I’m not saying that applies to every purchase. We can all look back on certain holidays or concerts with great pleasure, or point to items in our homes that we’ve loved for years.
But those are the standouts. So much of what we buy just becomes the new ordinary.
Next time you buy a treat, note in your diary to assess a month later – and a year later – if the purchase has made you happier.
Another reason you might spend more money than you have is to keep up appearances. Your friends have certain clothes, cars, holidays, whatever. You don’t want to look like the poor relation. But think about it. Do your friends care if you don’t “meet the standards”? If yes, how genuine is the friendship?
Back in 2008, the Families Commission said in its Beyond Reasonable Debt report that a person is more likely to get into debt if they:
• feel they are not in control of their own life and actions
• base their aspirations on comparison with others
• have poor self-control and a tendency to be impulsive.
I doubt that has changed.
I spend about um …
Here’s a trick. Write down estimates of how much you spend in different categories. They might include: food, clothes, transport, housing, entertainment and so on. Then keep track of your actual spending for a month or two. Where there’s a big difference between the estimate and the actual spending, that suggests where you could cut back.
Warning: you might learn something you don’t like! An Australian study found that most people estimated their pending on transport and rent fairly accurately. But they spent more than they thought on clothes, considerably more on booze, and way more on gambling. Funny that.
The Christmas trap
Christmas – and the holiday that often follows – mean credit card spending often gets out of control.
One survey found that 15% of New Zealanders have more than 11 people on their Christmas list to shop for. And about 27% (more often women) said they planned to spend over $200 per child on presents. Meanwhile, 15% (more often men) were spending more than $200 on their partners.
In sum, 17% expected their total household spend on Christmas to be more than $1000 – on food, travel, presents and decorations.
It’s hardly surprising that late credit card payments reach their peak in January, February and March each year.
Ask yourself: do you really enjoy buying, giving and receiving, or is the family gathering more important? Are children happier with more presents but stressed parents?
Other ways to do it:
• Draw names out of a hat and each person gives to just the family member whose name they have drawn
• Set a low dollar limit for presents
• Give to the kids only, and teens get $20 each
• Switch to giving presents for birthdays only. Make a bigger deal of each person’s birthday
• Family members all put money into a charity.
Free up time and energy to concentrate on good (but not necessarily expensive) food, and the family having a fun time together.
The power of habits
If you examine your spending, you’ll probably find that a lot of it is habitual. You always buy your lunch on workdays, or get a new outfit when you’re going to a party, or eat out at pricier places. But here’s the encouraging bit:
Key message: If you want to change a habit, you need to do the new behaviour for just one month.
That’s a lot easier to take on than thinking about struggling for a lifetime to do something different. I’ve tried it for all sorts of things, from alcohol-free days to taking get-fit walks. And it works! (There’s an excellent three-minute TED talk on this at www.tinyurl.com/30DaysTED)
Tip: Research has shown that you’re much more likely to form a new habit if you reward yourself every time you do the right thing, at least at the start. For something frequent, you might just mark off a card, and every time you get 10 marks you can do X. Each mark will feel like a reward. Changing bad habits is more complicated, but consistent rewards still make a big difference.
If your habit not only costs you money but harms your health – such as spending on cigarettes, booze or fast food – when you change it you kill two birds with one stone. Terrific!
On the good habits side of the ledger, a really good one is to always save up before you buy that car or trip or electronic toy, so you can buy it with cash.
If you usually take an overseas holiday on your credit card and pay it off many months later, decide that for just one year you’ll do a cheaper trip within New Zealand, and save for it first.
Right after that trip, you can start saving for next year’s overseas trip, using money that otherwise would have gone to credit card payments. By the time you take your next trip, you can pay for it with cash. And continue to do that year after year. For the sake of just one less exciting holiday, you’ve saved thousands of dollars of interest over the years.
By saving first, you make interest your friend – because you earn interest on your savings – instead of the enemy that doubles your debt or worse. The end result is that over a lifetime you can afford to buy many more cars, trips and toys – or perhaps help your grandchild to get through university.
What’s more, you can often get a better price on something like an appliance or computer if you tell the salesperson you’re paying with cash.
The other advantage of saving up first is that it gives you time to think about whether you really want to buy that item. Which brings me to another point: often, if you put off a purchase decision for a day, or even just a few hours, in a different place, perhaps with different people, you might come to your senses and realise you don’t need to make that purchase!
You probably don’t deserve it
I confess to being caught up by this line. An ad says I should buy something because I deserve it, or have earned it. Of course I know they’re conning me. I might have been lying around doing nothing. But if I want to justify buying an item I can always come up with something I’ve done lately that makes me feel like a good person.
It’s a clever line, and I’m sure I’m not the only one sucked in. Watch out for it – and all the other lines that advertisers and marketers come up with to “get” you.
Think about how they are manipulating your mind, and get them out of there. What you actually deserve is a decent retirement.
A couple of other traps:
• Cash back. You’re borrowing $15,000 to buy a car, and the lender offers you $16,000. It doesn’t seem like much more debt, and it would be great to have $1000 to blow on fun over the next couple of weeks. Don’t be tempted!
• Buy now, regret later. It’s becoming easier and easier to buy items online on a “buy now, pay later” basis, and recent research shows that many people using this service don’t look at the terms and conditions, which could include high interest or harsh penalties if you don’t pay on time. Users have told researchers, “I just clicked.” Don’t.
Rich Enough? A Laid-back Guide for Every Kiwi by Mary Holm is published by HarperCollins Aotearoa New Zealand.
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