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10 Simple Ways To Curb Impulsive Buying Habits

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Happy shopperImpulsive buying habits can be difficult problem to overcome. After all, habits can be hard to break. It is something that you are used to doing. Often times, you automatically do it without thinking about every step. That is how much you got used to the behavior. That is how it becomes a habit.

The thing is, being an impulsive buyer is one of the bad spending habits that can ruin your finances. If you cannot control your spending, it might lead you to accumulate so much debt. That debt can seriously compromise your financial future.

According to the survey done by Gallup.com, the daily spending of Americans in August went down to $91 – which used to be $100 in July. it is still relatively high compared to the spending last year – which was $89.

While it is true that we cannot avoid not spending, it is important for you to keep it curbed. Too much spending will not only compromise your financial future, it can also affect your family.

10 ways you can stop your impulsive spending habits

Since impulsive buying habits can be difficult to change, you need to be consistent about your activities. You cannot change now and then go back to your habits the next week. It has to be a continuous and consistent effort on your part.

Fortunately, the different ways that you can curb your spending are simple. Here are 10 of the different ways you can try to change your spending habits.

  1. Always shop with a list. Start by shopping with a list. Before you leave for your shopping errand, make sure that you sit down and write a list of the things that you need to spend on. Make sure you strictly follow this list. Anything that is not on it should not be bought.
  2. Use cash as your payment tool. Another effective way to curb impulsive spending habits is to use cash as payment. According to the study from CreditCards.com, only 9% of their respondents use cash. 43% use debit cards while 35% use credit cards. While using a debit card is the same as using cash, some people feel the pain of spending when they use cash. It is more difficult to spend if you know you will be paying with cash. So if you are trying to limit your spending, then this is the payment tool that you need to use.
  3. Wait before you buy. Some people say that when the product is in front of you, the compulsion to spend is high. But if you turn away, it urge is lessened. If you find something that you want to buy but it is not in the list, wait before you make the purchase. Ideally, you should go home and wait it out. In case this is something that you are sure cannot wait until the next shopping date, you should at least go to another part of the store to take care of other errands. If the compulsion to buy is still strong, then go back and buy it. If the urge is lessened then wait until you get home to confirm if you really need that purchase. Make sure you include it in your next list.
  4. Convert the amount into your time at work. A great technique to spend less is to convert the amount of the purchase on the hours that you need to work in order to pay for it. For instance, if you earn $15 an hour, a $150 purchase would mean working 10 hours to get that product or service. If you think the expense is worth 10 hours, then go ahead and buy it.
  5. Do not shop when on an emotional high. Sometimes, when we are feeling exaggerated emotions, we make illogical decisions. This is true whether it is positive or negative. So do not use retail therapy if you are feeling low and do not use it to celebrate. You will overspend. In case you want to use it to celebrate or it really relaxes you, make sure you set a strict limit and that you will adhere to it. If you know that you cannot commit to the limit, then do not shop when you are at an emotional high.
  6. Have planned shopping sprees. In case shopping makes you calm, you can always schedule it – and place a budget on it. Train yourself to not go beyond it. If you do it repeatedly, the self-control and discipline will help you overcome your impulsive buying habits.
  7. Practice the rule: one in and one out. There is a great rule that will keep you from accumulating junk. If you have to buy something new, you have to be prepared to get rid of something. If you cannot think of anything to get rid of, do not buy anything new.
  8. Shop with someone / or alone. This actually depends on your personality. If you can control your spending if you are alone, then do not bring your kids with you. If you cannot control yourself when you shop alone, then take someone who can tell you to stop – and this should be someone you respect enough to listen to.
  9. Use a budget. This is the best way to help you control your spending so you stay out of debt. A budget will give you an idea about the amount of money that you can afford to spend. If you have a complete understanding of your financial situation, that should be enough to stop you from making unnecessary purchases.
  10. Ask for help. Finally, if you think that you cannot change your impulsive buying habits, then ask for help. It does not have to be a professional if you do not want to spend. It can be a loved one – someone you trust and respect. Having someone to support you in changing your bad habits is a great way to successfully overcome your spending addiction.

How to help a loved one with impulsive shopping tendencies

In case the problem is not with you but with someone you love, then you need to know what to do in order to support them. For instance, if you are engaged to someone with debt troubles because of their spending habits, you want to address that before you tie the knot. This might be a cause of conflict in the future.

Here are some tips that you can follow.

  • Understand the problem. Impulsive buying habits can also be a serious problem that is similar to battling with addiction. If you really want to help, you need to understand what causes it. Do not be quick to judge. There are reasons why a person ended up with certain habits.
  • Be physically present. It is also important to be physically present to support them. If they have to go out and shop, make sure you spend time with them to guide them in making the right choices about their expenses. If they want to talk, be there to listen.
  • Talk about your finances often. It also helps to talk about your finances often – at least, if you are married to the person with a spending problem. According to an article published in FocusOnTheFamily.com, low self-esteem and lack of financial status lead to impulsive spending. You need to talk about the state of your finances so you both know your spending limits and if there are any financial goals that you need to prioritize over an expense.
  • Be understanding, but firm. Trust that there will be lapses. When it happens, you have to be patient and understanding. You want your loved one to continue talking to you about their financial struggles. If you are not understanding, they might withdraw from your support. While you have to be understanding, you should also be firm. Let them know if they are wrong and be present to help them avoid the same mistake.

The road to battle any addiction, including impulsive buying habits can be tough. But with a bit of help and patience, you should be able to overcome this bad spending habit.

Common questions about impulsive buying

Question: What is impulsive buying?

Answer: This is buying more than what you can afford. Most of the time, the purchase is not really something important. There are people who buy just because it is trending or someone they know bought the same thing.

Question: Why is impulsive buying dangerous?

Answer: This is dangerous because it usually ends up in debt. If you cannot control your spending, it is most likely that you will go beyond your budget – which often times lead you to use too much credit.

Question: Why does impulsive buying happen?

Answer: There are many reasons why it happens. Sometimes, people use it as retail therapy. The happiness they feel after a purchase makes them addicted to it. There are times when it is something that fills a person’s insecurities. Each case is unique so make sure you understand the cause so you can treat it properly.

Question: How do I stop impulsive buying?

Answer: This is actually like battling with addiction. You can only stop impulsive buying if you understand your financial situation. There are also times when it is effective to think about financial goals to help you battle this habit.

Question: How does my impulsive buying habits affect my life?

Answer: The negative impact of impulsive buying habits stem from the accumulation of debt. Once you have too much credit balance, you cause tension within the family. Too much debt can ruin not just your relationships, but also your health.

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5 Ways You Can Overcome Spending Temptations

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shopaholicSpending temptations are everywhere. You can see it in the billboards displayed along the streets. You can watch it in commercials and various programs. This is the reality that we have to live in day in and day out. It is very hard to curb unnecessary spending because everywhere you turn, you see something that will make you want to spend.

Companies spend millions of dollars on marketing and advertising campaigns. You can bet that these campaigns will be effective – it will make you want to spend. This is how the bad spending habits start. These corporations are using sneaky methods to get us to spend.

According to the article published on Bloomberg.com, consumer spending in the country is still high – despite the shocking Brexit and economic growth slowdown. While the article mentioned that the employment rate, salary increase, and low credit rates are contributing to the spending power of American consumers. Of course, this does not mean we should recklessly spend left and right. It is important that we limit our spending and we continue to regulate how we spend our money.

5 ways you can curb the temptation to spend

Curbing our spending temptations is easier said than done. For some of us, we got so used to spending that it is like our second nature. After all, we live in a consumerist society. In order to survive, we really need to spend. It is not possible for everyone to live off the earth because there is just no room for that anymore.

While spending is a necessity for most of us, that does not mean you cannot do anything to control our spending urges. Believe it or not, there are 5 ways that you can triumphantly get past the spending temptations that are thrown your way.

Shop with a list.

Start by always shopping with a list. Before you leave your home, make a list of everything that you need to buy for your house. If it is not yet needed or you still have enough supplies until the next shopping date, do not include that item on your list. Bring this list with you and stick to it! Do not buy anything that is not on the list. This is why you need to be thorough when you are creating your list – to remove any doubts that you might miss buying something.

Wait before you buy.

In case there is something that you really think you missed placing on the list, learn how to wait. This is the next tip that will help you curb the lure of spending temptations. If there is something that you want to buy, put it down first and then walk away. Try to complete the other items on your list and if you still feel strongly that you need that product, then go back and get it. Sometimes, we feel like we really need to buy something simply because it is on sale or we are attracted to the way the product is presented to packaged. But once we no longer have that item in our sight, we sometimes do not feel like we need to buy it – at least, not as strongly as when we had it in our hands. So wait before you buy. It is a great way to guarantee that we really want to buy something.

Use cash.

According to the data from ConsumerCredit.com, only 14% of the respondents of their survey said that they use cash. This should be done more often. It is believed that when you pay cash in purchases, you will feel more hesitant to part with it – thus making you spend less. When you use a debit or credit card, you do not really feel anything with the purchase. In fact, you feel more empowered – which is dangerous if you want to spend less.

Do not shop with spenders.

When you are trying to curb your spending habits, it is important for you to stay away from spenders. Sometimes, our peers influence our spending behavior. If you want to spend less, you will benefit more by going with savers. Spend time with your spender friends and colleagues if you know that it will not be a shopping event. If you will eat or hang out and have coffee, that is okay. But if they have plans to go shopping, skip the gathering.

Ask the right questions.

Finally, you should probably ask the right questions when you are trying to overcome spending temptations. This will help you ponder on the importance of a particular expense. For instance, ask yourself if you will buy the item even if it is at full price. If not, then you are probably just interested in buying it because it is on sale. Another question you can ask is how would you feel about the possibility that you will throw this product away in a couple of years? Will you still buy it? These questions will help you weigh the pros and cons of buying a product.

Different ways overspending can destroy your finances

The truth is, we need to spend and our economy thrives on consumer spending. However, you have to make sure that your every expense is done for the right reasons. If you cannot say no to spending temptations, you will be in danger of overspending. And we all know where that will lead.

Here are the various ways that overspending can ruin your finances.

Puts you in debt. Where do you think you will get the money when you spend beyond your budget? Obviously, you will borrow it. If you want to keep your household debt from becoming a burden, you need to control your spending. There is no other way for you to keep debt from ruining your finances.

Forces you to sacrifice financial goals. Another reason why you need to stay away from spending temptations is to preserve your financial goals. Instead of saving or investing the money in leading you one step closer to your goal, spending it will take you a step back.

Endangers your relationships. According to the data published on CNBC.com, money is the leading cause of relationship stress. If your spending behavior lands you in debt, you can be assured that this will not end well for your relationship – especially when only one partner acted on the debt. Do not let debt ruin your marriage. Learn how to spend your money wisely.

Here is a video that provides tips on how you can change your spending habits.

 

Common questions about spending

Question: What is a bad spending habit?

Answer: A bad spending habit is when your expenses are threatening your financial security and stability. This includes spending beyond your financial capabilities, buying something to keep up with your peers, etc. Any spending that is unnecessary can be considered a bad spending choice.

Question: What is a spending plan?

Answer: This is a financial plan that will help you organize your spending. It defines the important expenses that you have to focus on – especially when you have limited financial resources.

Question: What is spending power?

Answer: This is your financial capabilities to purchase something. It is not only measured by your discretionary income. It is also measured by the tools that you can use to make purchases.

Question: Why is spending money good for the economy?

Answer: The US economy is 70% reliant on consumer spending. If people spend their money to buy good and services, companies will profit. The respective employees and workers of that company will also gain from stable jobs. In return, the government will benefit from the taxes and the nation can use these taxes to improve the overall lifestyle of the residents.

Question: How to control spending?

Answer: If you want to control your spending, you need to be aware of your overall financial situation. Know your financial goals, have a budget plan, and understand your financial capabilities. A plan is the best way to control your spending. If it is not part of the plan, then it should not be spent on.

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Why Is Spending Less Than What You Earn So Difficult?

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man holding dollarsWe all know that spending less than what you earn is the best way to give your finances a boost. It is not enough that you earn more money. In fact, it doesn’t matter how much money you make. Some people earn a six-figure income and still have a lot of debt. The amount indicated in your paycheck does not define how financially successful you are.

If you analyze the American spending habits, you will realize that spending is actually something that is deeply ingrained in us. We’ve had our ups and downs but we just cannot stop spending. While you can argue that we need to spend in order to be comfortable, you have to admit that the American way of spending is quite different. Think about it, if something is broken, we usually throw it and buy something new. In some cultures, they fix whatever is broken. They are not quick to throw it.

The bottom line is, as a nation, we spend a lot. Even if the economy is showing signs of improvement, a lot of American households cannot feel it because their spending habits are keeping them from improving their financial lives.

You know that spending less than what you earn is important but we continue to let ourselves be influenced by what we see around us. Here’s an interesting article from WSJ.com. According to the research from the Federal Reserve Bank of Philadelphia, there is a rise in the bankruptcies filed by the neighbors of lottery winners. Surprising, right? The article said that economists have a theory about this. Knowing how Americans spend, they think that these neighbors tried to keep up with these big lottery winners in terms of asset accumulation. Keeping up with the Joneses is still true today.

What makes spending below your income hard to do

Despite everything that we went through during the Great Recession, people are still showing signs that they cannot control their own spending. According to an article published on MoneyCrashers.com, our spending is actually hardwired into our brains. Experts reveal that our brain chemistry influences our financial habits. Apparently, this is how spenders and savers are differentiated. In the study, Journal of Consumer Research, Rik, Cyder and Loewenstein reported the brain scans and their observations of consumer behavior. When the participants make buying decisions, it showed specific brain activities that could explain why we react to money the way we do. The participants were asked to make buying decisions and their brain was observed. It turned out that we have an area in our brain called the insula and it is what will help us stop spending. Whenever you go through something unpleasant, this part of our brain is stimulated. If we experience something unpleasant while spending and it keeps on happening, the insula can help us stop spending. If we experience pleasure as we spend – which is what most of us feel, that will make us spend more.

But beyond this brain activity, there are other reasons why spending less than what you earn is difficult to do. Here are some facts of life that we have to face.

We live in a consumerist society.

We cannot help but spend because we have to. Money is needed to make our lifestyle convenient, and comfortable. If you want food, you have to pay for it. If you want to own a house, you have to buy one. If you want to drive a car, you have to spend money to get it. The same is true for clothing, water, electricity and everything else that we need. Our economy is actually dependent on our spending. The more we spend, that is a sign that our country is financially improving. You can expect that the government will encourage us and even pass laws that will make us spend more.

Millions are spent to encourage consumers to spend.

This is in relation to the first. Since our economy is driven by consumer spending, you can assume that companies will be spending millions on campaigns and advertisements that will make you want to spend. Everywhere you look, there is a billboard, an advertisement, a commercial, or an endorser telling you to get your money and spend it on something.

It is hard not to compare.

Another thing that makes spending less than what you earn so difficult is that we always compare ourselves with others. According to an article published on PsychologyToday.com, we are “comparison junkies.” Even while we were young, we are compared or we compare ourselves to those around us. When someone has something we don’t, we are compelled to get the same thing.

We think our possessions define our success.

Because of the other three, we grow up with the knowledge that our possessions define who we are and what we have accomplished. You can say that you believe otherwise and you may agree that this thinking is materialistic and thus wrong. But at the end of the day, when you see your neighbor pull up with a new car or a huge TV, you will automatically picture yourself doing the same.

All of these prove that spending less than what you earn involves something deeper than just the act of not spending. You have to change your mindset in order for your to improve your habits. This is very important. If you really want to bring your finances to the next level, you need to control how much you will spend so you can keep your finances on its potential to grow.

Is it enough to spend below your means?

But then again, when it comes to financial success, is it really enough for you to work on spending less than what you earn?

The answer is no.

It is the first step. That is all there is to it. What will really bring your finances up a notch is what you will do with the money that you will not spend.

The answer to that is quite simple. You have to invest. This is how you can grow your personal wealth. It is not enough that you save what you did not spend. You need to put it somewhere it can grow fast. You leave it there so it can earn you some profit. There are a couple of ways that you can accomplish this.

Invest in stocks, bonds, mutual funds, or equity.

This is the best way to make your money work for you. There are many investment options out there and you need to study them so you will know which one suits your financial goals best. If your financial situation can afford to take high risks, you should invest in stocks. If you want a low-risk investment, bonds are good for you. Just remember that the higher the risk, the greater profit you will earn.

Invest in your future.

Another thing that you should do is to invest in your future self. Of course, this refers to your retirement. Most of the time, retirement funds are placed in investments that will make them grow. But unlike the other type of investments, you can only withdraw from this fund when you retire. At least, if you do not want to pay a penalty for that withdrawal. By saving for your future, you are setting yourself up to have a comfortable life. If that will not make spending less than what you earn motivating, what will?

Invest in a knowledge or skill.

Finally, you want to invest in improving your knowledge or skill. At first, this will seem like an expense. But if you improve yourself, you will increase your value and your ability to increase your income. That will help you earn more so spending less is easier to accomplish. Just make sure that when you get a salary increase, you will not increase your lifestyle with it. Every upgrade in your life will make spending less harder to do.

To motivate your further here is a video from National Debt Relief that discusses how spending less than what you earn can help you build your wealth.

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Impulse Buying: What To Do When It Cannot Be Avoided

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woman holding a lot of shopping bagsWe have all been told to put a lid on our impulse buying habits. This is a sound advice. Unplanned purchases can ruin our budget. If you cannot follow your budget plan, that has the potential to ruin your chances of reaching your financial goals. In case you have saving goals or financial plans for the future, all of these can be ruined by one impulsive purchase. If you want to be wise about your money, you must learn how to curb bad spending habits – one of which is an unplanned expense.

If you think that this impulsive buying habit is a personal problem, think again. You are actually not alone in your struggle. According to a recent study done by CreditCards.com, 8 out of 10 respondents admitted to making an impulse purchase in the past. In fact, 7 out of 10 said that they did an unplanned purchase in the past 3 months. The location by which the impulse buying was done seemed to be more common in the store. This study mentioned that this particular buying habit is usually done to satisfy a selfish desire. Most of the time, the purchase is for the buyer – the younger the buyer, the more they prone they are to buying on an impulse. As they age, these incidents tend to decrease. It is also important to note that the more people earn, the more likely they are to be an impulsive spender of big-ticket items.

Ask yourself these questions before you proceed with an unplanned purchase

The thing is, it is impossible to completely go without an impulse buy in your lifetime. Even if you spent hours creating your budget or poring over your spending plan, you will end up forgetting something or making a spur of the moment buying decision. There are so many factors than can influence this spending habit. For instance, did you know that retailers spend a lot of money to make sure that you will make impulse buying decisions? According to an article published on WashingtonPost.com, indulgent businesses like chocolates profit from the impulse spending decisions of consumers. This is why you will see a lot of unnecessary but indulgent products in the checkout counter. The article revealed that it is Hershey’s plan to win back consumers and make them commit unplanned purchases. They have started conducting tests in 2015 and you can be sure that they will do everything to make you do an impulse purchase.

Apart from that, there are also situations wherein making an impulsive purchase is actually necessary. For instance, your child accidentally dropped your phone and you have to buy a replacement. This is an impulse buying decision that you cannot postpone.

When you are faced with an unplanned yet necessary purchase, there are a couple of question that you need to ask yourself first.

What are the reasons why you need to buy it now?

Start by asking yourself the reasons why now is the perfect time to make the purchase. Why can you not wait until you have included this purchase in your budget or spending plan? Is it because you chanced upon a huge discount in the store? Or maybe the product is hard to find? These are reasons that can justify your impulse buying decision.

What expense will be sacrificed to make this purchase?

The next question you need to ask yourself is the expense that will have to be sacrificed. If you are following a strict budget, you have to get this money from the funds of another category. In case the impulse expense is something that cannot wait until the next month’s budget, you need to sacrifice something from your budget now. For instance, you may have to let go of 5 morning lattes to meet this expense. Identify the item in your plan that will be sacrificed immediately to avoid going beyond your budget.

Will the purchase be worth ruining your budget?

Finally, you have to ask yourself, is this expense worth ruining your budget? Sometimes, you have set your mind to spend only a particular amount. You have to spend some time to revise your budget or compromise it. Are you willing to put it on the line and be in danger of overspending? Sometimes, these impulse buying incidents compromise our budget plan for the month. If you want to avoid that, then you should rethink this expense. However, if the purchase is worth it, then go ahead with it and stop stressing yourself.

How should you react after an unexpected purchase

At the end of the day, you need to stop obsessing about these small diversions because things do happen that result in unplanned expenses. Of course, we want to avoid these as much as possible. You want to keep this purchase from giving you additional worries. But if you know that you need this expense, it’s okay. Forgive yourself for giving into your impulse buying urges.

HealthGuide.org published an article that revealed how we are genetically programmed to collect and gather. In the early days, this helps our kind attract partners because the better you are at gathering and collecting, the more you can survive – and those in your family. This genetic makeup, in a way, justifies our inclination to make impulse purchases. The article discussed further how our social impulses make us want to compete with those around us. So in case you really need to make an unplanned expense, forgive yourself and let it go. While you are encouraged to have this mindset, that does not mean you will not do anything about your finances. There are a couple of tasks that you need to accomplish to make sure that this financial decision will not affect your budget too much.

Start by consulting your budget – immediately. As soon as you get home and pack your purchases, you have to look at your budget to see how it will be affected by the expense that you just made. By looking at your budget, you will find two options to help you minimize any financial damages.

Choose the expense that you have to sacrifice

First is choosing the expense that you can sacrifice. While there are expenses that you should never sacrifice in your household budget, there are a lot that you can forego. For instance, you can skip a couple of date nights and just spend some quality time at home. You can also choose to brown bag your lunch for a week to compensate for the impulse buying decision that you made.

Find a way to replace the money that was lost

The other option that you have is finding a way to replace the money that you lost. You can choose to work longer hours or you can opt to sell some of your stuff. There are various ways for you to be able to increase your finances so your budget will not have to go through a major overhaul. This is especially true if your impulse expense is quite expensive.

Once you have figured out what you will do to help stabilize your budget, there is one more thing that you need to do.

Relax and enjoy your purchase.

If you follow the normal rules of financial management like budgeting, you have to trust your judgement. You should trust that you had a strong grasp of your finance capabilities before you made your spending choices. As long as you do not make a habit out of justifying your unplanned expenses and if this is a rare event, it should be alright. You can let this incident pass.

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American Spending Habits? Apparently Still Impulsive

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sad shopperAnalyzing American spending habits is important because you have to understand the factors that put us in our current situation. Regardless if you are in a bad or good financial situation, you need to identify the behavior that got you there. That is how you can chose which habits to replicate and those that you need to stop doing so you can successfully grow your personal wealth.

The thing about your spending behavior is that it is always affected by what you are going through. You may have habits that you have always practiced but one event in your life can change all that – at least, if you learned your lesson well enough.

According to WashingtonPost.com, the Great Recession caused a lot of American consumers to change their spending habits. While we continued to spend for basic necessities like food, clothing and gas, these expenses were done at a minimum. That was because a lot of us had to deal with a lower income and huge amounts of debt. There was also a considerable change in certain purchases like cars and other durable items. It seemed that consumers cut back heavily on expenses that they do not need to cope with the financial crisis.

You would think that these habits would stick for at least one generation. After all, our debt level is still very high – despite the improving economy and job market. We still have a lot of financial recovery to go through.

However, one study revealed that not much has changed with the spending habits of Americans today and the pre-recession days.

Survey says: Americans still practice impulse buying

CreditCard.com recently published an article that revealed the results of a recent study that they did. This study was meant to gauge the buying behavior of consumers as of late. You would think that we are wiser now. But that is not the case.

Apparently, we are still a nation of very impulsive buyers.

In truth, our consumerist society would probably rejoice because our economy is known to be 70% dependent on consumer spending. However, if you look at our own personal financial growth, you might want to step back and analyze if this is the right habit that you should continue to develop.

The statistics revealed by the Credit Card survey is actually quite scary. The results mentioned that 3 out of 4 Americans are still impulse buyers. What makes this scarier is the fact that our mental state prompts us to give in to our impulsiveness. Our impulsive buying habits reveal an alarming lack of control and this is scary because it is what brought most of us down during the last financial crisis.

Here are important details revealed by this survey.

  • 75% of respondents revealed to have made not just an impulsive purchase, but also an expensive one. 16% revealed that they spent at least $500 while 10% spent at least $1,000 on an impulse buying spree.
  • 49% of respondents who gave in to impulse purchases said they were excited when they were making the purchase. Other reasons for the impulsive spending habits is boredom (30%), sadness (22%), anger (9%), and intoxication (9%).
  • Men bought bigger items ($1,000 purchases) on an impulse and did so while they are intoxicated. Women tend to give in to impulse buying habits when they are feeling sad, although their spending is a lot less compared to men ($25 purchases).
  • Half of the respondents said that they did not regret making the impulse purchase.
  • No particular group is exempt from impulsive spending habits. Whether rich or poor, city or rural dwellers, young or old and even Democrats or Republicans – all of these categories are prone to impulse buying every now and then.
  • Those who bought impulsively paid for them in various ways: cash (33%), debit card (32%), credit card (30%), and check (3%).

These data reveals that we are either slipping back into our old ways or we never really learned our lesson. The respondents said that the unplanned purchases were mostly for cellphone upgrades, a new computer or a trendy gadget.

The scary fact that might put us back where we were in 2007 is that one out of 3 Americans do not mind being in debt just to give in to these purchases. After all, 30% of the respondents admitted that they used their credit card to spend on these purchases.

How to control bad spending behavior

It is quite obvious from this survey that we have a long way to go when it comes to improving our spending habits. Have we really forgotten how messed up our finances were a few years ago? This is not something that we should take lightly. It is important that we start doing something about our impulsive buying behavior. While we may think that we deserve to spend our hard earned money, it should not be done at the expense of our future.

Here are a couple of things to remember when trying to curb your bad spending habits.

  • Budget what you spend. If you want to spend, you should make sure that it is a part of your budget for that particular month. Unless it is an emergency, do not spend on something that is not a part of your plans. Not only will your budget help you monitor your finances, it will also help you determine what you can afford to spend on and what you should forego. In case there is an important expense that you need to spend on, you should choose which of your planned expenses can be delayed to make way for this unexpected purchase. The goal here is to spend within your budget so you do not overspend. Because overspending means your expenses are beyond your income’s capabilities. Any difference between your expenses and income is debt. You do not want to incur debt every month as that will put your future financial situation is a bad light.
  • Keep your credit cards. While credit cards can really be a convenient purchasing tool, it can also be dangerous. It increases the chance of overspending your monthly budget. If you cannot control your spending, just keep your cards and do not bring them with you when you go on a shopping errand. You can only spend on your credit card if you are sure that you know your monthly limit and you can stick to that. If you are prone to give in to impulsive spending habits, then do not bring your cards with you.
  • Plan your spending. Do not confuse this with budgeting. You may budget what you spend but planning it is going beyond your monthly expenses. Make annual plan of your spending. THis is how you are able to prepare for them. Like the holiday spending that is probably on your mind right now. According to HuffingtonPost.com, 41% of consumers plan to spend $500 or more this holiday. That is an amount that you should have planned for beforehand. Where will you get your finances? How much will you spend? If you will use your credit card, how will you pay for it? You need to ask these questions way before you are to make the purchase. Do not do them right before you make a purchase.

Trying to change your spending habits will take some time but if you follow these three tips, your chances of making an unplanned purchases will be less likely to happen.

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Are Money Habits Contagious? Absolutely!

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woman thinkingYour money habits can make or break your financial life. It does not matter how much money you earn. What matters are the decisions that you will make regarding how it will be used.

In truth, your preferred habits will play a role the financial decisions that can change your life. This is why you need to be careful about that habits that you will allow yourself to develop and get used to. The thing about these habits is they are instinctive. They become an integral part of your behavior that in most cases, you no longer think when you act on them. It is important that you learn how to choose the right money habits so it will only lead to the good financial behavior that will lead you to the growth of your personal net worth.

What is tricky about your financial habit is they are contagious. It goes both ways. You can influence the behavior of other people and they have the same effect on you. In fact, a study done by the American Institute of CPAs and published through the AICPA.org proves that financial peer pressure does exist. When Millennials are asked about their financial behavior, they usually have similar traits as their peers. 78% of young adults admitted that they have adapted the same money habits as their friends. In fact, 66% said that they consciously try to keep pace with their peers in terms of living arrangements. 64% feel the same way about their choice of clothing.

While there is nothing wrong about you wanting to keep up with your friends, you need to be cautious about how you are doing it. If it means that you have to rack up sizable credit card debts, then you may want to step back and analyze if the money habits you are showing is still healthy for your financial life.

Signs you are easily swayed by financial peer pressure

Succumbing to financial peer pressure is not really for everyone. Some people act as the influencer in the sense that they help others pattern habits according to their own. There are those that are on the other end in which they can easily be swayed by their friend’s money habits.

It has to be noted that not all influences are bad. You can save money through the influence of friends. But before you can identify how you can filter out the good from the bad influences, it is important to learn if you are highly inclined to adapt the habits of the people around you.

There are certain signs that will tell you if you can easily be influenced by the people around you.

Most of the stuff you own are things that you friends also have.

If you look at all your possessions and you find that there are several similarities with those of your friend’s, then you know that you either influenced them or they influenced you to make the purchases. It can go both ways but the important thing here is that within the group, someone is influencing others to buy all the same stuff. It does not have to be an active influence that they literally tell others to buy the same purchases. It can be a passive influence that will seem like each individual is making a choice but they are in fact, highly motivated by the money habits of others.

You do not aspire to own something unless it is owned by your friends.

Do you get the urge to buy something just because you saw a friend own it? When you shop with friends, you end up buying stuff that you never intended to. That is an indication that you are more likely to succumb to peer pressure. In some cases, it may not even be a friend. It can just be someone you know. Make sure that you will not give in to these urges if they are not necessary in your life. Although may think that you earn the same amount of money, your financial situation will always be unique compared to those of your friends. You may have other financial obligations that they do not have. They may be able to afford that purchase but the same is not true with you.

Opinions of other people matter to you.

Lastly, you know that you can easily be swayed by money habits of other people when you find that the opinion of other people matter to you. There is this innate need in us to be accepted by others. This is what leads us to seek out the opinion of other people. According to an article published on BeingHuman.org, as much as we need food and shelter, we also need acceptance. Even in the past, we needed to group together so we can survive by hunting in groups. Belonging to a group requires acceptance and that need in us fuels the importance of other people’s opinion. But here’s the thing – how important is it to you? Getting the opinion of other people is okay but make sure that you do your own thinking too. Do not blindly agree – think your way through it first.

How to keep yourself from contagious financial habits

We are not entirely saying that you should not let yourself be influenced, you just need to learn how to filter which influence will be worth your while. These is a connection between your money habits and your financial decisions because acting on your habits usually make you feel good. When that positive feeling is there, it helps you make a solid decision about your finances. After all, your emotions are one of the strong influencers in your life.

Here is a video of Professor David Tuckett, a member of the UCL Psychology and Language Sciences. He is explaining the role that emotions play in making financial decisions.

It is not yet a complete study but it is interesting that he said how emotions invested in a financial decision will help in the motivation of reaching a particular goal. That is part of the investment that you will personally make in your decision to act on certain money habits.

If you are intent on curing compulsive buying habits that are ruining your finance, here are some tips that we have for you.

  • Buy stuff on your own. If you have to make a purchase, just do it on your own. This is one of the ways you can curb the most dangerous money habits there is – overspending. In addition to that, you may want to make a list of what you need to buy. Bring that list with you and do not go beyond that list.
  • Look for a financial goal buddy. This will be a person that you will reveal your financial goals to so they can help tell you off if your decisions will take you further from your target. In most cases, this is a person with the positive money habits that you want to have – or at least, you both aspire to have the same financial behavior. It does not even have to be someone that you have known for a long time. It can be someone new. According to an article published on LiveScience.com, changing behaviors sometimes require someone new in the group. That way, they can bring something new to influence you with.
  • Keep track of your finances. Identifying the good financial habits mean you have to start tracking where your money  is going. That will help you identify what are the leaks and what should be prioritized. When you know your priorities, you will have the motivation to change any bad money habits that you may have.

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Why Spending Never Works Out The Way You Plan

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frustrated looking womanThe lessons learned from the 2008 recession prompted most of us to seriously consider financial planning. One of the things that we kept a close eye on was our spending. In truth, those bad spending habits that we got used to became our financial undoing. We spent beyond our means by using credit cards recklessly and it cost us a lot of money. For some of us, it led to losing some of the assets that we hold dear. It meant letting our homes go into foreclosure, selling our cars and even skipping the usual entertainment expenses that made us really happy.

Thankfully, financial plans can help us curb the bad habits that led to our money’s demise. But be very careful. Even if you create the most promising plan there is, you need to be able to implement it. A lot of us started strong with our plans but unfortunately, not everyone was successful in applying it in their lives.

A plan is necessary to keep your finances under control and this article will try to analyze why your spending never worked out that way you planned it to.

Comparing your budget with your spending plan

In most cases, your spending plan is confused with a budget plan. Some articles actually refer to them as one and the same. But you need to know that they are two separate concepts. Budgeting is the first step towards financial independence and your spending plan will serve as your action plan to connect them.

Here are other concepts that will help you differentiate the two.

  • Spending plans will be more appealing to follow because it does not have the restricting image of a budget plan.

  • Budgets will tell you how much you are allowed to spend for a specific expense category. The spending plans will allow you to control that total amount to satisfy your actual needs.

  • Spending plans can help you detail your wants and needs. A budget plan is more concentrated on your expense categories.

  • Budget plans will help you define what is left for your discretionary income. Spending plans can map out where you discretionary income will go.

More importantly, your spending plan will help define the different patterns that you have in your life. You can see when your housing costs spike and when food prices go up. It can help make your future financial plans more accurate.

Reasons why your plan for monthly expenses is not working

Now that you know how to differentiate a budget from a spending plan, let us identify the possible reason why it can fail you.

It does not include everything. We’ve mentioned how this plan is actually more detailed than your budget. You have to make sure that it includes all the expenses that you usually make. This is how you ensure that it remains true to the restrictions of your budget. You do not want to end up spending more than what you are allowed to. Ideally, your purchase plans cover a period of one month. Make sure that you include your annual and seasonal expenses too.

It failed to indicate your priorities. Another reason why this plan can fail you is when you did not indicate your priorities. This is very important to keep your plan from concentrating too much on the mundane expenses that make you happy. The whole purpose of planning is to ensure that you will not miss out on all your expenses. Put the priorities high on the list and make sure you understand the factors affecting them. In fact, Moneyning.com published an article that indicates how every generation usually have different priorities. For instance, Baby Boomers lived after the second World War and it made them heavy spenders compared to other generations. Millennials witnessed how the 2008 recession crippled their parents and grandparents financially, that made them more cautious about credit – especially credit card spending.

It is not realistic. The third reason it is not working is because it is not realistic. You may want to spend a lot on entertainment expenses but when your needs dictate that more funds should be allotted for your debts, then you should reconsider your plan. Based on the data from the Bureau of Labor Statistics (BLS.gov) last March 27, 2013, the average expenses of households depend on the income. The highest 20% allott 30.2% of their income in housing costs while the lowest 20% spend 40% of their income on the same category. In terms of food, the highest 20% spend 11.4% as compared to the lowest that spend 15.8% of their income on this expense. For personal insurance, the lowest 20% spend only 2.1% – which is very low compared to the 16% of the high income earners. Obviously, the low income earners have to forego insurance to pay for more important expenses. Your spending plan should consider all of these to make it realistic and true to your needs.

It is not flexible. Lastly, your plan may not be flexible and that is the reason why it is not working for you. Most spending plans require changes from time to time – just like your budget. As mentioned, your priorities are influenced by a lot of things and this should be something that you consider carefully. As you age, your needs will change and that should prompt you to constantly look at your spending plan to see if it is still workable.

Tips to create a working plan for purchases that compliment your budget

To be a smart spender begins with a well crafted spending plan. Here are some important considerations when you are trying to make this.

  • Base your spending on your net income – not our gross. Nobody ever sees their gross income. If you base it on this amount, you will always fall short and some of your expenses will end up being unpaid.

  • Always analyze your current spending. What you are spending a few months ago may not be the same as what you need right now. Always check if your spending plan is still aligned with your goals.

  • Categorize your expenses to keep the revisions from being tedious. You can put the fixed expenses first as these are the regular payments that you constantly have to make. In most cases, the amount does not change. These include your rent, loan payments, etc. You also have the flexible expenses that are still necessities but vary in amount every month. Your food, groceries and transportation can be placed here. Lastly, you have the discretionary expenses that are the expenses that you do not need to spend on all the time. These can be your clothing, shoes, and entertainment expenses. When you have to revise your plan, you only have to look at the flexible and discretionary expenses.

  • Make sure your income is higher than your expenses. If not, you will always have to spend some credit to take care of everything. That defeats the purpose of using this financial plan. Trade off some of the expenses that you can live without so you can afford those that you need to spend on.

StatisticBrain.com shows that the average household income is at $43,000. With the rising cost of living, this is just enough for a family of 4 to live on. If you want to make your spending less restrictive, you should consider earning more or cutting back. The bottom line is to make sure that you can control where your money goes and the plan that will help you achieve that is something that you can follow consistently. If it is not working for you, review the plan to see if it requires you to make some changes.

Here is a video created by National Debt Relief to help you learn how to budget for your household.

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How To Spot A Smart Spender From The Not

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retailer cutting a credit cardAfter everything that we have been through, we all know the importance of financial management. This is a lesson that we need to learn if we want to keep ourselves from being in a financial crisis once more.

One of the most important lessons that we will learn in money management is how to be a smart spender. Your spending habits has the power to make or break you. Either it will bring you towards financial security or pull you down into a debt pit.

Like the holidays for instance. How can you rate your holiday spending? Did you successfully adhere to your budget or have you gotten yourself into some serious debt? If you were a smart spender, you should have been able to stay away from holiday debt easily.

But with all the marked down prices, the people going crazy over shopping and the bonus that you got from work – keeping a tight lid on your spending is easier said than done. We are living in a consumerist society after all. You can expect that everywhere you turn, you will be encouraged to buy, buy, buy!

Shopoholism explained

Compulsive buying is a real and dangerous addiction. It can ruin not just your life, but that of your family as well. Your past exploits can ruin your present and future endeavors. So you need to seriously consider if you or a loved one has the signs of not being a smart spender.

Consumer spending in the country have steadily gone up over the years. TradingEconomics.com compiled a couple of statistics that show how spending have steadily increased over time.

  • Spending increased by $187 billion from Q3 of 2012 ($10.54 trillion) to Q3 of 2013 ($10.72 trillion).

  • Spending in every quarter of 2013 also showed a steady increase: Q1 $10.64 trillion, Q2 $10.69 trillion, and Q3 $10.72 trillion.

  • Growth from ten years ago (Q3 of 2003) is at $1.79 trillion. Consumer spending in 2003 was only at $8.93 trillion.

The only time that consumer spending declined was from mid 2008 to mid 2009 – which was during the height of the recession. But after that period, people started to spend more money on various items once more.

Even WebMD.com, an authority site on medical information, acknowledges that compulsive shopping is a real and dangerous condition. Coined as “shopoholism” medical experts know that this is as real as an addiction to drugs or alcohol.

An article published on the site reveals that people who do not have control over their impulses are considered to be an addiction. If you do not have control over your shopping impulses, then you may be addicted to buying more than what you should. Here are some highlights from the article.

  • “In America, shopping is embedded in our culture; so often, the impulsiveness comes out as excessive shopping,” Donald Black, MD, professor of psychiatry, University of Iowa College of Medicine.

  • “Some of the new evidence suggests that some people, maybe 10%-15%, may have a genetic predisposition to an addictive behavior, coupled with an environment in which the particular behavior is triggered, but no one really knows why,” Ruth Engs, EdD, professor of applied health science, Indiana University. “Individuals will get some kind of high from an addictive behavior like shopping.”

  • “Impairment can occur because the person spends time away from home to shop, covers up debt with deception, and emotionally and physically starts to isolate themselves from others as they become preoccupied with their behavior,” Rick Zehr, VP of addiction and behavioral services, Proctor Hospital at the Illinois Institute for Addiction Recovery.

Source: http://www.webmd.com/mental-health/features/shopping-spree-addiction

Here is where it all gets to be difficult. Being addicted means you cannot decide for yourself if you are a smart spender or not. Those addicted are usually in denial of their condition. Someone always has to step in to tell them that they are compulsive shoppers.

Signs you are not with a wise spender

Experts suggest that people should watch out for signs that a person is not a smart spender. Whether it is you or another person in your home, you need to be able to spot the telltale signs. It goes beyond paying in cash or credit.

ShopaholicsAnonymous.org provided a compilation of statistics about compulsive shoppers in the country. Here are some of them:

  • Compulsive shoppers in 2008 reached more than 25 million in the US.

  • The Stanford University Landmark Study revealed that there were 17 million compulsive shopper in the US. Men and women are also equally compulsive shoppers. Overshopping is usually caused by poor budgeting and saving efforts.

  • Psychology Today reports that the number one reason for relationship stress is money. It oftentimes lead to separation.

  • Time reports that the credit card debt of consumers are mostly unnecessary purchases.

Source: http://www.shopaholicsanonymous.org/facts.htm

While it may be hard to spot, you can observe yourself for the signs that you are more of a spender than a saver. Here are some of the characteristics that you can observe about yourself or a loved one.

  • Having a hard time or intentionally not following rules.

  • Feeling pride when you just ripped off people.

  • Cheating in tax or financial forms.

  • Keeping purchases a secret.

  • Inability to answer a direct question without being evasive.

  • Preferring to make rules for others – but cannot follow it themselves.

  • Sense of self-righteousness.

  • Likes to hoard during sale events.

Probably the most important sign that you have a spending problem is when you spend more in credit than you do in cash. Credit cards will not give you as much guilt trip as it would when buying in cash. You need to consider these signs if you really want to end up being a smart spender and not the opposite.

These characteristics are not definitive of a compulsive shopper but you have to know the person to truly define if they are smart shoppers or not. Observe and look at other factors too. For instance, if it is keeping you from fulfilling your budget goals, then this needs to be explored further. And, being an addictive condition, it has to be approached carefully to avoid ruining any relationship.

Can you change a spender to be a saver?

The big question is this: is it possible to change a spender and make them a saver? If there are chance for them to stop being an impulsive shopper to be a smart spender?

The answer is yes. It will be difficult, but it is not impossible. Drug and alcohol addicts have success stories and shopaholics can still be saved to become savers. Here are some tips that can help you and your loved ones work through this problem.

  • Accepting the problem. This is ideally for the person with the bad habits but it goes for the rest of the family too. If there are debts already incurred, just let it go and stop blaming each other.

  • Supporting each other. Debt can drive you apart but only if you play the blame game. No matter who is at fault, you need to give each other a chance and solve this together. Fighting will only make things worse.

  • Get professional help. It can be a psychiatrist to help with the impulsive habits or it could be a financial expert to help fix your finances. Usually, the expert can give you insight and techniques that would never have dawned on you.

Solving the shopping habits will help you turn your finances around. Being a smart spender is where you can take a more action about this problem.

Here is a video from National Debt Relief that will help you lower your bills in your household – regardless if you have a spender in the family.

Do you qualify for debt consolidation?

Analyzing American Spending Habits

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personal debt meterOur spending habits are influential enough to dictate how our lifestyles will be in the future. If you really want to prepare for your future, it is evident that you have to practice proper financial management skills. That includes how you spend your money.

We made a lot of mistakes in the past and to really get over that predicament, it is imperative that we do something to stop our bad spending habits. Of course, that is easier said than done. We all have to change a lot of things if we want to correct these habits. When you say habit, it means these are activities that we do almost impulsively. That could either be borne out of necessity or simply the pleasure of the act.

Where do Americans spent their money in 2012

Before we can correct the bad spending habits, it is important to analyze the actual figures that indicate where our money goes to. The best place to get that is through the Bureau of Labor Statistics.

In September 10, 2013, the BLS.gov website released a report about how the average American spends their income. This data was based on the spending habits of consumers in 2012. Here are the important breakdown of expenses for the whole year of 2012:

  • Housing: 33% at $16,887

  • Transportation: 17% at $8,998

  • Food: 13% at $6,599 (at home 59% and eating out 41%)

  • Insurance: 11% at $5,591

  • Other expenses: 7% at $3,557

  • Healthcare: 7% at $3,556

  • Entertainment: 5% at $2,605

  • Cash contributions: 4% $1,913

  • Apparel and services: 3% at $1,736

These all add up to the whole annual spending list of the average American household in 2012. Here are other important notes about these statistics as found on the BLS website:

  • Except for apparel and services, all of these categories increased compared to the 2011 statistics.

  • Health care expenses are mostly on health insurance at 60%

  • The cash contributions refer to church, charity and other forms of donations.

  • Transportation has the highest increase in amount from 2011 to 2012 at $705 while the highest percentage increase goes to cash contributions at 11.2%

So what does these data say about our spending?

  • It reveals the top three priorities in our spending: housing, transportation and food.

  • While most people cook their meals at home, a huge expense is still being made for meals outside.

  • Having the entertainment expense below the housing, transportation, food, insurance and healthcare means consumers know how to prioritize their expenses.

  • The lower spending for apparel and services compared to the 2011 statistic could also mean a smarter spending habit.

  • Consumers are making more socially responsible spending decisions given the rise in cash contributions.

Overall, you can see that consumers have done a great job in prioritizing their expenses. It is hard to say where the debts fall into but we can be sure that the housing category mostly refers to mortgage payments – that is why it is too big. Usually, a fully paid home will only cost you the annual property tax and the maintenance costs – which will hardly merit the top spot.

Other categories that could be debt payments are apparel, services, entertainment, transportation (car loans) and other expenses. Both insurance and healthcare (which is mostly health insurance) can hardly be considered as debt payments. Food can be a part but it is only when grocery expenses are paid in credit.

Best practices when it comes to spending your money

It is hard to assume that we are all practicing smart spending habits with the statistics given by the Bureau of Labor Statistics. However, it is comforting to know that the important expenses can be found on top of the list. This goes to show that debt ridden or not, we are not being irresponsible when it comes to our spending priorities.

To help keep you from wrong spending habits, here are important tips that you can follow:

  • Practice budgeting. You can ensure that you will have the funds put aside for all the priority expenses that you have.

  • Limit your credit spending. Adding to your debts is not really a good idea especially if you hardly have enough to pay for your expenses. Spend in cash as much as possible and if you have to use your credit card, make sure it is included in the budget. That way, when the billing statement comes, you know that you have the funds to pay for it immediately.

  • Create a payment plan for your debts. Debt payment take up a huge portion of your budget and you want to make way for the more fun expenses – at least until after you have boosted your savings.

  • Grow your savings. Speaking of savings, it is very important to have adequate savings for your emergency fund. That way, when your income is compromised, you can at least afford to spend for your priority expenses.

  • Think before you spend. In the data provided above, you notice that the other expenses make up a huge part of the budget. It is hard to say what these expenses are but we hardly see any other important category that is not indicated already. That leaves us to assume that these expenses may be discretionary or variable expenses. To be on the safe side, just be very careful about where you put your money. Even if it is something that you can afford, you may want to opt to grow your savings instead.

Do you qualify for debt consolidation?