After being a stay-at-home mom and doing daycare for years, my mom eventually went to work as a secretary. She is still working, 20+ years later, because she enjoys making her own money. Because she has been on a limited income for so many years she has developed some sure fire ways to prevent impulse buys and avoid overspending. For example, when she picks an item off the sales rack, long before she can fall in love with it, she looks at the price tag. If it’s too much she immediately puts it back down. If she wants to purchase the item, she calculates how many hours she would have to work to pay for it.
So let’s say the item is $50 and she makes $10 an hour. She’ll calculate that it will take her at least 6 hours, (once you include tax), to pay for the item. If an item is too expensive, and she can bear to live without it, she’ll usually put it back on the rack.
I often use my mom’s technique when shopping. First, it forces you to pause. The mere act of pausing can help prevent the impulse to buy. Second, rather than throwing the item in the cart and throwing the item in the closet when you get home, it forces you to think about the item in detail. Once you calculate the amount of time it will take for you to earn that much money you will think much harder about whether or not you really need to purchase it. Simple cognitive techniques like this one can greatly change your spending habits, and we all know the first step to creating wealth is to avoid spending. In life we are often so busy that we tend to live our lives on autopilot. This technique forces you to consciously think about your spending.
The next time you are considering a purchase, stop, and calculate how long it would take you to earn the money to pay for it. If that doesn’t stop you from making an impulse buy, think about the future goals that will be delayed as a result of the purchase. If that doesn’t work either, realize that saving $50 a month will result in a $600 a year savings, and that $600 a year for 10 years at 5% interest will net you nearly $8,000. If you think through all of these possibilities and still want to make the purchase: Go ahead and do it.
Great post. Credit cards makes this useless. That is why so many of us are in debt, when you swipe the card you do not forsee how many hours to pay for the item. We feel as long as we pay the minimun we are OK. We are not ok, we are in debt.
They say 80% of the stuff we buy we dont need it. So that 8 out of 10 thing we buy is a want.