I\u2019m 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\u2019ve loved for years.<\/p>\n
But those are the standouts. So much of what we buy just becomes the new ordinary.<\/p>\n
Next time you buy a treat, note in your diary to assess a month later \u2013 and a year later \u2013 if the purchase has made you happier.<\/p>\n
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\u2019t want to look like the poor relation. But think about it. Do your friends care if you don\u2019t \u201cmeet the standards\u201d? If yes, how genuine is the friendship?<\/p>\n
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:<\/p>\n
\u2022 feel they are not in control of their own life and actions<\/p>\n
\u2022 base their aspirations on comparison with others<\/p>\n
\u2022 have poor self-control and a tendency to be impulsive.<\/p>\n
I doubt that has changed.<\/p>\n
I spend about um \u2026<\/p>\n
Here\u2019s 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\u2019s a big difference between the estimate and the actual spending, that suggests where you could cut back.<\/p>\n
Warning: you might learn something you don\u2019t 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.<\/p>\n
The Christmas trap<\/p>\n
Christmas \u2013 and the holiday that often follows \u2013 mean credit card spending often gets out of control.<\/p>\n
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.<\/p>\n
In sum, 17% expected their total household spend on Christmas to be more than $1000 \u2013 on food, travel, presents and decorations.<\/p>\n
It\u2019s hardly surprising that late credit card payments reach their peak in January, February and March each year.<\/p>\n
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?<\/p>\n
Other ways to do it:<\/p>\n
\u2022 Draw names out of a hat and each person gives to just the family member whose name they have drawn<\/p>\n
\u2022 Set a low dollar limit for presents<\/p>\n
\u2022 Give to the kids only, and teens get $20 each<\/p>\n
\u2022 Switch to giving presents for birthdays only. Make a bigger deal of each person\u2019s birthday<\/p>\n
\u2022 Family members all put money into a charity.<\/p>\n
Free up time and energy to concentrate on good (but not necessarily expensive) food, and the family having a fun time together.<\/p>\n
The power of habits<\/p>\n
If you examine your spending, you\u2019ll probably find that a lot of it is habitual. You always buy your lunch on workdays, or get a new outfit when you\u2019re going to a party, or eat out at pricier places. But here\u2019s the encouraging bit:<\/p>\n
Key message: If you want to change a habit, you need to do the new behaviour for just one month.<\/p>\n
That\u2019s a lot easier to take on than thinking about struggling for a lifetime to do something different. I\u2019ve tried it for all sorts of things, from alcohol-free days to taking get-fit walks. And it works! (There\u2019s an excellent three-minute TED talk on this at www.tinyurl.com\/30DaysTED)<\/p>\n
Tip: Research has shown that you\u2019re 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.<\/p>\n
If your habit not only costs you money but harms your health \u2013 such as spending on cigarettes, booze or fast food \u2013 when you change it you kill two birds with one stone. Terrific!<\/p>\n
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.<\/p>\n
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\u2019ll do a cheaper trip within New Zealand, and save for it first. <\/p>\n
Right after that trip, you can start saving for next year\u2019s 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\u2019ve saved thousands of dollars of interest over the years.<\/p>\n
By saving first, you make interest your friend \u2013 because you earn interest on your savings \u2013 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 \u2013 or perhaps help your grandchild to get through university.<\/p>\n
What\u2019s more, you can often get a better price on something like an appliance or computer if you tell the salesperson you\u2019re paying with cash.<\/p>\n
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\u2019t need to make that purchase!<\/p>\n
You probably don\u2019t deserve it<\/p>\n
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\u2019re 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\u2019ve done lately that makes me feel like a good person.<\/p>\n
It\u2019s a clever line, and I\u2019m sure I\u2019m not the only one sucked in. Watch out for it \u2013 and all the other lines that advertisers and marketers come up with to \u201cget\u201d you.<\/p>\n
Think about how they are manipulating your mind, and get them out of there. What you actually deserve is a decent retirement.<\/p>\n
A couple of other traps:<\/p>\n
\u2022 Cash back. You\u2019re borrowing $15,000 to buy a car, and the lender offers you $16,000. It doesn\u2019t seem like much more debt, and it would be great to have $1000 to blow on fun over the next couple of weeks. Don\u2019t be tempted!<\/p>\n
\u2022 Buy now, regret later. It\u2019s becoming easier and easier to buy items online on a \u201cbuy now, pay later\u201d basis, and recent research shows that many people using this service don\u2019t look at the terms and conditions, which could include high interest or harsh penalties if you don\u2019t pay on time. Users have told researchers, \u201cI just clicked.\u201d Don\u2019t.<\/p>\n
Rich Enough? A Laid-back Guide for Every Kiwi by Mary Holm is published by HarperCollins Aotearoa New Zealand.<\/p>\n