How to Reduce Impulse Shopping Using the 1% Rule
Buying something spontaneously can be both fun and emotional. However, that emotional rush can give way to an unbudgeted purchase that you might not have really needed.
Instead, try the 1% rule to minimize those big purchases you might later regret. The way it works is simple: When something you want to buy exceeds 1% of your annual gross income, wait one day before you purchase it. The rule applies to everything including those new sneakers or the latest gaming console.
For example, let’s say you make $50,000 and want to make an $800 purchase. With the 1% rule, you would multiply $50,000 x 1% to get $500. As your $800 purchase exceeds your 1% cap of $500, you must wait one day before acquiring it. This 24-hour cool down period provides time to re-think the purchase….and if you truly need it!
It is always a good rule to have a pre-set idea of how much you can spend before you go shopping. If the rule helps you avoid an unnecessary purchase — even just once — that could be big savings. Here are 6 other tips to help prevent impulse spending:
1) Delay your online purchases. Give yourself 24 hours to think about something you want to buy. Leave the items in your cart, and physically get away from your phone or laptop.
2) Be clear about your budget and savings. Review your budget every month. Creating a budget you will stick to will help hold you accountable when you have the urge to shop.
3) Make it harder to shop online. Set up obstacles so you can be more mindful when you do shop. Delete shopping apps so you have to go to the store website. And, delete credit card information if stored on sites where you shop. These steps can give you more time to think about what you’re buying.
4) Allow for healthy spending. Create a budget that allows flexibility for a “fun budget” to splurge once in a while. Being too restrictive with yourself will end up discouraging you from sticking to a budget altogether, and might make you go back to unhealthy spending habits.
5) Take your mind off of spending. If you are prone to shop when feeling anxious or sad, stop and do something else. Go for a walk, listen to music, or call a friend. Taking care of yourself in ways that don’t involve money can keep you from making impulse purchases to self-soothe.
6) Get advice from a certified financial counselor. At NIHFCU, a GreenPath Financial Wellness counselor can give you advice to help you gain a better understanding of your financial picture and what steps to take to improve your financial wellness and spending habits.
From CNBC.com
