According to a study from Vanquis, people in the UK make an average of seven large impulse purchases each year. This adds up to at least £1,050 a year in spending that people later come to regret.
Vanquis tasked mathematician and University Challenge star Bobby Seagull with finding ways to avoid “buyer’s regret” – the feeling that many people experience after spending on items they later decide are not worth the money.
He calculated that waiting an average of two days and 21 hours could help you decide if a purchase is worthwhile or not. By following this simple rule, he believes that you can avoid buyer’s regret and reduce overspending in the future.
Whether you take this approach or not, finding ways to cut back on overspending is certainly important. If you can reduce unnecessary expenses, you may have more opportunities to invest or contribute to your pension, for example.
As a result, reining in your spending could mean that you are better able to meet your long-term financial goals and enjoy a higher standard of living later in life.
Read on for five tips that could help you cut back on unnecessary spending and boost your finances.
1. Be more mindful about your spending
Often, you may overspend because you are not being mindful of the purchases you make. This is especially true now that you likely make a lot of transactions online or using a card, rather than cash.
It is easy to lose track of exactly what you spend and consequently, you may not always consider how your spending could affect your long-term financial plan.
Additionally, you may fall victim to “subscription creep”, the gradual build-up of direct debits for services you rarely use, such as gym memberships or streaming services.
These expenses could eat into your budget each month because you are not being mindful and paying attention to the money leaving your account.
Budgeting is important because it encourages you to take note of each transaction and consider whether it is necessary or not. There are lots of excellent budgeting apps that make this very simple.
When you take this mindful approach to your wealth, you may find that you eliminate a lot of unnecessary expenses and make more considered decisions about your spending.
2. Take a break before making a purchase
Impulse purchases are a common cause of overspending, which is why Bobby Seagull recommends a cooling-off period before buying certain items.
He also suggests waiting a different amount of time depending on the item that you buy. For example, he calculated that you should wait 1 day and 11 hours before purchasing clothes if you want to avoid buyer’s regret.
While you don’t need to follow the specific times he calculated, waiting a short while before making a non-essential purchase may give you clarity. In many cases, you might decide against the purchase and avoid overspending as a result.
3. Consider how much value a purchase adds to your life
When you delay a purchase and give yourself time to consider it, you may find it useful to think about how much value a certain item adds to your life.
Some purchases do not improve your quality of life or create meaningful experiences. Consequently, you may be more likely to see them as a waste of money.
The Vanquis study found that people regretted some purchases far more than others for this precise reason. For instance, footwear was top of the list with 19% saying they did not feel shoes were worth what they paid for them.
However, people tend to be far less prone to regret purchasing valuable experiences. For instance, holidays and weekends away were bottom of the list with only 6% saying they regretted spending the money. People were also happy to spend money on items that they regularly used, such as beds and fridges.
As such, you may want to think about the lasting value of a purchase before spending your money. It might also be useful to calculate a cost-per-use price by dividing the cost of the item by how many times you expect to use it.
4. Be aware of emotional spending
Emotional spending is a well-documented phenomenon that affects many of us and it is important to be aware of it if you want to reduce overspending.
Research shows that strong emotions often drive people to spend more money. According to Credit Karma, a study found that 22% of people said their spending decisions were driven by feelings of depression, while 28% cited boredom.
Your perception may be that buying something will make you feel better. However, using spending as a coping mechanism in this way may lead to more stress in the future as it can cause financial problems.
It is not only negative emotions that lead to overspending either. In fact, happiness is the biggest trigger, with 29% of people saying that they spend more when they are in a good mood.
Everybody experiences emotional spending in their own way. As such, it may be useful to pay attention to how you feel when making purchases and how certain emotions change your habits.
If you can recognise certain situations that trigger emotional spending, you may be able to avoid poor spending decisions.
5. Focus on your goals
Having goals to focus on may make it easier to change your mindset and adopt better spending habits. Every time you are tempted to make a frivolous purchase, you can think about how this extra spending could disrupt your progress towards your goals.
You may have a clear goal for retirement saving, for example. Excessive spending now could make it harder to contribute to your pension and, as a result, you may not be able to achieve the lifestyle you want in retirement.
By framing it in this way, you may be more likely to take an active approach to reducing spending, making it easier to resist impulse purchases.
Working with a financial planner can also help you see how much difference it would make if you were able to find some extra funds to contribute to savings and investments. This could give you more motivation to find ways to reduce spending.
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This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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