Wednesday, March 5, 2014

3 Steps to Stop Impulsive Spending

Wealth should not be defined by the amount of money or assets a person has at the moment. The true measure of wealth is a person's ability to generate, manage and build streams of income that will always provide enough.
"Gold is reserved for those who know its laws and abide by them" - The Richest Man in Babylon
One of the laws of wealth is to be wise with our spendings; and being wise means avoiding impulsive decisions. However, this post is completely useless if you do not know why you need to stop spending impulsively; but if you really want to get out of the rat cage, then here are 3 steps that will help you gnaw your way out of the cage.

1) Anchor 

Remember that time when you were all hyped-out over that new smartphone with the fingerprint sensor? that vintage handbag on the shelf? those designer clothes on discounts? that mechanical Swiss watch?

Yup, you bought them. They were expensive but you heard voices in your head, "It's okay, I will be receiving another paycheck soon" and 10 minutes later, you were holding the receipt in your hands - excitement was all over the place.

We all know how that story ended; that excitement was short-lived. That is why we keep looking out for that next big purchase, longing for another quick dose of excitement, time and time again.

When that excitement wore off and you were left with a growing sum on your credit card statement, how did that feel? You struggled to make ends meet. How did that feel?

So, the next time you get hyped-out over an item and you can't wait to whip out your wallet, remember the negative parts of your previous impulsive purchases. Remember that feeling of regret, that excitement that was short-lived.

That, my fellow white-collar rats, is known as anchoring.

2) H.A.L.T.

This technique has been used actively to help people manage their addictions and the triggers that cause them to lapse and relapse. It is scientifically proven that we make bad decisions whenever we experience any of the symptoms below:

HUNGRY/HAPPY: Whenever you're hungry or happy, you'll make impulsive decisions. People generally spend more during the weekends because they feel a temporary spike of happiness.

"It's the weekends! Let's have fun! Let's spend!"

ANGRY: Whenever you're angry, you'll make bad decisions. Period.

LONELY: It's a Friday night, but you're alone and you decide to throw caution to the wind. "I'll do whatever I want to make myself happy".

TIRED: You've had a long day at work, you're tired and you need a new pair of black shoes. Most of the time, you'll just grab the pair that fancies you most and screw the thought about finding one that is reasonably priced.

When you're queueing up at the cashier, ask yourself if you're Hungry, Angry, Lonely or Tired. If you are, then HALT your purchase. You'll make a better decision the next day when you're using your cool-headed logic.

3) Consciousness & Accountability 

I've struggled with the thought of tracking my expenses for a very long time before finally sticking to it. Firstly, it sounds like a hassle and you'll most likely tell yourself that this is not the way to live life. 

"I'm a free man, I'll do whatever I want with my money". Little did I know that it was my ego talking; the ego of a white-collar rat.

I've always thought that tracking expenses was controlling and restrictive. Budget? Damn, I hated that word. 

But it's really not about that. Tracking your expenses has a far greater effect than sticking to a restriction.

When you start to track your expenses, you'll start to be very conscious of every freedom chip that leaves your wallet. Soon, you'll be more conscious about your decisions.

And that made all the difference - Consciousness. 

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