How often do you indulge in retail therapy? According to a recent survey from the Bank of Montreal, a surprising majority of Canadians improve their mood with an afternoon at the mall. According to the poll, 59 percent of those surveyed admitted to indulging in impulse purchases of items like clothes and shoes, as well as by engaging in extravagant dinners out. In terms of dollars and cents, the average Canadian spends roughly $3,720 on unplanned purchases every year.
This news comes as the Canadian debt-to-income ratio sits at a record high of 152 percent, or roughly $26,221 per person.
That's a lot of frivolous spending.
Whether you catch yourself buying an unnecessary tube of lipstick or splurging on an expensive gadget, be careful. Impulse purchases can add up quickly, impacting your daily budget and your ability to save for the future.
Who has the worst impulse control?
Think women lack self-control at the cashier? Think again! Data from the BMO survey shows that men spend twice as much as women ($414 vs. $207 on average per month) on impulse purchases. While women are more likely to purchase clothing on a whim (66 percent), men often empty their wallets when dining out with friends.
Age also appears to have an impact on consumer behaviour. According to the survey, one in three Canadians under the age of 30 is unable to afford something they need because of spending money on unnecessary "wants."
Impulse buying spells trouble
While an extra latte every now and then won't break the bank, that's a poor excuse to shrug off persistent impulse purchases. And don't assume that you're off the hook if your impulse purchase is a sale item...purchasing a "discounted" item that you don't need is still a waste of money (that could have grown into more money, had you put it aside and invested it properly...just sayin').
Fortunately, there's a silver lining within the BMO survey data: the opportunity to change. According to the survey, the average Canadian spends roughly $310 a month on superfluous items. Respondents felt that they could probably save two-thirds of that, or $206 a month, if they simply made an effort to limit impulse spending. That's an additional $2,472 a year. Keep that up for 25 years, and you'll have managed to tuck away over $61,000 plus interest for your retirement.
Not too shabby, eh?
How to curb your impulse spending
If you're having trouble tracking where you're money is going, chances are good that a portion is being lost to impulse purchases. Here are five tips to help you avoid unnecessary purchases and put more money towards your savings....
1) Make a list
Planning purchases is the quickest and easiest way to ensure that you use your money wisely. Granted, finding the time to sit down and map out something even as simple as a grocery list can seem like a daunting task. However, by planning your meals and sticking to a strict shopping list, you'll notice an almost immediate drop in your expenses.
2) Track where your money goes
It's hard to curb your spending if you're not aware of where your money is actually going. Luckily, there are tons of great online financial applications designed specifically to help you monitor your spending. Make a point of tracking your expenses — everything from rent and insurance premiums to food and entertainment costs. This will help you to locate and rectify worrisome spending habits.
3) Don't buy into fancy marketing schemes
It's no secret that stores place items strategically in order to trigger emotion-based spending. Think about it: when you enter the grocery store, what department do you normally step into first? More often than not, it's the bakery area where the smell of fresh bread instantly makes your mouth water. Or the deli area, where the scent of prepared meals, like roasted chickens or barbequed ribs, sets your stomach growling (and makes dinner seem sooo much easier). Retailers have put a ton of thought into their store design in order to profit off your impulses. Once you realize this it will be easier to avoid these clever sales tactics.
4) Resist temptation
If you know you have a soft spot for shoes or an addiction to accessories, do yourself a favour and avoid stores or departments that sell these items. If you do find yourself staring at an item that you can't resist, ask yourself if it's something that you actually need, or if it's just something that you want. If it falls under the "want" list, consider holding off.
5) Plan for small impulse purchases
Cutting impulse spending out of your retail diet isn't easy. You know how it works...as soon as you cut back, you desperately crave whatever it is you've decided you can't have! If you can't go cold turkey, that's okay. Simply plan for these types of purchases. Fit small impulse buys into your budget as a mini-reward. When you set money aside specifically for little splurges, you won't feel guilty and your budget won't suffer.
It all adds up
Controlling impulse spending will help to improve your saving habits and enable you to achieve your long-term financial goals faster. While it certainly isn't a crime to reward yourself every now and then, a lot of small purchases can add up over time - and make a serious dent in your brighter financial future.
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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial or legal strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances, as well as fully aware of current laws and regulations