Today we continue with evaluating whether your spending is consistent with the goals and objectives which you have set for your life. Such an evaluation would not be complete without a look at impulse buying. The amount spent on impulse more than any other category of spending tends to shock people who are disciplined enough to track their expenses over a 3 to 4-month period.
As you keep track of how you dispose of your earnings over the months, you will need to review specifically the relative proportion of spending that is done on impulse.
As long as you didn’t have it in your planned spending and you find yourself making a relatively quick decision to spend, that purchase qualifies as falling into the category of impulse spending.
For example, if a salesman calls at your home and convinces you to purchase a service or gadget he is promoting, that is impulse spending. If you decide to buy magazines or sweets only because you notice them near to the supermarket check-out counter – that qualifies, too.
So, you are window shopping and you see a gorgeous suit which you decide on the spot that you must have; there is a personal care advisor visiting your office and you attend the presentation and select a range of beauty care products as part of an unplanned purchase – add these amounts to your listing of impulse buying.
For sure, even as you are researching your spending habits and getting the real picture, you may care to start to adjust your impulse spending to be in more reasonable proportion. This is what is called low hanging fruit, one of the earliest adjustments you can make in your spending habits that will make a noticeable impact in bringing your budget back in line with your explicit goals and objectives.
Impulse buying tends to happen when you are in a relatively upbeat mood; there is a sense of rewarding yourself.
“Surely, I can afford this relatively small treat,” you think. So, one good measure in avoiding impulse shopping is to avoid spending when you are extra happy or celebrating.
When you avoid impulse spending, you will spend less and feel better. During the period of tracking your expenses, think carefully if every purchase is a “need” or a “want” and try to avoid the purchase, using every excuse to do without it. If, in the end, you must give in and make the purchase, then that purchase is a real need.
Being able to accomplish this unleashes your personal financial power at its highest. There will be less regret later about frittering away sums that add up to a significant amount; that significant sum could have been better targeted when spending.
This brings us neatly around to the profound benefits of pre-planning one’s spending by maintaining an explicit personal budget. One of the most powerful tools for managing your money is preparing, maintaining and following a detailed budget of earnings and spending.
Yes, be kind to yourself and reward yourself, yet let it not lead to you worrying about being able to meet the cost of another budget category. Then, too, draw on your observations from your tracked expenses during this period to revise and update your budget.
You may be one of those organized people that already keep a personal budget. If so, this is a good period for you to reconsider the luxuries and “wants” that have been included for this year. These items may be reduced or postponed in part to another year in order to realign the relative proportions of the budget categories.
• Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
