519-646-2222Impulse Spending
Impulse spending always comes with a cost, and frequently buyer’s remorse. We have all done it, bought a new gizmo, article of clothing or in more extreme cases even a house or a car and later wished we hadn’t. Interestingly the average new home buyer makes a purchase decision within minutes – not days or weeks of consideration.
There are many reasons why we impulsively spend, but correctly identifying the reason is not enough to provide a behavioural solution. Changing behaviour takes desire, time and effort. I once had a client who was a member of marginalized community and had moved to a larger municipality where he had no friends – pretty soon he started to seek out social interactions in malls and shops where staff would engage in conversation. His motivation was purely social.
Some people spend excessively on their children, particularly at Christmas. This type of spending may be compensatory, perhaps driven by guilt or by ego, trying to “one-up” an estranged spouse or another family member. Impulse spending may be driven by status, having the latest in fashions or design. Boredom can be another motivating factor; a person may have the means of purchase (a credit card) and a whole bunch of time on their hands. Of course, serious mental health issues, like bipolar depression, may also be factors.
How about that coffee on the way to work? Perhaps you calculated that if you buy a coffee and a cookie twice each day from Tim Horton’s, with a twice daily cost of $2.89, your total annualized cost would be more than $2,100.00 (in net pay). Of course, depending on your tax bracket that amount might be as much as $3,000.00 of gross annual salary. The decision is made – “no more Timmies”. First day you smugly drive past the coffee shop you usually stop in at, then you go past another as you get closer to work, but the instinct is strong, and you remember there’s another outlet just past your office. Oh yeah, you’re going to cave!
Oftentimes it’s easier to cave into an impulse than it is to resist it. The real danger is that you may use credit to pay for the purchase and the availability of credit makes larger impulse purchases not only more affordable but far more likely.