How I Curbed My Habit of Impulse Buying with 3 Simple Steps
Disclaimer: I'm no expert in the field of personal finance and this article is no advice or one-stop guide to solving your problems! This is just my journey to cutting down impulse spends.
To give a bit of background, I was always interested in technology and loved gadgets. Any latest and greatest gadget gets released, I had to have it! Little did I think of how much I will use it or it is worth the money before I clicked that Buy Now button. Having a paid internship right from the third year of college, getting into a decent paying job as a tech consultant right after graduation, getting to travel around the world for work, and having a good credit card portfolio just fueled my impulse purchasing habit.
A few months back, I stumbled across a video explaining how we have been sucked into the gadget upgrade cycle by clever marketing, enabling companies to sell minor upgrades to tech gadgets as must-have features. This got me thinking and I started to prepare a simple list of all the gadgets I own and how often I have used the niche features I purchased it for and how often I have used the gadget itself in general. Of course, it was not a pretty list to look at and this made me completely change the way I look at a gadget now and assess the need before buying it. The 3-step process I follow before buying anything started with gadgets but I apply it to pretty much any non-essential item now.
I know what you are thinking by now. Can we get straight to the point??
Well then, let's take a look at the 3 step process I follow to curb my impulse buying!
Start with "I don't need it"
Before I start doing some research on a product I want to purchase, I always go in with an "I don't need it" mindset and this helps a lot in making logical decisions. For example, I was about to purchase a Blue Yeti microphone as the mic on my laptop did not work well for my calls. I was also tempted to buy it as it was one of the best in its segment. Following my own advice, I started thinking I don't need it because…, and, much to my surprise, the answer was very simple! I had a pair of Sony headphones which came with a decent mic and my problem was solved :-)
This is one of the strongest points in the whole process in my opinion as I feel that the mindset of not wanting something makes us think of alternatives and most of the time, the answers to avoid buying something are very simple!
Make a utilization matrix
This is a more logical step and helps you assess the need for a product more objectively. If I can't think of a simple reason or alternative from the previous step, this step mostly convinces me not to make an unnecessary purchase.
Image 1: Example utilization matrix
Let me explain the process by taking the example in the picture above. I start with the same template of asking these 4 questions:
- Why do I need it?
- When or how often will I use it?
- Can I afford it?
- Does it pose an investment opportunity?
I start by answering the last two question and if the answer to those is a NO, then I drop the purchase. If they are inconclusive or YES then I start by listing the reasons for why I would need it and how often will I use it. Using these, I arrive at a logical reason why I should or should not purchase it.
I can't stress on this point enough! Though it is not directly related to deciding whether you want to purchase something or not, it definitely curbs your urge to buy something indirectly. The simple way how it works is that you start a committed investment program and invest a major chunk of your income at the beginning of every month (these savings also help you get through tough times!). You also set aside money to pay off your bills and make any other essential purchases you need. This leaves you with the amount you can actually afford to spend in a month on non-essential items and most of the time this value makes it very easy to answer the affordability question we saw in the previous step!
In addition to these steps, treating a credit card as a tool which only helps in making your purchase easier while providing some rewards and not something to purchase a non-essential product that you don't have the money for at the moment is a mindset that helps a lot as well!
Another point to note is that more strict I was in the categorization of products into essential and non-essential buckets, the better results I got. My simple rule for categorization is that any product or service I need to lead a comfortable life and use it often, it is essential. I totally agree that it is very abstract and flexible but in my experience, following the above process when I have the slightest doubt on any purchase helps me arrive an answer quite fast and the decisions get better with time.
With these simple steps, I was able to cut down the majority of my non-essential spends and I can safely say, I have not made any impulse purchases in the past 6 months!
While this all looks rosy, I also have to say that this process is very subjective and might not be right for everyone. I'm no expert in this field and I can't guarantee that following this process will magically make your impulse buying habits go away but utilizing this as maybe a basic reference and building your own process which works best for you is definitely a good start.