I saw a graphic the other day that explained that blowing $10,000 a year meant spending a mere $192 on miscellaneous purchases EVERY WEEK. Those little trips to Starbucks & Target … they add up. It’s something called the lattè factor (thank you David Bach) and it explains how mindless spending of a few dollars here and there on things we don’t really need adds up to serious money that comes out of our pockets that can’t be used to pay off debt or invest in our retirement.
Wealthy people stay wealthy by acting like they’re poor while poor people stay poor while acting like they’re wealthy.
BOOM. I said it. It’s something to think about, right?
Now let’s take that $10,000 of frivolous purchases and put it into a retirement account that has an APY of 8% compound interest:
In 5 years, that money will turn into $14,898.
In 10 years, that will turn into $22,196.
In 20 years, that measly $10,000 will have turned into $49,267. And you didn’t even have to contribute a penny more. It grew all on its own.
So tell me… how much does that Venti Mocha Frappuccino mean to you now?
One way to help stop impulse buying is paying for things IN CASH.
Purchases made with CASH hit the brain’s pain center, while purchases made with CREDIT don’t?!? You guys… I am ALL about science & psychology and REALLY geek out when it marries with financial education, so this fact has me on full NERD ALERT over here!
If YOU are wanting to save more money to help build your wealth, start using CASH ONLY (this includes debit card usage) to make purchases. Doing so will help you feel that pain to help you really consider if the purchase is worth the pain!
So let’s talk about three quick (but incredibly impactful) tips to minimize impulse purchases!
1. DELETE your payment info from your favorite online shops – yes, even your debit account info. When we store the payment info in their database, it makes it so easy to rush through an impulse purchase. The goal is to slow down the buying process to really consider if you want the products or not.
2. DELETE your card info from your internet browser. You know what I’m talking about… the automatic fill in option that allows you to sail through purchases without batting an eye. Get rid of it.
3. SLEEP ON IT. A lot of online impulse buys can be chalked up to adrenaline & serotonin levels in the brain. I know that new dress may be exciting right now, but if you REALLY want it, it will likely be exciting tomorrow as well. Sleeping on the purchase will allow you to really weigh your pros and cons as to if you should buy it or not.