Plug up the leaks in your budget- Part 3
Pity purchases and impulsive buys are two spending habits that impact your budget.
Spending habits and “spending leaks” is the focus of a series by Michigan State University Extension. Part three continues the series by recognizing these two habits in order to help ensure your budget is not negatively impacted.
The National Endowment for Financial Education High School Financial Planning Program uses the term, spending leaks, to refer to those unplanned or unhelpful expenses you have that interfere with your successful saving goals. They categorize spending leaks into six categories.
We will cover all of these leaks in this series. This article focuses on pity purchases and impulsive buys.
These are very easy to make because, similar to stress eating, these purchases are made when feeling unhappy. These purchases, we think, will cheer us up. Maybe they do, for the moment, but overall the spending and the items were not worth the cost. Pity purchases can also result from seemingly normal monetary transactions. Perhaps you got a bonus, tax refund, a gift of money from a family member or found cash in your pocket. You get excited and decide that you deserve something when the best plan might have been to use that money in another way. Consider these examples:
- Buying new shoes or clothes to make yourself feel better
- Buying a fancy, and expensive smoothie at a restaurant
- Getting an expensive piece of jewelry
- Buying an extra toy or game out of guilt
This does not mean never buy things because “you deserve it,” but keep in mind your mental state when shopping or making spending decisions. Will you feel okay about it tomorrow? Will you regret the choices a week from now or when your bill arrives?
These are the expenses that are quite common for most people. These purchases are made in haste or without taking the time to do research before making a purchase. If you took some time before purchasing an item or did some homework, these expenses might not be a drain. These are examples:
- A grill that breaks after one summer’s use
- A television that you found cheaper at another store
- Buying a skin clearing product that you hope will work and you find out it does not
- Getting a brand name hair product when the generic works just as well
These expenses are another time when Stop, Drop and Think is good to use before making a purchase. It is important to do your research with these types of purchases. Check out the reviews of the product online. Find out what the return or warranty policy is if the item breaks or does not last. Find out if alternate products work just as well, but are cheaper; items such as medicine, lip gloss, paper towels and more!
MSU Extension has a great deal of resources to help you create a budget, spending plan and manage your money. Whether an adult or youth, these tools are important to help you stay in control of your cash flow.
More information on money management topics is available by MSU Extension as well as additional information by MIMoneyHealth. The NEFE High School Financial Planning Program website has information and ordering instructions as well.