Author Katrina Shanks, CEO Financial Advice NZ Article originally published on Stuff.co.nz.
Kiwis love a good sale. It seems it doesn’t matter what it is, we’re attracted to them like bees to a honey pot, even if we previously had no intention of buying a particular product. We simply love a bargain.
Yes, it seems everyone likes a bargain and these are the days we hunt down the best prices, but how much of it is impulse spending that throws our budgets for the rest of the year into disarray?
Last year, according to Worldline figures, Kiwis spent $248 million over the four days of Black Friday and a massive $5.2 billion in the six weeks leading to Christmas, while on Boxing Day alone, we spent a cool $100m. A recent survey shows Kiwis each spend around $1200 on Boxing Day. These are just a handful of days when there are sales – then we have Easter, Queens Birthday, Labour Day and so the list goes on.
As inflation increases and our dollar does not stretch as far as it used to, impulse buying can be a much bigger problem for our day-to-day cashflow and budgets. If impulse spending is a problem for you and your budget then it’s probably time you took a close look how you can get your finances back in order.
The first thing you should do is understand why you do it and when you do it.
We all have different reasons for impulse spending, but studies show one thing – spending of any type can give us a huge hit of dopamine, the chemical in the body that sends messages between nerve cells and plays a big part in how we feel pleasure.
It’s after we’ve had a bad week at work, or we’re stressed, or something’s happened in your personal life, or something hasn’t gone our way, or maybe it’s just wanting to keep up with the Jones’s that we’re at our most vulnerable for that bit of impulse spending and that hit of dopamine.
Impulse spending makes us feel a bit more protected and comfortable. It’s something we do for ourselves to feel better or maybe just not as worse.
When we’re down or stressed we subconsciously go searching for that dopamine hit.
We need to be aware impulse spending is not just that special trip you make somewhere but when you add some unplanned or unintended spending.
Once you’ve got an idea of why you do it and when, then you need to look at ways to lessen the chance or remove the temptation.
Here are some you may be able to apply:
– Limit your time on social media. A recent survey in Australia suggested impulse buyers were more likely to use social media and wouldn’t have bought as much as they did if they weren’t on it. Obviously, social media exposes you to influencers and possibly peer pressure to stay up with things like fashion. The longer time you’re on it, the more exposed you are to nice-to-haves.
– It’s also a good idea to unsubscribe from unnecessary marketing emails.
– Make room in your budget for indulgent spending. Having a small fund set aside could help stop that binge spending that could destroy your budget while not restricting you totally. Starting a budget is a lifestyle change and this could help you ease into it.
– Put time between you and your spending. This particularly applies to online shopping, which has exploded since the Covid-19 lockdowns. If you want something, put it in your online cart and leave it there till tomorrow. This takes the emotion out of your spending, and if you do still want it tomorrow then maybe it is a good spend. The chances are you will change your mind.
– Introduce different spending strategies, such as using cash for a set time (maybe a couple of weeks) instead of your eftpos or credit card for shopping. This tends to help you value your money more. You could even divide it up into envelopes for specific things. Or put a set amount on to your eftpos card and when it’s gone, it’s gone. I have heard of people having a no-spend week every month, where they buy just the essentials.
– Think about your purchases in different ways. For example, working out how much time you have to work to buy that pair of shoes may give you a reality check and dissuade you from buying them. Or, will the outfit you’re looking at for that wedding be suitable for not just that occasion, but also for work?
The key question to ask is, is it really a good purchase?
This month I am going to apply a different strategy every week to see what works best for me. I think I will start with the no-spend week.
As my financial adviser would say –different things work for different people, and if you can find a way that works for you, then maybe that will be the key to sticking with your budget. And if you have room in your budget to reward yourself, then you are much less likely to do impulsive spending.