Key highlights
- Impulsive spending is often linked to emotional spending, which can lead to financial distress.
- One solution is to create a budget and stick to it, to avoid overspending and plan for necessary expenses.
- Seeking help from a financial advisor can also provide valuable guidance on how to break bad financial habits and improve overall financial health.
How many times have you gone to the mall and vowed not to spend more than a certain amount of money but when you go you find yourself picking just “everything” in the store? The old version of your watch just had a “new limited edition release that would soon go out of stock if you don’t buy it now!”.
Or you just wake up and have a “craving” for something expensive. These are impulsive spending. Expenses that could be quite gargantuan but are mostly never planned for. Spending decisions were taken in the heat of the moment without much consideration of their financial implications.
Impulsive spending is closely linked with emotional spending. Spending that’s fueled by pure emotions like fear, anxiety, stress or sadness rather than logic and rational thought. Researchers have found out that most consumers who spend emotionally do so in an attempt to take charge of certain areas of their lives when the others are clearly failing.
In an attempt to “feel good”, many have thrown themselves into more emotional ruin and of course financial distress.
Nothing is particularly wrong with taking yourself for a treat once in a while after a stressful day or in the midst of a traumatic experience, the problem starts when it becomes a reoccurring habit and the expenses grow out of proportion.
Depending on the financial situation, there have been cases where people have spent thousands of dollars on items they don’t need just to release some dopamine.
The main problem with impulsive spending is the fact that it is nearly always unplanned. The spender has little or no room for these “August” expenses in their budget beforehand. This may not seem like a big deal but in the world of finance there is no “free money” or “idle money”.
Monies spent on “unnecessary” items could have been channelled towards savings, investments or building a robust emergency fund.
Make a budget
One really easy way to spend without accounting for where the monies went is without a budget. How do you even know your spending limits if you don’t have a tool that tells you when to stop spending? It is ludicrous to spend without having a budget and if you are an impulsive spender it only compounds the issue and hastens the journey to financial ruin.
Solve the underlying issue
Emotional spending is akin to alcohol abuse as a means to “escaping” the issues on the ground. And as with alcohol abuse, the problem remains when the sedative effects of alcohol have worn out.
Invariably, the best route would be to solve the underlying problem. If you feel stressed out, take time off(if your work permits you), if you are bereaved, seek emotional or psychological help to get through that period but have it at the back of your mind that going overboard with your expenses would leave you in more ruins after the whole episode ends.
See a financial adviser
When people are ill they quickly see a doctor. When their car breaks down they see a mechanic but most often than not they rather speak with a “friend” or co-worker when in financial distress. A financial adviser is more qualified and probably has more experience and knowledge to help you get over bad financial habits.
Your best bet on who to speak with is a financial adviser. These days it is much easier to speak with qualified professionals who would take their time to understand your problems, pinpoint the underlying issue and proffer solutions for you.
There are a plethora of online financial advisory services, one of which is Perth Partners. Perth Partners boasts of a team of seasoned financial experts that would help you crush old habits and take your finances to the next level.
