Have you gone to the grocery store for milk and eggs and come home with steak and eggs? Have you ever been tempted to buy something just because it was on sale? Impulse spending can wreck your finances and is a major reason why most people have difficulty saving money. Learning why you buy on impulse can be the key to saving more money.
Why are you saving money?
Understanding why you are saving money is just as important as learning about what types of things you spend your money on. Do you have long-term savings goals like a home and retirement? Are you able to sacrifice short-term desires like that vacation to Europe so that you can meet your long-term savings goals? Our spending behaviors are very often tied to our emotional needs. You don’t believe me? Just take a look at media advertising in magazines and on television. Advertisers are very skilled at trying to convince you that their product or service will fill a need and it usually has an emotional component. People act on emotion, why do you think car salesmen will do just about anything to get you to sign that sales agreement on your first visit? Emotions are highest and you are more likely to pay more since you have not had the time to comparison shop with other car dealers.
Recognize Triggers to Impulse Spending
By recognizing what triggers your impulsive purchases you can try to avoid those triggers. Everyone knows that it is not a good idea to do your grocery shopping when you are hungry because statistics show many shoppers make impulsive decisions on which foods to buy. Researchers have discovered a hormone called grehlin that increases hunger and believe it or not, researchers believe it makes food look more appealing. According to Wharton Marketing Professor David R. Bell, young single shoppers are 45% more likely to make unplanned purchases. Another telling statistic is that 88% of all impulse purchases are made because the item is on sale. Another reason most impulse purchases are made is because shoppers feel angry, stressed, guilty, or bored.
As I stated earlier, the key to saving money is to avoid the triggers that cause impulsive purchases. So how do you avoid triggers? Here are some suggestions:
- Eat a snack before you go shopping
- Make a grocery list and stick to it
- Leave children (aka guilt triggers) at home
- Build a monthly budget based on planned purchases
- Leave credit cards at home and use cash
- Avoid shopping when you are stressed
- Always comparison shop on major purchases
- Avoid buying because item is “on sale”
- Ask yourself what will you be willing to give up in order to make this purchase?
Your success in saving money is at odds with impulsive spending decisions so it is important to understand what your triggers are and to avoid them. The best way to identify what your triggers are is to look at your bank and credit card statements. Place a check next to each purchase that was not planned. The next step is to figure out what triggered your decision to buy that item. If you find that you are making impulsive clothing purchases at the same department store, avoid that store or limit your ability to overspend by using cash. By identifying your own spending triggers and avoiding them you can increase your ability to save money for your long-term goals.
What are your impulse shopping triggers? Are they preventing you from saving money for other things?