Spending

Before You Click 'Buy,' Ask Yourself These Questions

Tim Stobierski

I pride myself on being a financially responsible person: I prioritize paying down student debt, cut out my bad habits and invest the excess cash and contribute 10 percent of my salary to a retirement account. But I also know how hard it can be to brush off the urge to buy something I really want now in order to stay on track with my financial goals.

As it turns out, a lot of Americans struggle with this problem. According to a 2014 CreditCards.com survey, 75 percent admitted to making impulse purchases, with 10 percent shelling out $1,000 or more. Worse, nearly half reported regretting their purchases later.

“Being financially responsible means enjoying the present while preparing for an ideal future,” says Kristen Euretig, a Certified Financial Planner and founder of Brooklyn Plans. “Effective financial planning is a balance between two extremes: saving for the future without ever really enjoying the present versus enjoying the present and never saving for the future.”

Need help finding this balance? Here are three questions to ask yourself to evaluate whether that new purchase you’ve been eyeing is really worth your hard-earned cash—or if you’re better off without it.

1. How many hours would I have to work to pay for this?

I’ve found that when I’m evaluating a new thing, thinking in terms of time instead of money provides an interesting perspective. Time is precious, after all; we only get so much of it to allocate to work, family, friends and ourselves. So before pulling the trigger, I take my hourly rate—$14.50 after taxes, Social Security and Medicare are deducted—and determine how long I’d have to work in order to afford the purchase.

Euretig says this can be an effective strategy. “It’s easy for people to become disconnected from their own value and how much time they put into earning a wage,” she says. “Equating money to time allows us to evaluate if something we want is worth the effort it took to get the funds to pay for it.”

Was I willing to forfeit 14 hours of my life to buy that $200 jacket that’s only slightly more current than the one I already have? Was an $1,800 laptop worth another 124 hours, when the computer I have now still works? I ultimately said no to both because, in my mind, they simply weren’t worth my time.

I did, however, say yes to a $1,500, two-week Thailand trip. A hundred hours of work in exchange for learning how to medidate with monks, care for and bond with elephants and experience a completely different way of life seemed like a fair trade—and I haven’t regretted it a day since.

2. How much is this really costing me?

Do you dream of paying off your student loans ahead of schedule? Are you saving up for a down payment on your first home? Every purchase you make, or forego, has an effect on your other big goals—so looking at nonessential purchases through this lens is another good test. (And remember it’s not just the money you’ve spent that you’re losing, but the interest you could have earned or avoided paying.)

Next time you’re hit with the urge to splurge, think about how much interest an extra $1,000 applied to your student loans or credit cards would save you—and how much sooner you’d be out of debt. If you’re debt-free, how much money in investing returns could you be sacrificing if you bought the new couch instead of putting it in your IRA? (FinAid.org and Bankrate have calculators to help you do the math.)

Though it might seem like rerouting money for your wants to your financial goals would be a downer, it’s actually one of the happiest (and most responsible) ways to spend. “Aspiring to fulfill an important goal should be viewed through a motivational lens, not through a deprivation mentality,” says Euretig. “You are choosing not to buy something you want now, not because you don’t deserve it, but so that you can have something bigger, better and more fulfilling in the future.”

3. Will I be just as excited about buying this later?

Sometimes when you’re at the mall or surfing the deals on Amazon, you’ll stumble upon something you’re sure you need, like, I don’t know—a frying pan that makes adorable pig-shaped pancakes. No, it wasn’t on your list. (And, yes, you know it’s better to shop with a list.) But it’s suddenly become very difficult to keep this item out of your shopping cart.

The remedy: Give yourself some time to cool off, whether that means walking around the store for five minutes or going offline for 24 hours.

“The goal of walking away is to take the initial emotion out of the decision-making process,” says Leslie John, assistant professor at Harvard Business School, who’s studied consumer behavior. “Once that ‘I need to have this now’ impulse wanes, you are better able to determine whether you really want something.”

If it’s a big sale that’s gotten you amped up, ask yourself if you’d still want the item if it wasn’t discounted. Or if it’s an emotion that’s triggered your spending desires—the CreditCards.com survey cites excitement, boredom, anger, sadness and even intoxication as big encouragers of impulse buying—time should allow those feelings to subside, as well.

Just as gung-ho about the joy pig-shaped pancakes will bring to your life, even after the cooling-off period expires? Go for it (provided the expense fits in your budget, of course), with the assurance you’re not buying out of impulse or emotion.

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