DO you ever go to the shop with the intention of buying one or two things, but come back with seven or eight? This happens to me all the time, particularly when I go grocery shopping.
I was reminded of spending more than we originally set out to when I met a couple last week. They were concerned about their lack of savings and how nearly every month they end up in their overdraft.
One of the reasons this happens is because, she, in particular, mentioned that whenever she goes to a local shopping centre she invariably spends much more than she set out to. This is causing them a problem, because despite their good income, they have very little in savings, and a large part of this is down to their spending habits.
Last week, for example, she told me how she went to a shopping outlet with her two children, because one of them needed a new pair of socks for school. Fast forward two hours later, and she arrived home with a €150 hole made in their account.
“You know the way,” she said, “the kids see this or that and you end up buying it and you go into Penneys and buy four or five things that cost €10 each, and individually they may not cost much, but when you get to the checkout and the total amounts to €50 or €60 and you wonder how could it be so much, and you can’t put anything back, you’ve come that far.”
Anyway, it was interesting to listen to this couple because I think I know the three reasons why they are prone to overspending.
Back before they had children, they told me how they saved really hard for a deposit on the house they now live in. And I mean saved really hard, because not only did they save a big deposit, but they also paid for their wedding, honeymoon and all the furniture in their home from personal savings.
They didn't borrow a cent, which is laudable, hardly ever went out, didn't take a holiday for two years, and I think the amount they saved and how long it took them is now affecting the way they manage their money each month.
You see there is a term for what I believe they suffer from which is called “Frugal Fatigue”.
They had gone so long without spending any money on themselves that they were sick of feeling this way. They wanted to spend money and it didn't matter how much or on what, because they had some catching up to do, but unfortunately they had gone from one extreme — saving too much — to the other, spending too much.
This is one of the reasons, why I always encourage people to spend guilt-free money on themselves if they can, every month. Of course you can continue to save but you need to build into your budget an amount that you can spend on yourself without suffering from buyer’s remorse (that’s the feeling of regret after having bought something).
I read once that saving money is like running a long distance race: you run at a pace that suits you, but along the way, you stop for that bottle of water which in this analogy is to spend some money. Otherwise that race becomes so long and so monotonous and boring that eventually you will just stop and run no more.
So, stop and take a drink, but don’t empty the bottle either.
The other reason why this couple spend more money than they should, particularly on their children, is because they both work hard and very long hours, and he might spend two or three nights of the week away, so they think they can make up for lost time by buying their children whatever they want, and this is a mistake in my opinion.
You don't need to buy things for your kids to make up for your sense of guilt for not spending more time with them. What they want is to spend time with you, so go play a game of tennis, kick a ball, or go for a bike ride. That would mean more to them than any gadget or toy.
The third reason this couple spend more than they should, is to reward themselves.
Some people feel they have to reward themselves because they work so hard and work very long hours every month.
I am not sure whether this is a valid excuse or not but I have seen people’s bank statements and credit card statements who attest to this logic, and if you were to add up the cost of everything they spend to reward themselves for working, the amount can in some cases be staggering.
Multiplying a typical monthly spend by 12, the figure is huge, and multiplied by 120 the amount spent over 10 years can be enormous.
There is no harm in splurging every month, but if it means you are living pay cheque to pay cheque then you have to stop, and when you compare the value of things in your wardrobe, shed or driveway, to the savings and goals you have given up, it might get you to think a little bit differently.
You may be actually punishing yourself rather than rewarding yourself because your need for short-term enjoyment will prevent you from achieving longer term goals that will ultimately make you feel much happier and for a lot longer.
Some psychologists even suggest that impulse buying is related to anxiety and unhappiness. They also say that impulse buyers are more social status conscious and image concerned.
Everyone behaves impulsively now and then — we are only human after all and a certain amount of impulse buying can be harmless.
However you need to watch out if you buy things without really thinking about what you are buying and why, or if you comfort buy because you want to lift your mood, or you buy something because someone else has one, then you need to be careful.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie