It is tough to manage emotional purchases, especially because the year has left a lot of us in a whirlwind of emotions. From fear to panic and even hopelessness and despair. Many Americans are going through a lot of challenging situations, especially with their finances. From struggling to work from home set up to try to find work in the middle of a challenging economy.
As a result, people are going through a series of emotions which can affect the way they manage their finances. This is a problem because people have the tendency to overspend and make unnecessary purchases which are out of budget. As a result, you end up spending more than what you can afford which puts your finances in a more precarious situation.
This is one of the biggest reasons why you need to get a grip and manage emotional purchases. If you allow it to get out of control, it can create multiple problems for your finances. It could start with a simple unbudgeted expense but its effects can be far and wide. It could make you miss a payment which allows lenders to add fees and penalties to succeeding monthly billings.
When this happens, then it has a negative ripple effect that reaches out to all your other payment schedules. Admittedly, a lot of people find it is easier to “checkout” their online purchases rather than process their emotions. Oberlo even shares that about 42% of Americans bought groceries online in 2020 from 22% in 2018. This makes it more difficult to get to the bottom of the problem. It just compounds over time slowly creeping up on you. Here are a few things you can do now to help you address the problem.
Be more intentional to manage emotional purchases
This is one of the most straightforward approaches you can take when trying to get ahead of emotional purchases. You need to be very intentional with every expense you make. Each purchase has to be for a specific reason. One financial tool that can help you in this aspect is having a comprehensive household budget.
Your budget lists down all your expenses according to your income. Part of being intentional with money is knowing how much income you have you can use every month. It helps to be reactive with your savings by prioritizing them ahead of your expenses. Do not save only what is left, spend only what is left after you have saved money.
This is one way to get ahead of emotional purchases. You save first and pay for your expenses next. If you continue with this approach, you will develop the habit soon. You will start saving money even before making a purchase. This lowers the chances of spending mindlessly simply because you trained your mind to save money first.
Wait on it
One of the most effective ways to manage emotional purchases is to wait out your decision to buy things you think you need. When you feel the urge to buy a specific item, try to wait it out. If you come across something you like in the mall, walk away and see if you still feel like buying it after a few minutes of walking around.
If you find something online, switch to another page with the same goal. See if you still find that urge to buy what you were looking at earlier. There is a big chance that you will even forget about it after a few hours. You will be preoccupied with something else that you will completely forget about what you wanted to buy in the first place.
You can also try and save up for what you really want to buy. You can break the price down and save up for your purchase over a certain period of time. This can help you wait it out and give you the chance to think things through. When the time comes that you get to finally save up, you might not even want to buy the item anymore. You can simply put that amount over to savings.
Identify your weak points
It is not easy to manage emotional purchases but identifying your weaknesses can help you stay away from unnecessary expenses. We all have our own set of weaknesses when it comes to purchases. It can be anything from smelling freshly-baked food or even seeing a really great photo of a meal. There are times when a big flashing red sale sign is enough to get our blood pumping with excitement.
It is important that you identify your weak points early on. When you are able to do that, you can mentally prepare and avoid putting yourself in situations where you are most exposed to factors that make you overspend. This can significantly lower the chances of overspending on things you do not really need.
If you are quick to “add to cart” whenever you visit your favorite online store, try and limit checking out those websites. There are apps to help you concentrate while at work so you do not visit specific websites for a particular stretch of time. It would also help if you do not save your credit card information on your devices. This puts a little more work whenever you need to pay for an item. It gives you the time you need to re-think your purchase.
Focus on your goals
Your long term goals are normally anchored on where you want to be in the future. It is also tied to strong emotions of wanting to be financially independent, be debt-free, or have the freedom to travel the world. As a result, these goals are attached to huge and powerful emotions which can overpower your simple purchasing desires.
There is a good chance that buying that new dress would pale in comparison when you think about your retirement plans. It can be frolicking around the beach the whole day and maybe taking up surfing. That new gadget you want seems insignificant when you compare it to your goal of paying down your house in a few years.
One thing that can help is getting a financial advisor to help you plot out your action path based on your goals. It should help especially as CNBC shares that about 3 in every 4 Americans manage their finances on their own. You can definitely benefit from having a professional guide you all the way.
Automate your savings
One of the tricks people use to help them overcome and manage emotional purchases is automating their savings. The goal behind it is to make sure that your income is allocated even before you get the chance to use them impulsively. Simply put, you cannot spend what you don’t have in your checking account anymore.
This is because they are already deposited in various savings funds. It can be a combination of your emergency fund, retirement account, and other investment accounts. When what you have left is only enough to meet your other payments, it would be difficult to spend it. Especially when you know you cannot make all your payments at the end of the month.
You cannot spend what you don’t have in your account. This also forces you to be more intentional with your expenses. As mentioned earlier, this is a great way to help you get ahead of your emotional spending. When every dollar has a role to play, you are able to track every expenses and focus on what matters the most.
It is important to manage emotional purchases to help you improve your finances for the year. It is not easy to get a grip on your emotions to help you improve your finances. A lot of people have a very challenging time getting a grasp on it. Just make sure you understand that you have needs and the resources for them. The goal is to make sure you meet your needs with the limited resources available.