Put That Down! Build your savings by curbing impulse buys

Impulse purchases can drain your bank balance before you know it. Learn how to curb rushed spending decisions and identify needs versus wants.

Most of you know what it's like to walk into a store with a shopping list and leave with five things you didn't plan to buy. What's worse is when you get home and ask yourself if you really needed another pair of black flats or a new set of screwdrivers. Buyer's remorse sets in as you get that nagging feeling that you spent too much, bought the wrong thing, or didn't need it in the first place. You start to think about better uses for the money you spent, like paying off credit card debt or building up savings in your money market account.

Buyer's remorse is tough to take, but there are ways to feel more confident about your purchases and distinguish needs from wants. Buy guilt-free and prevent impulse buys from getting in the way of your financial goals.

Lured by the label

It's understandable that consumers are prone to impulse buying. Supermarkets use merchandising committees that make packaging and product placement art forms that persuade a shopper more than he or she would like to believe. This is their business -- to attract your attention and entice you to buy. In fact, according to a TIME magazine article, "Business: Impulse Buying," marketers have come to the conclusion that you don't even know what you want when you walk into a grocery store:

Despite all talk about price as the great determinant, low cost is the major factor for barely 16% of all shoppers; studies also show that another 16% shop only for heavily advertised brands...They claim, for instance, that the undecided mass of supermarket shoppers --they call them "emotionally insecure"--really do not know what they want when they enter a store and often are not sure what they have bought right up to the cash registers...What sells is what appeals to the shopper's impulse: the color, the size, the shape, even the shelf position of the package. Years ago, only comparatively few companies worried about their labels. Now all do.

Mad rush at launch time

Besides having an illogical attraction to bright and shiny packaging, consumers are often tempted when a new product is launched.

Early adopters, or lighthouse customers, are the trendsetters who thrive on owning the latest technology or the newest product. But being the first kid on the block to have the shiny new thing also exposes him or her to the problems and risks that come with early-stage product deployment. Early versions of products may have bugs, malfunction, or become prematurely obsolete. Usually a better, less expensive version is launched within a few months, costing the trendsetter an "early adopter tax." A great example of this is the first iPhone launch. In a New York Times article, "Applause, Please, for Early Adopters," Damon Darlin writes:

A tough lesson about buying early could have been learned by the iPhone's first buyers back in 2007. Those early adopters paid $600 for a phone. Two months later, Apple dropped the price to $400. Then, in June 2009, it introduced a better version, with twice the storage, for $200, one-third the original's price.

The article includes comments from Jay Pil Choi, a professor of economics at Michigan State University, who says, "[The early adopters'] purchase allows the firms to go down the learning curve and enables a lower price for other consumers."

In other words, by being an early adopter, you take the hit and make it possible for other consumers to enjoy a cheaper, better product.

How to curb impulse buying

If that sounds like a raw deal, it is. So what do you do when faced with temptation? Lifestyle guru and Zen Habits writer Leo Babauta recommends that you impose a 30-day waiting period. While his advice pertained to decluttering, it's equally effective for curbing the impulse buy:

Take a minute to create a 30-day list, and every time you want to buy something that's not absolutely necessary (and no, that new Macbook Air isn't absolutely necessary), put it on the list with the date it was added to the list. Make a rule never to buy anything (except necessities) unless they've been on the list for 30 days. Often you'll lose the urge to buy the stuff and you'll save yourself a lot of money and clutter.

By using this method, you'll begin to distinguish wants from needs. Is the product really so new and improved that you need to replace the one you already have? Do you really need to stand in line at 6 a.m. to be the first one with the newest thingamajig? And if you do decide to buy it, you'll have had the time to think it through, which means less chance of buyer's remorse. Savers, start your list-making!

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