“Making money is hard. Keeping money is really hard.” – Paul Kindzia
A very common problem to building wealth is depleting hard earned money on impulse purchases. Who hasn’t experienced that deep conviction to purchase something that we are just absolutely convinced will make ourselves happy for a very long time. But how soon after we make that purchase do we realize that not only did the novelty of the item quickly wear off, but we committed financial resources which prevent us from pursuing our other long term wealth goals and we just added to our overall debt problem.
I’ve seen plenty of clients make large impulse purchases from cars to houses that impact their wealth plans significantly (or completely derail their plans permanently).
This isn’t to be confused with never buying nice things or upgrading our lifestyle. Those are all the benefits of being wealthy. What we are trying to do is avoid situations where we make poor decisions as a result of impulsive and emotionally charged motives that contradict our own long term self-interests and goals.
I’d like to share 5 habits that really work for me. These not only help prevent me from making bad decisions but they also reduce the stress and anxiety of the realities of always wanting more.
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Build in time buffers for larger purchases of any sort.
I call these “time circuit breakers.” I like putting specific time restrictions for purchases that exceed certain levels. For instance, I may allow myself instant approval for items less than $200.00. But for items from $200 to a few thousand, I need to wait a few weeks to really think through the decision unless it is more of an emergency (like to replace a broken refrigerator or air conditioning unit). All expenditures over a few thousand dollars require an automatic waiting period of say three months (or more).
I can’t believe how many times I was “absolutely convinced” that I really wanted something and then just a week or two later my desire for that specific item passed as well and I was so glad I didn’t commit myself financially to parting with my hard earned money. I realize that my desires were just episodes of emotionally charged weaknesses to compensate for something else that was happening in my life.
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Write it down.
If you really want something, write it down. Better yet, make a collage or clip out pictures of what you think you really want. Keep a list of all the things you want and the date that you originally wanted that item. Periodically review that list and rank the items by priority. Notice how many times things that were once really important to own quickly move either down the list or even completely off the list. It’s not until we honestly review this list do we realize how often we fool ourselves.
But you may often find that if you wrote something down, clipped out pictures, saved websites and weeks or months later you still want that item, then it’s ok to “lock onto it” and use it as a specific goal or accomplishment. If you think you really want a particular; boat, car, house, beach condo, motorcycle, horse, and you do all the work necessary to accomplish that goal, then go and make it happen by making your dreams come true. Then you will really enjoy ownership of that item because you know you really wanted it and did all the work necessary to obtain it and hopefully you eliminate buyer’s remorse.
Writing it down also gives you more time to shop, investigate, research and compare. What color do you want? What options or features? How much do those things cost? What brand? Is it worth the upgrades to you? If you are going to buy something significant, make sure you get what you really want and the way you want it. Don’t make rash decisions for your big purchases. Extra research prevents buyer’s remorse.
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Take inventory of your house for former impulse purchases.
When I am about to make an impulse decision, I try and walk around my house and just look at all the other stuff that I have purchased over the years (some of which were undoubtedly impulse purchases). Remind yourself of past failures in spending. Be honest if adding “more stuff” to the garage or basement will really keep you happy in two weeks or if, “This too shall pass…” How much stuff do you already have that is just collecting dust or is no longer making you happy even though at one point you were absolutely convinced that one item was going to be the key to your everlasting happiness?
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Go treat yourself to a much smaller purchase.
Look, sometimes we are just having an emotional day/week/month and need a little treat or to spoil ourselves if the big bad world is kicking our butt. Go treat yourself to something much less expensive. Go for a massage. Go away for the weekend. Go fishing, or hiking, or buy yourself a new pair of shoes. Those items may not be prudent financial moves but they are much better alternatives than buying a large item on impulse during a moment of weakness and insecurity. The last thing you want to do is wake up in a new house one day with a 30 year mortgage and think, “My God, what have I done to myself?!?!”
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Review your written long term wealth goals and action plan.
When we have written long term wealth goals and action items, we can honestly hold ourselves to our own set of standards. What do you REALLY want in life? What do you really want to accomplish? What are you willing to do to get there? There are a million distractions out there from jet-skis, cars, clothes, vacations, jewelry, houses, cabins, boats, food. It’s up to each of us to determine what is best for us and not fall for all of the distractions that move us further away from our own unique goals and objectives in life. If you really want to accumulate a million dollars or more, you can’t start blowing all of your money when you reach $250k.
When we exchange our cash for goods and services, we end up with the goods and services and not our cash.
Good habits lead to good behaviors. Good behaviors lead to good decisions. Good decisions lead to a good life. Live by principles and choose wisely.