The following is a guest post from our friend Kate Phillips of Total Wealth.
“I have a confession to make: every day I work on the dark side… helping ruthless corporations apply behavioral science and make you purchase products you don’t really want in quantities you absolutely do not need for the money you probably don’t have to impress people you don’t really like.”
—Maciej Kraus, Ted Talk on Behavioral Economics.
According to a new article and video from The Atlantic, consumerism in America has reached an all-time high. In 2017, we spent $240 billion on consumer goods such as jewelry, watches, books, luggage and phones—twice as much as in 2002, even though the population only grew by 13 percent during that time.
What’s happening? Online shopping has driven impulse spending to new levels… and the savings rate to its lowest point in 6 years, according to TradingEconomics.com.
Shopping has become a favorite pastime, a way of life, even a socially-accepted addiction in the U.S. And you don’t have to be financially stressed or in debt to feel the effects. Perhaps you can relate to some part of my embarrassing personal story—or benefit from the tips that helped me reign back my spending.
When Spending Becomes a Problem
A number of years ago, I had a wake-up call one day when the mailman dropped off a package on my doorstep. It contained a product I had seen on a late-night “infomercial.” I remembered watching the commercial. But I had no memory of ordering the product.
A bit of an insomniac/night owl, I would often find myself wandering through television channels late at night, which were heavy on infomercials in those days. Since up-leveling my income, I could actually BUY some of the things I used to only “look” at. And buy I did.
Within a few months, I had acquired skin moisturizers and toners, a spinning brush for my face, jewelry cleaner (that smelled suspiciously like watered-down Windex), exercise videos, car wax, and anti-cellulite cream—which arrived monthly until I stopped it.
To be honest, I barely used any of the things I had ordered from those late night purchases. Mostly, they just sat on a shelf (or two) in my hall closet, offering a shaming reminder of my impulse buying whenever I reached for a towel on the shelf below.
And now, I was staring at a box of miracle cleaner for my furniture and floors… that I didn’t even remember ordering.
Like someone confronted with photographic proof of what they did on a drunken binge, I had to face the facts: Somewhere along the line from being a frugal 20-something waitress to a 30-something realtor with cash flow, I had become an impulse buyer.
There were no obvious signs of damage. No creditors were calling. My bills were current. I paid off the airmiles Visa I used to make the purchases in full every few months. I could technically “afford” the purchases, but I knew it was time for a change!
Simple Changes Make a BIG Difference
As I broke the late-night shopping habit, I found simple changes of habit that made spending less almost effortless.
First, I did more late night reading (or writing) and a lot less late-night TV. I slept better, and the books proved more enlightening and less pricey than the infomercials.
Secondly, when I did come across an advertisement that sounded useful or compelling, I chose to wait. I would write down the phone number or website of the product, promising myself that I would not actually order the product for two days.
The healthy distraction helped, and the cooling off period was pure magic. I wrote down some websites and phone numbers at first, but I stopped buying things. I even stopped wanting things so much! Then… I dropped the shopping addiction altogether. I realized I could resist buying and life would go on just as happily as before (if not more so). The experience also laid the foundation for my philosophy on Intentional Spending (but that’s another post for another time.)
Breaking the Spending Addiction: Are You Spending “Accidentally”?
When we use our emotional impulses to make financial choices, we aren’t looking through the proper lens. (See my post on Emotional Spending: Buying Love for more on this.)
Now, all financial decisions may have an emotional component. That’s not necessarily a bad thing. Sometimes emotion propels us to do the thing we “should” do – such as purchase something that will help us grow, heal, prosper, or live joyfully… something that will serve us. Emotion might inspire us to invest in ourselves, buy a worthwhile asset, or treat ourselves to a truly memorable experience.
Other times, we buy things on impulse that we don’t love, don’t value, or don’t even use. We’re left feeling weak, foolish, or perhaps taken advantage of.
Worse yet, we trade our precious time and life energy to make the money we spend on things we don’t even use or value! Yuck.
The Rehabilitation of a Former Impulse Spender
I’ve never racked up a hundred thousand in debt or declared bankruptcy, and I’m relatively frugal these days. But I remember what it’s like to look at my bank balance with regret and wonder, “Where did it all go?” And I’ve learned some lessons that have helped me (as well as my clients) tremendously.
1. Interrupt your shopping routine.
A simple change of habits can help your inner impulse buyer remain in control of your actions and your money. See how you can “head spending off at the pass” by changing the behaviors that lead to mindless or impulsive purchases. For instance:
- Make shopping lists. Never simply wander through stores, malls, or com without a purpose.
- Stick to a shopping budget. Decide ahead of time your spending limit.
- Find you’re going over your limit? Leave the cards at home and just take cash.
- Don’t browse catalogs or online stores unless you are buying a specific needed item.
- If you see an “impulse item” that wasn’t on your list, commit to a cooling off period. (I rarely go back to buy something after deciding to wait.)
2. Purchase according to your values.
Consider what is important to you when making a purchase. I tend to look for quality, value, or something that I truly enjoy. (Marie Kondo’s popularity affirms the power of only keeping what brings you joy.) You may use a different measuring stick, such as beauty, comfort, or inspiration. Consider what made good purchases or investments “good” for you, and why other purchases left you with regret.
Decide your values, priorities, budget and intentions ahead of time. This is not about deprivation – it’s about choice!
Make a list of the things you WANT to spend money on in the future, the things that are important to you. These could be purchases, investments, experiences, or something else. Then when you are tempted to purchase on impulse, reference your list. It will remind you of your financial priorities. Often, you’ll realize that the new thing is not as important as the other things you’re already saving for. (This strategy helped me save for a trip to Hawaii AND a home down payment in 2018.)
Your inner child may not thank you for reminding her that car repairs or dental work comes before an impulse outfit or new tech gadget, but you’ll have more peace of mind – and no toothache!
3. Make research your friend.
Buyer’s remorse can result if you’re quick to buy before doing some research. Whether you’re buying a house, a car, or a cell phone, be smart. Ask for references, look up online reviews, or talk to those who have purchased the same thing. Consider what your trusted friends or advisors with experience in the area have to say.
Many times, I have changed my mind about a purchase when the reviews gave me further information. Getting the facts allows you to be an informed consumer.
4. Remember that “scarcity” tactics are often artificial.
“Today only!” “Only 3 left!” “This offer won’t last!”
Scarcity is a proven sales tactic used to help a buyer make a decision or desire the “scarce” thing more. Auctions work on this same principle. Rather than thinking, “I have to buy this now!” consider that instead, “Someone wants me to buy now.”
“Limited time offers” often aren’t, and if the deal really does go away, life goes on and you will likely be no worse for it. Consider that you have two choices to make: first, to buy or not to buy. Secondly, you have the choice of when to buy. It’s okay to let a buying opportunity slip through your grasp… you’ll have more opportunities later.
5. Use your preferred method to get clarity with decisions.
Do you journal? Pray? Make a pro and con list? Get advice and then sleep on it? If money is an area of shame for you, you might tend to bypass the tried-and-true decision-making practices you use in other areas of your life.
Don’t be afraid if a decision contains emotion, but make sure you aren’t buying for the wrong reasons. It’s important to not just consider what to buy or your budget, but why you’re buying as well. Is the purchase you’re considering filling a genuine need, or just tickling an emotional longing to trigger your shopping impulses?
In a workshop I attended, Rachel Cole talked about what it means to be a “well-fed woman” who understands her deeper hungers. Without self-awareness, we can find ourselves using a pint of ice cream or a shopping binge to feed emotional needs.
Addictions tend to mask deeper needs by giving us a distraction that is temporarily pleasurable. Shopping addictions have been proven to trigger dopamine and affect the brain similarly to highly addictive drugs! Fortunately, I found kicking the shopping habit downright pleasurable when I replaced it with activities that were more satisfying.
6. Be savvy – do the math and know your rights.
The worst “purchase” decision I ever made was not technically a purchase, it was a lease. This happened about 20 years ago. Somehow, I called to buy a Dell computer, but after a long talk with the salesperson, I found myself leasing not one, but two computers. (A desktop and a laptop.) There was “no interest” and hey, it’s “tax-deductible,” which sounded good, in theory. I could easily manage the payments, and they would stretch the purchase out over time.
However, I didn’t do the math. There was no “interest,” technically, but that was really a matter of semantics, as I discovered there were a LOT of “finance charges!” The payments equaled what I would have paid for a VERY high-interest loan.
I called back the next day and attempted to cancel. However, I was informed that because a lease is not technically a purchase, I had no 3-day right of rescission.
In the end, I paid double what the computers were worth in only three years. At that point, I was given the choice of buying the computers for above market value—as if I hadn’t already paid for them—or taking on two MORE years of payments! (I made two more payments then quit, citing their deception, my failed attempt to cancel, and the fact I had already overpaid as my reasons. I told the leasing rep that if the computers were of value to them, they were welcome to come and get them. No one ever came.)
ALWAYS do the math and don’t let anyone rush your decision. And if you don’t get what you thought you were getting, don’t forget you (typically) have 3 days right of rescission on most purchases! Don’t be afraid to ask for your money back, return something, challenge a financing company, or ask for a better deal or a price match. And stay far away from those leases with “low monthly payments” and “no interest”!
7. Make a decision and move on.
Don’t be so cautious or analytical with your purchases that it takes up too much valuable time or strips the enjoyment out of purchasing something you want. (I.e., it’s not worth hours of research to save $30 on a flight, nor is it worth aggravating your significant other with analysis paralysis. Sometimes the best decision is to simply make one!)
If you make a purchase then get buyer’s remorse after it’s a done deal, don’t beat yourself up. DO become a more savvy, patient, and intentional buyer in the future.
Why Is Spending So Addictive?
Since I halted my informercial addiction nearly 20 years ago, a lot has changed. The video below shows how the shift to online shopping has fueled more impulse spending than ever:
The BEST Solution to Spend Less and Save More…
Unfortunately, the biggest impact of our national shopping addiction is on the national savings rate. The more we spend… the LESS we save!
The solution? Instead of saving what’s left after spending… SPEND what’s left after saving! Set up automated savings that puts money from your checking account (or even your paycheck) straight into a saving vehicle.
Where should the money go? For the answer, read this Partners for Prosperity blog post: “Where Should You Keep Your Cash Savings?”