A bargain is not a bargain unless you need the item in question and are actually going to use it.
The government’s Savings Working Group thinks we’re pretty bad at salting our money away for the future. It turns out we’re impulse spending $16m per day. Ouch.
What was the last thing you bought on a whim? My last impulse buy was a basecamp by Kathmandu camping cupboard for less than half price.
Bargain? No way. I was fooling myself. The cupboard takes an age to assemble and once I’d committed some post-purchase thought to the issue I went back and bought a folding model that doesn’t need assembling.
Video: Supermarket Psychology: Specials, pricing, labelling and packaging
There’s a moral to this story. It’s those impulse buyers that really eat into our savings potential. A bargain is not a bargain unless you need the item in question and are actually going to use it. Even then, we can do without most of the stuff we buy. I could probably do with a personal ticking off from the New Zealand Treasury.
But, impulse buying isn’t just a Kiwi disease. I chanced upon this video from Kenya exploring impulse buying African-style, which looked very familiar indeed:
Video: Impulse Buying
Impulse spending really does add up. Let’s say my impulse spending on everything from tat at garage sales to items such as my cupboard adds up to $1,000 a year – which is modest by most people’s standards - I would have lost out on $29,617 over the next 20 years. That’s based on RaboDirect’s six month term deposit rate of 5.15%, and a marginal tax rate of 30%.
A reader emailed me pointing out that he didn’t want to go back to the deprivation of his 1950s childhood . He liked having money and being able to spend it. I’m sure even the Savings Working Group wouldn’t expect him to live the depression-inspired reality of his parents. I’m just arguing against unplanned decisions to buy made just before a purchase. They’re a danger to your long-term wealth.
Overcoming these impulses is easier said than done, but here are some tips:
Remember that impulse buyers are conned by the marketing people to make spur of the moment decisions. Wrest back the control.
Make rational purchases, not emotional ones.
If you didn’t plan to buy the item before you left home or logged onto Trade Me, then don’t. Wait until next payday at least. By then you might have overcome the emotional triggers that led you to make that impulse purchase.
Beware of “specials”. They’re not always specials but tricks to trigger your impulses.
Watch out for time-limited offers. One of the worst of these is the rash of Daily Deal-style websites.
Find some mantras that stop you taking action on impulse. My favourite, which I’ve mentioned before is to repeat to myself: “do I really need it”.
Avoid hype. There’s no-such-thing as a once in a lifetime offer. This isn’t the only time that Noel Leeming or Harvey Norman is going to offer that 50-inch to-die-for TV at $999. There are always better sales down the track.
Consider whether the goods are what you really want. If you’re of the “instant camping” mentality, for example, a cupboard that needs assembling isn’t for you.