How to stop impulse buying

What is impulse buying?

Impulse buying is unplanned spending where the decision to buy is made immediately before purchase. Impulse buying is normally motivated by emotional thinking where there is a perception that a purchase will bring a change in mood.

Impulse buying is commonly associated with ‘buyer’s remorse’ and feelings of guilt following the purchase. It was once thought to only apply to small purchases, like those that appear at the grocery store check out: chocolates, chewing gum, or soft drink – or those found by chance at never-to-be-repeated prices: bargain bins, 50% off sales, closing down sales, or promotional deals.

How your brain tricks you into impulse buying

Projection bias

New research suggests that impulse buying also applies to large purchases like cars and houses. A recent research paper called ‘Projection Bias in the Car and Housing Markets‘ published by the National Bureau of Economic Research suggests that impulse buying is a real psychological phenomena and is more widespread than first thought. It is related to a type of psychological bias known as projection bias. This is the tendency for the mind to think that current conditions are going to continue into the future and that current tastes will be the same as future tastes.

The extensive study examined more than 40 million car sales over eight years. Some of the surprising findings of the research include:

  • A day that is nine degrees hotter than normal saw an 8.5% increase in convertibles sold, even in winter. To support the notion that they were impulse purchases, convertibles bought on these days were many times more likely to be returned than normal.
  • Houses with pools sell for $1,600 more on average in summer than in winter.
  • In the three weeks following a snow storm of more than 10 inches, 6% more four-wheeled drive cars are sold.
  • Less black cars are sold on hot days.

These are all examples of irrational purchases that are influenced by current events. The brain expects the future to be like the present, even when logic dictates quite the opposite. The first thing to know about impulse buying is that it is irrational and not necessarily in accordance with our long term views and plans – particularly if you are living on a tight budget or aiming for financial independence.

The effect of hunger on decision making for the future

Daniel Read and Barbara van Leeuwen proved that shopping on an empty stomach is more likely to lead to impulse buying, as did making decisions in the spur of the moment.

In a study they published they found that making future decisions while hungry led to poor nutritional choices and that decisions made on the spot were also more likely to lead to a preference for junk-food than healthy food (I think we’ve all been there).

We are more likely to choose poorly in the present because we are irrational and overestimate the value of our current feelings. Decisions are best made when we are stable and psychologically neutral (in the case of food, sated) and also when they are made in the course of planning for the future rather than made quickly in the moment.

How businesses trick you into impulse buying

Businesses are well versed in the irrational nature of consumers and play to them at every opportunity. Infomercials exploit our tendency to make poor decisions on the spur of the moment – they only have a very limited time to explain their product and make you want it.

They play on fear (your stomach is flabby, buy an ab-roller-pro-5000!); they offer you a money back guarantee to ward off lingering fears of potential buyer’s remorse and have endless testimonials. They convince you that it’s perfectly normal and quite an everyday experience to purchase something from the television at 3am that not even 15 minutes ago you had never heard of – let alone realized that YOU COULDN’T LIVE WITHOUT!

Then there are the rows of colorful packages that greet you at the check out – the point where you wait ready to purchase perhaps $100 worth of goods – so what’s the harm in another $1 chocolate?

They also rely on another psychological bias known as the anchoring effect. This is where you value an item by comparison to those around it, rather than for its intrinsic or universal value. Businesses place a television that is on sale between two much more expensive televisions to make the one on sale much more attractive – despite it still being overpriced.

Wine lists in restaurants will often feature very expensive wines to make the mid-range look more appealing.

The list of techniques used by businesses is endless and it’s important to realize that they exist before your enter a shop so that you can try to assess whether it’s your irrational mind and biases taking control or whether you are really seeing good value. Preparation and planning are key to overcoming impulse buying.

10 ways to stop impulse buying

  1. Realize that you don’t know when you’re being irrational. The best way to avoid impulse buying is to make it impossible. Take your credit cards out of your wallet, and don’t take money with you unless you are shopping for a specific item you have already decided on. Turn off one-click ordering on Amazon and the like.
  2. Plan purchases in advance. Take a shopping list when grocery shopping and don’t deviate.
  3. Use a 30 day purchase list for items above $100. You can’t buy the item on the list until 30 days have past. What you will find is that you don’t want the item any more, or at the very least, you’ve found it for much less somewhere else. Delayed satisfaction leads to greater satisfaction anyway – and you’ll be much less likely to experience buyer’s remorse.
  4. Make a game out of avoiding spending. Have a budget and know how much is left in each category for the month. Learn to get a sense of satisfaction for beating the shop you’re in when you leave with nothing.
  5. Watch less television. TV is packed with advertising which is very carefully designed to take advantage of our psychological biases and irrationality. It’s good at making us want things and good at making us feel like we’re worth less if we don’t have a particular product. If this were not true consider how and why the advertising industry is worth billions of dollars world wide.
  6. Eat before going grocery shopping. The study I referred to above is proof that shopping on an empty stomach will cost you money. Same goes for shopping when upset. Our irrational mind can convince us that purchases will make us happy in the short term.
  7. Track your spending. Knowing where your money is going is a great way to prevent future spending.
  8. Write down your financial goals. Have a short version of them on a sticky note on the inside of your wallet or purse so you see it before you spend anything.
  9. Be wary of special offers or never-to-be-repeated deals. Compare prices on the internet and between other retailers before committing. It’s not a bargain and it’s not saving you money if you weren’t going to buy it in the first place.
  10. Shop alone. Don’t shop with someone you know is a bad influence on your spending habits. If you have a friend who has convinced you to splurge in the past – try to avoid shopping with them in the future.

I think making the realization that I was wasting thousands of dollars a year thanks to impulse buying has made a huge difference to my early retirement plans. I feel much more in control of my spending and go days without spending a cent. For example, so far in January I’ve only spent money on recurring expenses (phone, registration) and haven’t spent anything at a shop.

Have you ever regretted a purchase or been a victim of impulse buying? What do you do to stop it? Share your tips below.

    No more excuses: bring your lunch to work

    Don't eat out at work

    The following post is a guest post by CF from The Outlier Model. I have written about exactly how much you can save over ten years following the techniques discussed below. Safe to say that it’s a considerable amount – no more excuses if you don’t already take your lunch to work EVERY DAY!

    The Outlier Model is a personal finance and lifestyle blog based on the pillars of “living life a little bit differently”. Based on the belief that success follows those who choose to do something other than the normal, posts at The Outlier Model discuss topics such as budgeting, life hacking, and smart shopping. Using a combination of personal anecdotes, how-to tips and commentary, readers are introduced to the small steps that can help them become something more than average. 

    If you’ve been reading personal finance blogs for long enough, you’ll know by now that bringing your lunch to work is a great way to save money.  When lunches cost anywhere between $5 and $15, packing a homemade meal for $1 to $3 is a steal – and often healthier!  At the Outlier Model, Brian and I usually just make a larger portion of dinner the night before, and then we take the leftovers for lunch.  Easy and fast!  But what if you don’t have a fridge at work?  Leftovers can go bad sitting on a desk in a warm office.  Or what if you didn’t have a microwave to heat up your food?  Cold leftovers aren’t terribly appetizing.  And lets face it – some of us just don’t like eating leftovers.  There’s still plenty of cheap and easy lunch ideas that you can try.

    No fridge?  No problem!

    Now, don’t get me wrong – food can  stay unrefrigerated for a time and be perfectly fine.  But, if you are concerned, simply pack your lunch with an ice pack!  A resusable ice pack will keep your lunch chill till noon without any problems.  Depending on how cold your food started, packing your lunch in an insulated bag might keep it chilled enough as well.  If that doesn’t work for you, consider packing picnic lunches of crackers, cheese and dried sausage or canned tuna.  And don’t forget the fresh fruit!

    When I was in university, we did not have fridges that we could use.  As a result, I would pack my food the night before so that it was cold coming out of the fridge.  It was generally find until lunch!  When I had class on warm days, I’d pack my lunch with a cold drink or ice pack to keep it cold.

    No microwave?  Not a worry!

    Some workplaces don’t have microwaves.  I personally think that that is the sign of a bad workplace, but it may be that your place of work is too small to have a kitchen.  If that’s the case, try to bring lunches that don’t need heating.  Sandwiches are a great option, as are salads, boiled eggs, fresh fruit, and again, crackers and cheese.

    For us, sandwiches are our go-to option for lunch with microwaves.  To keep things quick and easy, I usually prepare the sandwich ingredients ahead of time.  For example, I might make a big batch of tuna salad for filling.  Or, I might wash the lettuce and slice the cheese, tomatoes and cucumber at the beginning of the week.  Along with some fruit, it makes a great healthy meal.

    Not a leftover person?  There’s still hope!

    For some of us, leftovers don’t cut it and daily sandwiches can get bland.  Even so, there are ways for you to enjoy healthy homemade lunches at work.  Here’s some ideas:

    • Make a “big” meat on Sunday like roast chicken, roast beef, turkey or pulled pork.  Then throughout the week, use that meat in different meals – it might be turkey sandwiches on Monday and Tuesday, but turkey and rice on Wednesday, turkey tacos on Thursday and cold turkey salad on Friday, for example.  Or chicken or pulled pork.  The key is, most meats can be used in multiple meals just by changing the sides and the condiments.  Bonus points for using turkey by the way – if you buy it over the holidays, it’s damn cheap.
    • Make multiple batch meals over the weekend and alternate them for lunches.  For example, you could make a lasagne and a pot of fried rice over the weekend. Have lasagne Monday, Wednesday and Friday and have fried rice on Tuesdays and Thursdays.

    Finally, even if you don’t succeed at bringing your lunch each day to work, try bringing some of your lunch.  Even a piece of fruit or a cup of yogurt will stem the hunger at lunch and allow you to buy less food for your meal.

    What are your tips for keeping work lunches cheap and easy?

      Men: Save money by cutting your own hair

      Click on the image to buy the best value set of clippers available at the moment

      When the goal is early retirement sometimes you have to get creative.

      I cut my own hair and estimate that it will save me about $2,473.87 over a ten year period, and a whole lot more by the end of my life.

      One of the remarkable things about modern western society is that we have become incredibly competitive about our consumption of stuff. It seems that it doesn’t really matter what it is, but it’s important that other people know that we’re buying it. It’s a phenomenon known as conspicuous consumption and was first explained by Thorstein Veblen in 1899. He noted that some of the rich were using their wealth to be ‘socially visible’ – rather than useful.

      It’s a phrase that has more application than ever. You only have to look at the cars we drive, the clothes we wear and even the food we eat to know that it’s not just about function – large portions of the way we spend money as modern people is to show our station in life for all to see.

      One of the ways we do this is to pay people lots of money (equivalent to the value of several hours of our life at work) to cut our hair a little bit shorter every now and again. But why? It’s an almost purely an aesthetic expense that we do to fit in and because other people do it.

      It’s also something you can do yourself if you’re happy with short haircuts.

      I decided to opt out of the system of paying for haircuts because the value and utility is almost zero given you can do it for free at home with scissors or hair clippers. Almost all short haircuts are easy to achieve with clippers and a few of the attachments they normally come with.

      The beauty of doing this is that the result is normally extremely similar to that of a cut from an expensive salon. Only today, a few days after a recent cut using my trusty clippers, I received a compliment on my new haircut and was asked where I had my hair cut!

      This is just another small step on the way to a life in which I aspire to be able to do more myself, reduce my reliance on others, simplify my life and worry less about what others think.

      The best part is that is will save me a bucket-load of money that will allow me to retire just that little bit earlier.

      How much do you pay for a haircut? Have you ever cut your own hair?

        Book Review: Your Money Or Your Life

        Your money or your life review

        Make no mistake.

        Your Money or Your Life is an amazing book.

        It kick-started an awesome transformation in my financial life and my decision making more broadly. I recommend this book in the highest possible terms.

        At it’s core, it’s a book about changing the way we look at money and our relationships with money. It encourages us to spend in accordance with our true interests, to reduce our spending in areas which don’t provide us with happiness and to invest the difference.

        Essentially it shows us a manageable way to financial independence and early retirement even when income is moderate but also why we should think about trying it in the first place.

         The concept of having enough

        Your Money or Your Life - the fulfillment curve

        One of the central themes in Your Money or Your Life is understanding the point of enough.

        There have been extraordinary excesses delivered to western nations since the industrial revolution but we have reached a point of competitive and unnecessary consumption that threatens our planet, our relationships with other people, our relationship with work and our mental health.

        Vicki Robbins explains in very simple terms how to find what is enough for you, how to reassess your spending so that it’s no bigger than it has to be so that happiness is maximized and spending kept in check.  This concept has been particularly useful to me because for a long time I was trapped into the perilous trap of consumerism – Your Money or Your Life helped me understand that the excesses I was used to were actually delivering absolutely no increased level of comfort or happiness and was utterly pointless.

        Needless to say, just this one aspect of the book alone has made it a worthwhile purchase many times over.

        Money as energy

        I was initially skeptical of this concept when I read it being discussed prior to reading Your Money or Your Life – but it makes perfect sense when fully explained.

        The book encourages us to look at money not just as a number, but as a unit of our energy, or more broadly, as a unit of our remaining time on earth. It requires us to work out how much money we are truly earning from paid employment which involves going far beyond just deducting tax from our hourly rate.

        It must take into account all work related expenses, like travel costs, uniforms, any health care necessary because of work – the lot. Everything you wouldn’t have to pay for if you didn’t do your job should be included.

        The hourly rate you arrive at will probably be surprisingly low when all of the associated costs are taken into account.

        Let’s assume that your hourly rate is $20, but after all of the appropriate deductions are taken into account, your true rate is $10 per hour.

        Now when you face the decision when you’re watching late night television and see an extremely enticing advertisement for the AB DESTROYER 3500 MK5 for the low, low price of $59.95 instead of picking up the phone like a consumer drone. Stop! Think about the purchase in light of the cost in terms of your time or energy. The actual cost of the item is 6 hours of your life that you won’t ever get back.

        It’s not to say that the book simply advocates for extreme frugality or that we should always do without. Far from it. It just encourages us to assess our actual priorities in life and to spend in accordance with them.

        The natural extension of this idea of money as energy is that if we can accrue enough money and can live very frugal lives, then we can live without work and reach true financial independence. For me, it was an extremely exciting revelation that money represented my time both in terms of the work that went into getting it, but also that it represented a way to avoid working for the rest of my life.

        The wall chart – the early retirement financial snapshot

        Every month I update my blog with a quick review of my finances and include a graph that has three lines covering my monthly income, expenses and investment income.

        The top line (blue) is monthly income
        The middle line (red) is monthly expenses
        The bottom line (orange) is investment income
        The graph is broken down into months and for me goes out to 2020 (not all of it is pictured here)
        I keep my actual income and expense numbers hidden because they aren’t really relevant

        The purpose of the wall chart is to be accountable and to be able to see long term progress to provide motivation. I have to say it’s been great for both for me. It’s great for seeing the big picture very quickly, for example:

        1. The gap between the income line and the expense line is the amount of money I’m saving per month.
        2. The gap between the expense line and the investment income line is how close I am to financial independence – once those lines cross over, I could live on passive investment income alone if I chose to.

        The knowledge that there is a definable time left until financial independence is extremely exciting and I have to admit that as I was reading the book and came to this part I was very keen to try it myself and couldn’t wait. It hasn’t disappointed.

        I enjoy doing my budget and tracking my expenses so I can enter the data into my graph and see how I’ve done compared to last month.

        In summary

        If you haven’t read this book yet and are interested in personal finance, frugality or early retirement then you really should because it’s become the go to book particularly for financial independence. It’s been around for a while now, but is just as relevant today as it was when it was released in 1992.

        It’s full of interesting case studies and anecdotes and isn’t full of financial jargon or complicated investing advice. As always, I recommend trying to get a copy from the library or from a second hand shop before buying but if you decide you need a copy buying from Amazon using any of the links in this article will help support Free in Ten Years.

          How much money do I need for my early retirement?

          Early retirement to the country

          A paddock of sheep is moved to more fertile pasture

          Many people who are asked what they would do if they won the lottery, frequently say “I would quit my job immediately”, or “I’d tell my boss to get stuffed!” without realizing that the dream of early retirement is often closer than it appears. As I discussed in my post on reducing spending, the amount of money needed to retire depends to a very large extent on the amount of money you will need to spend each year.

          If you MUST have an expensive annual holiday, or drive a brand new Mercedes Benz, then clearly you will need more money to retire. If however, you simplify your lifestyle by realizing that it is actually impossible to achieve meaningful happiness by spending money alone, your nest-egg required will shrink.

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