- Nearly 40% of all money spent on e-commerce sites are the results of impulse buying – it’s big business
- Impulse buying is bad. Left uncontrolled, it leads to credit card debt.
- How to avoid impulse buying
- Are you compensating for something?
- We offer suggestions for alternative activities that are good for you
What is Impulse Buying?
The dictionary says:
Do you impulse buy?
Factoid: Nearly 40% of all money spent on e-commerce sites are the results of impulse buying.
The two most influential factors when making a spontaneous purchase are the special sale price (for a limited time) and free shipping.
Let us ask again, do you impulse buy? Be truthful to yourself now.
For business, impulse buying is a huge opportunity! There is a science behind encouraging consumers to do so. Read How to Sell to Impulse Buyers. Retailers describe these shoppers as emotionally-driven, favoring instant gratification, social status-conscious, and image-concerned, anxious, or less happy/depressed. Techniques that retailers use to encourage impulse buying include:
- Special sale price, usually “for a limited time”. Why do you think that is?
- Brick-and-mortar retailers place nick nacks near the checkout counters.
- E-commerce sites with their easy to use web site with lots of impulse buying suggestions such as “Related items”, or “What others are buying”.
- The one-click checkout makes it very easy. Too easy. Scary easy. One click and it’s yours. Money changes hands, yours into theirs. No longer do you have to put in your credit card info, your shipping address, confirm the item and quantity. Instead, it’s “bam!” And it’s done.
Why is Impulse Buying Bad?
Impulse buying is bad because it puts your ability to save money each month at risk, depletes your savings, gets you into and debt, and eventually erodes your freedom.
“Freedom?” You ask.
“Yes, freedom! Freedom to eventually do anything you want, any time you want, and being able to pay for it. And pay for it just once.”
“Paying for it just once?” You ask.
“Yes, just once. When you can’t live within your means, you’re going into debt.”
For most consumers, it’s usually credit card debt that gets them into trouble. When you’re in debt, you pay for the amount you borrowed (the principal) and interest on that principal. And your total payments snowball in comparison to the original amount borrowed. When you make a monthly payment, the first portion of that payment goes toward the interest for borrowing the principal. Then what remains go towards lowering the amount you borrowed. Let’s go through a couple of examples:
Example #1. You spend $1000 and charge it against your credit card. Each month, you decide to only pay 4% of the amount owed, or $40/month. Let’s assume your credit card is charging you 20% APR (annual percentage rate). Using the Bankrate.com credit card calculator, we see that it would take 74 months (over 6 years) to pay off the $1000. With interest, you would be paying a total of $1,560 for a financed purchase of $1000. So you’re paying 1.5 times the original purchase price. That’s what we mean by paying for it more than once.
Example #2. Let’s say, you’re in a bind and can only pay $35 a month and that you’re credit rating is not good, so you’re paying 24% APR. It would take you 98 months (that’s over 8 years!) to pay it off, and it would cost you a total of $1975. That’s paying for the $1000 purchase twice!
Everything costs more when you’re in debt. So going back to our assertion that buying impulsively will eventually get you deep into debt and erode your freedom…
If you carry a credit card balance
and just make the minimum payment each month,
you would be paying exorbitant interest rates
on the remaining balance.
This is like putting yourself into
the modern day equivalent of indentured servitude.
Don’t do this!
Admittedly, that was a bit dramatic, but hopefully you got our point?
How to Avoid Impulse Buying
Here are a number of ways to avoid getting into trouble with impulse buying:
Stick to Your Shopping List
Prepare a shopping list for the things that you need. Not want. The shopping list is like a grocery list. They both need to be written (on paper or digital like on Evernote). For big ticket items, write down the features that you need, so you don’t over buy and spend more to pay for unnecessary bells and whistles. If the item is not on your shopping list – simply don’t buy it. If you realize you need to add something new to your list, do so. Ah, but don’t buy it at the same moment (or even the same day). Think about it… for how long?
Sleep on It
Yes, get a good night of rest. And if you still need it in the morning, add it to your shopping list. What if you forget about it in the morning? That’s easy. Then it wasn’t a need after all.
The items on your shopping list should be accounted for in your monthly budget…
Establish a Monthly Budget
Do establish a monthly budget. In our Budgeting 101 article, we discuss the importance of living within a budget, show you how to create a monthly budget, provide an example spreadsheet template to get you started, and offer suggestions on how to stick to your monthly budget.
Weigh the Lost Opportunities
When we buy one thing, we give up the opportunities to use that money elsewhere. Something has to give. Nothing is free. For an impulsive buy of XYZ (fill in your impulsive buy item), you might have to give that next weekend getaway, . It’s lost opportunities that you need to consider.
Remove the Temptation
Make it harder for yourself do impulse buy. Consider these actions:
- Don’t stop by the shopping mall on your way home. Even on payday Friday.
- Don’t go into the convenience store when filling up your car with gas. Pay for the gas at the pump, and avoid the temptation.
- Remove the Amazon, Best Buy, eBay, Etsy, and other e-commerce apps from your mobile device.
- Remove the option to check out with one click. Remove your credit card info from your online profile/account. (This also reduces your risk of exposure should these merchants leak your financial data.)
- Avoid browsing web sites that are littered with ads. Instead, visit web sites that are impulse buying-“safe”, like Pragnotion.com. (Notice we purposefully did not put in hot links to e-commerce sites in this article.)
- Unsubscribe from promotional emails from these e-merchants, so you’re not bombarded with ads that tempt you all week.
Are You Compensating for Something?
Lastly, we want to say that while impulse buying is clearly a bad habit, it is probably as a result of your trying to compensate for something in your life. Whether you’re aware of it or not, your impulse buying is likely a symptom of a root cause that is something else… Could it be stress or anxiety about something? Something at work worries you? Something at home? A personal relationship issue? Do you have feelings of doubt, inadequacy, guilt, shame, or other emotional issues? You need to figure this out. Seek professional help if needed.
Meanwhile, instead of impulse buying, substitute it with something that is actually good for you. Here are our suggestions:
- Exercise: Do some yoga in the morning, or take an evening stroll after dinner instead of going online and buying things impulsively.
- Get more sleep: Go to bed earlier an hour or two, and get the much needed 8 hours of sleep, instead of browsing e-commerce sites.
- Spend quality time with your loved ones: Do what your significant other, spouse, or kids want to do. (Hopefully it’s not impulse shopping!)
- Reach out to your extended family and friends: Catch up on the good old times. Do some relationship maintenance.
- Focus on your hobby: Enjoy some “me” time and relax. (Hopefully this does not involve any impulse buying?!)
- Set your goals: Re-focus on what is important to your life. Use the time to set your lifetime goals.
- Establish or refine your budget: Read our Budgeting 101 article.
Hopefully these ideas will help you get your mind off of risky activities that lead to impulse buying. Good luck. We wish you the best.