Impulsive Shopping: The Cash-Consuming Virus and How To Avoid It
We’ve all done it. A weekend where $500 quickly dissipates on a pair of sneakers and Champion’s new hoodie. Scouring through our jeans in the laundry for the lost $100 note, only to realize we spent it last week on impromptu food sprees. Asking our parents for a night out’s cash, even though they just deposited our allowance last week.
Impulsive spending is a mess that everyone has periodically endured, but if it’s a mess you want to clean up, this article’s for you!
As multimillionaire entrepreneur MJ DeMarco said: each $1 bill saved from impulsive spending is an “embryonic start to a new income stream”. While that’s slightly exaggerated, the main idea is that saving from wasted purchases is something that could finally allow you to invest in the growth of your money and gain an incremental sense of financial independence: both of which pay out far higher dividends compared to the satisfaction of owning the latest trends.
Using the following 2 rules as a basic criterion to stop you from impulsive purchases, you will sequentially be able to save yourself a significant amount of cash over time… and who doesn’t like some extra cash? If that sounds enticing, read on further!
1. The 3-day Want Rule:
I can’t even count how many hundreds or even thousands of dollars this rule has saved me over the years, and it’ll undoubtedly save you the same. It’s an odd psychological trick that exposes our momentary lust for instant gratification: we want something and we want it NOW. This is a wildly pervasive issue that causes most teenagers and young adults to waste far more money than necessary, and you’ll know this is true because there are certain things you’ve bought that are worn for several days after the purchase, and then remain concretely untouched afterwards. Shortly later, regret for buying that hoodie or pair of shoes starts looming, yet you unknowingly repeat the whole process again during the next shopping season because you haven’t realized your mistake: you’ve misconstrued your desire for the product with the desire for the experience.
The satisfaction and sense of pleasure that encompasses you after a purchase is the primal weapon of the “instant gratification monkey” in your mind (as Tim Urban calls it). It’s supremely why you don’t actually desire 80% of the products you think you want: you subconsciously just lust for the feeling that comes with purchasing items, and not the actual items themselves.
I want you to forego making the initial mistake of buying things you won’t wear within a week, and you can do that by using – what I’ll call – the 3-day Want Rule:
Delaying your potential purchase by 3 days leverages time to combat our mind’s futile attraction to instant gratification, and successfully depicts what you actually desire. If we force ourselves to wait, one of two things will happen:
a) The impasse actually increases your desired gratification (i.e. you want the product more), which would suggest that it’s an item you’ve wanted for a while.
b) The 3-day wait causes your lust for the product to wither, which would show you that you didn’t really want the product, you just wanted the gratification and heightened satisfaction that comes with experience of buying the product.
This Rule will allow you to differ between wanting the actual product versus the experience, which is precisely why it’s a powerful tool to consult before purchasing anything.
So, each time you feel the sudden need for a certain something – for anything, clothes, shoes, concert tickets or accessories – just pause and take 3 days. If your desire for the product shrinks, you’ll immediately know that it was just a moment of shopping impulse.
Don’t just take my word for it though: psychological studies linked below have explored that impulse shopping is a real issue and it’s growing, so certainly give this rule a shot before you splurge at your nearest H&M!
Study showing 62% of online purchases are impulsive: https://www.theguardian.com/media-network/2015/nov/26/psychology-impulsive-shopping-christmas-black-friday-sales
2. Cost Per Use (CPU):
This is another logical trick that’ll allow you to both retain a significant deal of cash in your pocket, and ensure that your spending is worthwhile. Before we get into how, let’s consider this:
Ask yourself what is (or would’ve been) the more beneficial purchase?:
· $500 white sneakers vs $500 Yeezy’s?
· $150 high-quality pair of jeans vs $70 mediocre pair of jeans?
· $600 Plain Luxury Leather wallet vs $450 Tiger-Printed Gucci Wallet?
Hopefully, you’ll figure that even if it’s more expensive, the former option is the better investment in each case. Why? How? Cost Per Use.
If you splurged 500 bucks on a pair of Yeezy’s, that money is as good as gone once the year’s over. Trends come and go, so whilst wearing Kanye’s bestsellers will score you some points with your crew in the short term, you’re 90% not going to wear them once the trend disappears. In contrast, a timeless $500 pair of white sneakers will pay you dividends over the long term, because you can consistently wear them anytime and in anyplace.
Still need convincing? Take the mathematical perspective:
Cost Per Use of Yeezy’s: $500/180 days = $2.78 per day for the 6 months that its trendy.
Cost Per Use of classic White Sneakers: $500/ 1460 days = $0.34 per day for the 4 years that you can use a pair of good-quality, timeless shoes.
As you can see, you’d be paying almost 10 times the Cost Per Use of the sneakers for former option because the trend would inevitably fade. Undoubtedly, perhaps the Yeezy hype exceeded 6 months, but the fact still remains that the trend evaporated and therefore any money you spent on them would’ve essentially been futile.
Additionally, you might even be thinking, “Screw that Saahil, $2.78 per day is nothing!”. That may be true, but if you indefinitely repeat this with many different purchases, you’ll cost yourself far more than 3 bucks. In fact, CNBC estimates that continuous impulsive shopping costs the average consumer $5,400 per year, and you wouldn’t even notice this level you’re spending at because the money didn’t come from you! Here’s exactly where the problem surfaces:
Taking 5 grand a year out of your parents’ paychecks for things you won’t use in 3 months isn’t worth the time they spent earning that money, and it certainly isn’t the roadmap towards ameliorating your personal finances.
Now I’m not saying don’t spend money at all: I’m simply pointing out that if you’re going to buy an expensive product, ensure that it’s one which is useable over time rather than a temporarily trendy one. Think CPU!
To solidify the logic behind thinking CPU, let’s do the 2nd example too:
Cost Per Use of High-Quality jeans: $150/ 1095 days = $0.14 per day for the 3 years that you can use a great, durable pair of jeans.
Cost Per Use of Low-Quality jeans: $70/180 days = $0.39 per day for the 6 months that you can use a substandard pair of jeans before the colors fade and the fit loosens.
Again, you’re paying almost triple the cost per day for the inferior jeans simply because it’s not useable for as long its high-quality counterpart. Even if the high-quality pair is initially more than twice as expensive, you’re getting a much more impressive return on your investment because you will utilize it for far longer, unlike the easily-dismantled inferior pair.
Hopefully this enlightens you to the fact that you’re astronomically better off acquiring more expensive yet timeless items, because they’re pieces that would last you years and still satisfy your expectations. It’s critical that you ingrain this: if you’re incessantly buying goods with high Cost Per Use, you’ll indefinitely be stuck in cycle of wasting your money.
Try to start consulting the Cost Per Use mechanism from today itself: it’s a basic mathematical realization that’ll save you from futile purchases, and it’s one that’ll assuredly pay off!
Well, there you have it! Two simple rules that I consider a mental checklist before purchasing anything: two simple rules that saved me enough money to start investing and growing my wealth from the age of 16 itself. These rules will give you the ability to save on impulsive purchases and therefore allow you to buy the big thing you’ve wanted for ages, or invest in the stock portfolio you’ve been looking to improve, or even pursue the side projects you’re dedicated to growing: just like it did for me.
But, the greatest benefit of implementing these rules and neglecting ridiculous purchases over time is the reduced reliance on your parent’s money: a minute taste of the feeling of financial independence. Believe me, that’s a feeling greater than wearing any pair of sneakers, hoodies, clothes or watches. It’s one you’ll strive to retain once you feel it for the first time.
The habit of incrementally becoming more and more independent when you’re young itself is one that, I believe, will have an incredible Dividend Payout down the road; and better yet, its one that you can start working on today!