Putting the Brakes on Impulse Spending

Smart management of personal finances requires three basic elements: optimising income, reining in expenditures, and choosing the best savings and/or investment strategies. For many people, it’s the second element that snags them: one of their biggest challenges is keeping their spending under control.

And for those who spend much of their life online, impulse buying can turn into a serious problem. Perhaps you’re experiencing such a problem. If so, you may have discovered that while technology has made money management easier in many ways, it has also made spending far too easy.

That said, don’t think that you’re doomed to wallow in a never-ending cycle of impulse buying, buyer’s remorse, additional buying, and even deeper remorse. If you take a few steps back and look at the ways you’re being manipulated into spending, you can use that awareness to steel yourself against the manipulation. Then you’ll be better equipped to become a smarter shopper.

The retail industry’s not-so-secret weapon

The first thing you need to keep in mind is that you aren’t alone in your impulse buying. As a matter of fact, people in the UK spent over £6 billion on impulse purchases, which averages out to roughly £129 per person. Millennials are more prone to making impulse buys than older generations, women are more prone than men, and everyone is more likely to make impulse purchases when they have extra money in their current accounts or available on their credit cards.

Merchants know this, of course, and use all sorts of devious schemes to take advantage of people’s spending tendencies. Look at how many impulse purchase items end in the number 9, especially when such a small reduction makes the price appear significantly lower. For instance, dropping the price of a £10 item by merely one pence, to £9.99, leads the consumer to instinctively see a reduction in the number of pounds, which represents a significant savings. That is, at least until the shopper thinks about it for a moment, which is contrary to the very nature of impulse shopping.

Some people are also inclined to grab what they perceive as a great bargain, even if they have little use for the item or already own a similar item for which they had previously paid more. If you find yourself in either of these situations, take a breath – or a day, if you need to – and consider whether the purchase is really going to benefit you. You can always come back if the answer is yes.

The nighttime is the right time for impulse buyers

Although some studies have shown that most impulse buys occur in-store, there’s no doubt that online shopping is also a source of problem spending. This can be particularly valid during late-night hours, when infomercials and all-night shopping networks make the bulk of their sales. The insomnia that drives many people to spend the wee hours watching these merchants may even be a part of larger issues that also induce a tendency to over-shop.

Furthermore, some online merchants have been accused of encouraging impulse spending by sending email alerts at the precise times that customers may be most vulnerable, though a retail trade group naturally denies targeting vulnerable consumers. The Money and Mental Health Institute has offered some possible remedies to reduce compulsive purchases, such as implementing regulations that would delay completion of a purchase, pending a confirmation sent by the consumer after a bit of a cooling off period had passed. Other suggested measures include either government or personal restriction of access to shopping channels and online stores, particularly at night. As would be expected, trade groups do not take kindly to such suggestions.

The keyword is “responsibility”

If you have a real problem with overspending, you may be able to get it under control yourself, but you may decide that you require outside help. But you will never make any progress unless you acknowledge that you and you alone are ultimately responsible for the way you spend your money. It doesn’t matter how many options and settings the shopping web sites allow to help minimise impulse purchases; if you don’t take full responsibility for your spending, you will continue to find a way to squander your money.

Chronic overspending can be one of the quickest routes to a true financial crisis, a situation in which you don’t have enough money for necessities, much less for the occasional indulgence. If you find yourself in this kind of situation, you might need a loan. And you likely won’t have a lot of good options if your financial situation has compromised your credit. But you can find options, if you just take a bit of time and shop around to see what loans are available and how much each will cost you. Now is certainly not the time to continue following the same impulsive tendencies that got you into trouble in the first place. Once you do manage to get a loan to cover those necessities – and only those necessities – you will need to handle the loan responsibly so you won’t make your situation worse.

While some of life’s experiences are best decided on the spur of the moment, this rarely applies to financial decisions. Such decisions are best carefully thought out, and based upon good information rather than emotions. Keep a cool head, and you can avoid the kind of traps that uncontrolled impulse spending can spring on you.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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