Personal Financing & Preventing Impulsive Spending
The pandemic has kept us stuck in our homes for most of the day and with easy access to social media platforms, it makes it easier to feel tempted to buy things we don't necessarily need. Tik-Tok and other social platforms can heavily influence our spending decisions. With trendy pieces, shoes, and gadgets constantly flooding our "for-you-page," it can be hard to control the urge to step away and rationally think things through. Often more than not, when we do buy into our desires, we may feel regret with our purchases afterwards. Whether through bank statements or the realization that a purchase was not worth it—we've all been there.
We're here to help! Here are some tips that we've accumulated to get on track – whatever your financial goals may be:
Make a list and stick to it
Although simple to say, it proves to be significantly helpful when shopping in-store and getting groceries. In order to stray away from impulsive buying, it may be useful to apply this tip into your online shopping and to create a list that you can refer to. Another tip is not to shop on an empty stomach; eat at home before you go out. By doing so, you’ll be less inclined to buy goods you wouldn’t purchase if you were full, ultimately leading to better financial decisions.
2. Think before you purchase
With Amazon and other shopping apps at the tips of our fingers, we browse and stumble upon items that look “cool” and may even impulsively say, “I want”. It’s important to not give into your emotions and to not let it do the thinking. Leave the item(s) in your cart and realistically think of how much you’d use this item. See if it’s something you could compensate for something you already have at home. After critically thinking, continue to leave the item(s) in your cart for the next 2-3 weeks. If you don’t think about it then you already have your answer. But, if you go back to it, think about the object again and if it’s something you still want, buy it. That way, you reduce the amount of spending regrets you may have later.
3. Change your mindset
Your mind has a lot to do with your actions. If you say you aren’t able to save money, become successful, or believe that you need to be born into a rich family to be wealthy in the first place, your brain automatically stops thinking. But, when you believe that you are able to achieve the dreams and goals you have in place, your brain will begin a critical-thinking process. Instead of stopping at, “I can’t do it,” it will think,” How do I achieve the goals I put out?”, “What steps do I need to take from here in order to find that success?” When we stop limiting our potential, our brain begins to find opportunities and strategies instead of settling. Financial stability and wealth is an achievable goal for anyone. It all depends on your mindset—key to saving and making money.
4. Go by the 50-30-20 rule
A friendly start-up to budgeting and keeping your finances in track is to follow the 50-30-20 method. You should spend roughly 50% of your income on your needs, such as groceries, bills, insurance, and rent. Then, 30% is for your wants, and 20% is put into your savings or investment accounts. Therefore, say you earn $1000 (without tax deductions, etc.), approximately $500 should be allocated into your needs, $300 into your wants, and $200 into your savings/investments.
5. Become financially literate
It is important to note that by educating ourselves, we’ll have a higher success in whatever task we do. The same rule applies with financing. When we educate ourselves financially, we can solve problems and find ways to produce money. Without that financial intelligence, you can expect to blow the money and not understand how to handle the money long-term.
Did you know?
Based on the National Endowment of Financial Education, 70% of lottery winners end up filing for bankruptcy a few years later.
The reason is simple, they don’t know how to manage their money. Which is why being able to account for the money that is earned and deducted is important. Learning the difference between Assets, which means something that puts money into your pocket, and Liabilities, which takes money away from your pocket, is also important to know. When you understand how money works, you can then use these fundamentals to build your own personal wealth.
Main Takeaway
Building the fundamentals to saving and being financially more stable is a process that can't be completed overnight, It will take lots of sacrifice and discipline. But, with a positive and optimistic mindset, it can help significantly in the journey to building personal wealth and stability.
About the Author:
Angela Siauw is a first year student at the Southern Alberta Institute of Technology's Vision Science Optician program in Calgary, Alberta. She graduated from Foundations For the Future Charter Academy in 2019.
Read her full bio on our Communications Team page.