Impulse Buying is Killing Canadians’ Budgets: how and what to do about it?

I have talked and warned about ‘impulse buying’ in the past and  recent bank polls re-affirmed and legitimized my warnings and fear: impulse buying is indeed killing the budgets of Canadians.  According to a BMO poll, Canadians spend an average of $3720 on impulse purchases, which include clothing, shoes, electronics and even food (possibly leading to another problem: obesity) Think about that amount for a second. It is a lot of money, probably more than what an average Canadian is able to save a year (assuming savings of 5-10% on a a net income of about $25,000) In other words, halving or eliminating impulse purchases could help those who couldn’t save before, to start saving thousands per year.

Men’s top 5 impulse purchases were the following

1-Dinning Out (53%)
2-Clothing (47%)
3-Books/Magazines (32%)
4-Shoes (29%)
5-Software/apps (26%)

For women, the top ‘impulse purchases’ were”

1-Clothing (66%)
2-Dining out (50%)
3-Shoes (48%)
4-Books/Magazines (44%)
5-Make-up (36%)

So what is exactly meant by ‘impulse buying’? Think of it as money spent on things that you didn’t need just a few moments earlier or at least not right away. It is the purchase you make as a result of passing by a shoe store and seeing a new style you like, but don’t really need because you already have a gazillion pair of shoes. Or that trip you make to McDonald with your coworkers to buy lunch even though your spouse or mom has already packed lunch.  In conclusion, it is a purchase decision that didn’t involve much thinking or time and was made on the fly.

We always knew how dangerous impulse purchasing really is to our pockets but this poll has cemented and legitimized this concern.  Canadian finance and government officials have been warning people not to take on too much debt or risk going the same downward path that the US and various European nations went through. We are constantly being told to tone it down with our debt and save more. But who is listening?  Recent surveys and polls are indicating that more Canadians have started to save money. But debt-to-income levels remain high and in fact approaching dangerous levels.

Needless to say, if an economy or a household wants to decrease the risk of a recession, depression or even bankruptcy, they out to lower how much money is spent on impulse as opposed to purchasing things out of necessity, research or need.

Ways to lower or eliminate ‘impulse purchases’

For some, impulse buying is not a big deal and may be able to deal with it with ease. For others-an ever increasing number of people-it requires more than that. It requires something akin to a therapy.

It starts by acknowledging that ‘impulse purchasing’ is a problem and one that is costing you a lot of money. Ensure that when you go out to a mall or with friends, to only take money that you know you will need and if possible, leave your debit and credit cards behind. Don’t worry, there won’t be an extreme emergency where you will need them right away.  While in a mall or a retail store, observe triggers that lead you to want to buy something. Is it a certain ‘for sale’ sign? is it because the item is featured in the middle of the store? Is it because no one else has it and you want to be the first? Once you identify these triggers, it becomes easier to deal with them and cut them out as a source of your impulse buying.

Another way is to literally take the money that you would otherwise spend on food on other things you don’t need, and set it on a side for one or two weeks. At the end of this exercise, count how much money you have saved, that would otherwise be wasted on ‘impulse purchases’ and then you will realize how much money you are burning.  It helps to physically and literally feel and see the money that you are wasting, for you to appreciate its value.

It also helps to start logging all your purchases and then go through them to determine what can be considered an impulse purchase.  And last but not least, don’t ignore the important of budgeting, the very core of every financial planning or strategy!  Look at your budget. It most likely has little room, if any, for impulse purchases. And if it does, be sure not to exceed it. Note: don’t confuse an ’emergency fund’  in your budget with money allocated for ‘impulse buying’!