A new survey conducted by Bankrate.com reported that a quarter of Americans had no savings to weather financial hard times. It didn’t matter if the respondents were relatively higher earners: Folks are spending pretty much what they make. Impulse purchases are definitely a culprit here, along with the refusal to make saving a priority.
The world of retail is exceptionally good at keeping the Rainy Day Fund drier than the Mojave Desert on the Fourth of July, as retailers bank on you parking your money in things that depreciate in value rather than in an account that earns compound interest. Some retailers have adapted to the new challenges of emptying consumers’ pockets by allowing shoppers to order online, then pick up the items in the store where the snares of impulse purchases are set with mercenary skill.
The age-old secret to curbing impulse buys -- using cash -- might help; and, sure, you can start a slush fund for special purchases. But if you are susceptible to impulse buying, there may just come a day when you succumb to the thrills of buying something you don’t need without knowing why you did it. And if you charge it to a credit card, and that purchase pushes your balance past 10% of your line of available credit, you could hurt your credit score. Why? Your amount of debt accounts for a whopping 30 percent of your credit score – and charging more than 10 percent of your available credit can do some damage.
If you hope to avoid the perils of using too much credit by using a debit card, fine. Just keep in mind that a data breach at your favorite e-tailer – or retailer -- could lead to your bank account getting drained by the bad guys.
Yogi Berra might say that the secret to stopping impulse purchases is to stop buying things on impulse. Here are some places to start.
|Groceries You Don’t Need (or Really Even Want)|
Supermarkets and smaller purveyors of foodstuffs are designed to get you in and out in two ways: One is the outer ring where you will find produce, dairy, meats and fish, and frozen foods -- and with the exception of the latter, if you stay to that outer ring, you will not see a lot of the things you don’t need to buy. Start spelunking those dastardly aisles on the inner-ring that is the realm of expensive processed foods, however, and the retail-twitchy among us are doomed. Unless you really do need Lucky Charms and Flowers of Hawaii-scented tea…. (You do not.)
|The Beer Bottle Cap Hat|
This is a catch-all for the ridiculously silly or useless things that we occasionally buy while we are out and about, especially with acquisitive children who think cute or novel items are the fruit that grows on the proverbial money tree.
|Certain Types of Clothing (You Know What I’m Talking About)|
Whether you are shopping online or in a store that sells clothing, you should be on high alert. How many pairs of whatever just hit you with the Stun Gun of Extreme Want do you really need? Take a deep breath, and walk away from the re-issued 1950s jeans. Are they really worth $300? Shoes are also a good example of this. Marilyn Monroe once said, “Give a girl the right shoes, and she can conquer the world.” This may be true, but if you are crippled by debt, expensive shoes are not so much a good buy, as a good-bye to fiscal well-being.
How much extra does it cost to supersize something? Let’s say you do that four times a week: maybe it’s $1 today, but if you do that once a week it’s a full $52 a year you could be saving, not to mention the extra trip (or two) to the gym.
The gaming industry increasingly allows gamers to download new video games for free, but you’re going to pay dearly if you want to get cool stuff that makes the game actually fun to play.
Not much to say here that you don’t already know: It adds up. This financial death by a thousand cuts will not only leave you an angry bird, but the pigs will happily grunt all the way to the bank. Save the money, and the time you spent on being “less productive” (i.e., completely useless).
|Theme Parks & Midway Games of Chance|
While there’s a vague sense of accomplishment to have guided a claw to the perfect spot for it to drop and seize the fluffy blue bunny for the love of your life, it’s also really a lot more expensive than simply buying one. The theme park rides aren’t anywhere near the scariest part of the trip. It’s $100 per person for starters, then there’s parking, food and anything and everything else you buy at the theme park. Camping, anyone?
You stand a better chance of being picked by Adam, Shakira, Usher or Blake to be on The Voice than winning these things. ‘Nuff said.
|Latte & Lunch|
Consider brown-bagging it and drinking the coffee at work -- or bring a Thermos with you! The average American spends more than $3,000 a year on lunch and coffee, according to a recent study.
While saving money might be less fun in the short run, it gets easier and more rewarding once you decide to do it and see the fruits of your self-control as your bank balances start to lift. Furthermore, if your love of impulse buying is leading you to spend more than you earn, the interest you pay from carrying debt will eat away at your future efforts to save. If you’re maxing out your credit cards, too, your credit scores will feel the pain, which will lead to higher interest rates – and probably less savings – for you in the long run.
If you are rigorous, you can have a six-month cushion in the bank in no time -- but you have to take the first step, which in many cases is a non-step. Leave the items on the shelf (virtual or otherwise) and keep your wallet in your pocket.
Adam Levin is chairman and co-founder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.