I’m sure every single one of you reading this has flirted with impulse spending in the past, maybe a lot. I certainly have. Even though I would like to think of myself as a rational director of my own money, I simply know that isn’t always the case. But a few pounds here and there don’t really matter, right? Well, research suggests Brits spend a whopping £144k over their lifetimes on impulse buys, which we may later struggle to justify with 30% of impulse purchases followed up with feelings of regret. In this article, I’ll help you to understand more about impulse buying and why we do it as well as some tips on how to control impulse spending.
Keeping a lid on my impulse spending helped play its part in me saving a house deposit (>£20k) in only a year.
What is impulse spending and why do we do it?
These are the spontaneous, unplanned purchases. This can range from an innocent chocolate bar being lobbed into your trolley all the way up to spontaneously buying a £5,000 holiday (!) or even a house.
“a consumer experiences a sudden, often powerful and persistent urge to buy something immediately”Rook, 1987 (p.191)
People tend to impulse buy for one of a few reasons:
- Fear of missing out
- Thinking you’re saving money
Traditionally, economists view the world through the lense of a consumer being rational. This means laboriously weighing up the pros and cons of each option and making the most logical spending decision based on their needs and resources.
However, we know this isn’t always the case. Knackered after a long day at work and the beer and chocolate bars just won’t stop staring at you until you drop them into your trolley? Ever been bored and ended up coming home with a statue of Winston Churchill? Yeah, unfortunately, that isn’t a made-up example, so I know I’m far from being a rational consumer (after my decision regret creeped in, I returned it swiftly).
As a general rule, try to remove your emotions from most of your personal finance decisions. We’ve all got desires and biases that lead us astray at times.
FOMO (Fear of Missing Out)
If the retailer puts a special time-limited deal on with the product, then beware. This is playing on your scarcity bias. Typically people feel the effects of a loss more than a gain, and as such it feels like the better option is to secure the product now, rather than miss out on the special offer and not be able to purchase it at a later date.
Thinking you’re saving money
Pricing is an influential factor in your spending decision, with a survey by MYJAR.com showing 70% of people were more likely to buy something on impulse when it has been reduced in price.
However, just because you may have saved £20 on the list price of that shirt down from £80, you’ve still parted ways with £60 that you weren’t intending to.
Even though you may be drawn into an impulse buy via one of the other 3 reasons above, over time it can develop into a habit. A way of dealing with a particular situation or feeling that can be hard to break out of.
This is a topic that warrants its own article, so I won’t dig into the details here. However, if you want to understand more about habits, I would highly recommend Charles Duhigg’s “The Power of Habit“.
Is impulse spending bad?
You may be quite contented with your impulse purchase, in which case is there even a need to change your behaviour?
If your impulse spending is consistently making you miss your budget, then now is the time to change behaviour so you can start to work towards your money goals.
However, if you already have a budget that gives you a sufficient monthly personal profit, and you have budgeted for “fun money”, then this is your money to splurge as you see fit! If this is on impulse buys, then go for it! The caveat is that if your impulse buys cause you to miss your budget, you’ll need to look at changing your behaviour.
Just take a minute to reflect on any times when you are susceptible to making impulse buys. If you can’t think of any now, just be mindful of these areas in the future when you find yourself making an impulse buy. This is so important as it will help you to put in place solutions to reduce your impulse spending.
Is it always at the grocery store, or only when you are idly browsing the bookshop? For me, I’m clinical in the supermarket and only buy based on my list, but whenever I’m browsing my local bookshop, I get suckered into buying the exclusive signed edition of the book I’ve been eyeing up, as I’m worried it won’t be there when I go back.
These are unique to you, so think of the places where you typically get caught out with impulse buys.
Think of your feelings when you normally impulse buy. Are you always hungry when you impulse buy in the supermarket? Or are you always feeling down when you end up buying a new shirt online?
Think of the timing. Is it normally always payday? Every weekend? Or completely random.
How to control impulse spending
Make a budget
If you haven’t already, make yourself a budget. This will allow you to see how much “fun money” you have to use on a monthly basis.
You can use this “fun money” however you please, so this can enable you to have guilt-free impulse buys as long as it falls under budget.
However, if you do find yourself impulsively spending over and above your budget, then…
Prevention is better than cure
If you know that a certain place or a certain mood or a certain time is responsible for most of the times you impulse buy, then try to deliberately stop going shopping when you know you’re at your most vulnerable.
For example, if you know that you are susceptible to buying a tonne of extra items when you go grocery shopping hungry, then make sure you only go shopping when you’ve eaten, or better yet shop for it online.
If you know you always end up buying a top when you’re bored and idly browsing online, then try to figure a different activity to do when you’re bored.
Have a list
This applies to almost all places that you spend money. Be it a supermarket, a clothes shop or shopping online.
As part of your budget, you would have specified the amount of money for each category that means something to you. Having a list when you go into these shopping “arenas” will keep you focused and reduce the temptation to even look for additional items, maximising your chances of staying in budget.
The key is to be mindful and intentional with your spending, and a list is the way to do it. If you have the budget for it and you’re going out with an idea of what you want, then this is a mindful and intentional way of spending your money. However, if you go in with this list and come out spending 3x the amount you intended, you’re back into impulse territory.
Be wary of offers
Retailers try to get you to spend money you didn’t intend to part with by giving you an irresistible offer. Remember, even if you saved £20 on widget X, you still parted ways with the cash that you didn’t intend to spend, so it is not a saving.
Sleep on it
If something catches your eye, take a picture of the product or make a note of the product code, price and where you found it.
Walk away and wait for at least 7 days – set a reminder in your calendar when the 7 days are up if you want.
If you still want it after the emotion has dissipated in the 7 day period, then be my guest (as long as it fits within your budget).
Understand the trade-off
Everything in life is a trade-off. If you struggle with keeping your budget due to impulse buying, then you’ll need to constantly dip into your savings each month (or take on additional debt) to pay for it. This means less money available to work towards your financial goals, which is the trade-off.
Think of it this way. If we all on average spend £200 a month on impulse buys (this isn’t made up), then this is £200 that could have otherwise been invested for our long term financial goals.
This isn’t a trivial sum of money, either.
If we invested £200 per month for 40 years, earning an 8% nominal return, we would have £626k! Wow. This is due to the magic of compound returns.
Think of your purchase in terms of time
For most people, you trade time for money. Working out your hourly, after-tax rate is a good way to make yourself understand if the impulse purchase is worth it.
This way, if you calculate your after-tax hourly rate is £10. This means that when you’re faced with the impulse to buy a new £50 shirt, you can just catch yourself and ask yourself if you would still buy it if you knew it cost you 5 hours of your time to do so.
I will do a more thorough post detailing how to calculate your hourly after-tax rate, but a brief calculation is to:
- Go to The Salary Calculator take-home pay calculator
- Fill out the details specific to your situation.
- Take the subsequent daily take-home amount and divide by your average daily working hours, typically 7-8 hours per day if you work a standard 9-5 or 9-6 job.
Restrict your resources
You can only impulse buy if you have the money available to you. If you have a budget of say £50 to go grocery shopping, then try taking out £50 in physical cash and leaving your cards at home. This will force you to spend your budgeted amount or less, as you can’t physically spend more.
Looking for a way to stop impulse buying food? Or how to stop impulse buying clothes? Whatever your weak spot is, don’t beat yourself up about it. Having a moment of self-reflection to understand more about how you specifically are vulnerable to impulse buying, and then putting in place a plan to help control your impulse spending, you will find it much easier to stick to your budget.
Setting a good budget, and then sticking to it is key to building a secure set of personal finances. Remember the trade-offs in each purchase, and find a solution that works for you.
Have you found a solution that helps you control your impulse spending? Drop me an email via our contact page or leave a comment below!
“Brits spend £144,000 on ‘impulse buys’ during lifetime, research finds”. Independent. Link here.
Scarcity bias. The Behaviours Agency. Link here.
“Splurchase! The how and why of the impulse buy”. The Mind Lab. Link here.
Iyer, G.R., Blut, M., Xiao, S.H. et al. Impulse buying: a meta-analytic review. J. of the Acad. Mark. Sci. 48, 384–404 (2020). Link here.
Ahh the emergency fund – the safety net of all safety nets. Everyone tends to…
Looking to trim back your subscriptions and cancel your Virgin Active membership in the UK?…
We all love the epics that are shown on Sky Sports, but we’re not as…
With nearly 17% of jobs getting paid weekly, you’re certainly not alone in trying to…
You’re looking to cancel your Wall Street Journal (otherwise known as WSJ) subscription in the…
I always harp on about giving your finances a shot in the arm by cutting…
If you’re looking to invest your money to reach your financial goals, you’ll be glad…
Sick of the gym or found a better option? Nice. Most gyms are an absolute…
Wanting to cancel your monthly beauty box subscription? We’ve laid out the steps you need…
Bored of your subscription or wanting to move to another provider? We get you. We’ve…