse spending is any spending done at the heat of the moment. It’s usually an emotional response to something you have heard or seen. It’s irrational because it doesn’t allow you to think correctly about how much you have before making the buying decision. And if you are unfortunate to have a credit card at such moments-you are a goner. Most of us have bought on impulse one time or another but there are people for whom impulse buying is a way of life. They have been taken by the jugular and they just do the biddings of the habit.

Impulse buying can cause debt. It has the potential to put a strain on your relationships especially when you share accounts or financial resources with your spouse. It could also be bad for your reputation because if everyone knows that you are an uncontrolled spender, advice might just go round that everyone should keep anything and everything that looks like credit and money away from you.

The interesting thing is that some see shopping as affordable entertainment or recreational shopping-something you do when you are bored or want to catch some fun-so it’s shopping time whenever they feel bored. For some others it’s a stress reliever or mood booster, so when they are down and out-spending comes handy.

 

However to live a happy life that excludes creditors and ensures peace of mind you definitely need to take control of your spending. There are a number of ways to do this. One of them is to make yourself responsible to someone. Let them hold you accountable for your decisions. Another way to do this is to create self-imposed barriers that can help curb the habit. Lots of practical suggestions have been made about controlling spending especially money you do not own but have access to like the credit card. One of the interesting ones I read about was the “Ice Glass Method” in “Predictably Irrational” [http://www.predictablyirrational.com/] by Dan Ariely.

THE ICE GLASS METHOD

The method suggests that you consider putting your credit card in a glass of water and putting it in a freezer to freeze it up if you have a problem controlling your spending on your credit card. The whole idea is that if you now have to use the card, you will have to wait for the credit card to melt. And the likelihood is that by the time the ice has thawed your burning desire to impulsively purchase would hopefully have also dissipated.  Apparently the practice doesn’t ruin the credit card but lets the owner wait restlessly and finally eases them from the impulse.

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