Impulse purchases are the dynamite that blows up any budget. I made one this week. I was cruising through town with a friend that wanted to innocently check out a few stores. $100 later I am recovering from a retail coma. $78 out of the $100 was a Halloween costume from a store that does no returns or exchanges. Perfect.
Step 1: Accept
The first lesson of impulse purchases is accepting that they are going to happen. No matter how disciplined we are about our budget, we are humans and we are going to make mistakes. Sometimes it is a $4 latte, sometimes a $78 Halloween outfit, sometimes it’s a car. The important thing is to not go into debt for an impulse purchase. As long as debt isn’t involved, we have the chance to correct the mistake with little pain.
Step 2: Correct
Ok, so I made an impulse purchase, what do I do now? The first thing I do is to go to my budget and see what I can move around to make the purchase fit within my spending plan. I decided to cut a little from my home furnishings budget and realized I overbudgeted on utilities for the month, so I was able to move that money over. Because I tend to overcompensate, I also sold some concert tickets that I was iffy about and I talked to my job about picking up a few hours in the store for the holiday season.
If you truly regret the purchase, you can always return it. If you can’t you can sell it on eBay!
Step 3: Reflect
The final lesson of impulse purchases is to reflect on what happened that caused the purchase to take place. Personal finance is affected by our behavior and environment. After reflecting, I realized that I was shopping with a friend for entertainment. If I am shopping for entertainment, the more I buy, the more fun I have. The next time a friend suggests shopping, I will suggest something else, like walking to a park or grabbing a coffee. It’s my responsibility to create an environment where I won’t overspend.
What activities are you doing? Scrolling through Amazon? Checking emails from your favorite online stores? Looking at cars or homes on the web? Those are all activities that create an environment for impulse purchasing. Even watching TV or going on social media exposes us to advertisements that trigger the “buy” switch in our brain. For me, I had to unsubscribe from all marketing emails, restrict Amazon to e-book purchases, and kick Zillow to the curb.
Who we hang around with is another important piece. If all my friends do X activity, I am way more likely to do X activity. I am struggling with this right now. I moved to a new town and everyone wants to get to know me over a meal at a restaurant. I do not want to isolate, so I had to adjust my budget to be realistic about how much I will spend eating out. I try to eat beforehand, stick to water, and avoid dessert and appetizers. Simply pushing for a coffee date instead saves me $20.
So there it is- Impulse Purchases 101. I suggest thinking about your last impulse purchase and going through the steps. Is there anything you learned that you hadn’t thought about before? Have you noticed any patterns of behavior that lead you to overspend? As always, you can always email me at firstname.lastname@example.org or tweet @maddymoneycash. I will always respond. Also, signup for my weekly newsletter, where once a week I will send you helpful tips, articles, and insights to help you live your best financial life. I also created a Facebook page, for the non-Twitter readers out there.