Are your spending habits out of control? You're not alone. We are constantly tempted to spend money and splurge on things we don't need.
Clever marketing tactics, FOMO, the YOLO economy, and the desire for more have become a common part of daily life. But it doesn't have to stay that way. If you care enough about yourself and your future, you can learn how to control the urge to splurge. By the end of this post you'll be on your way to saving more money!
The Temptation To Splurge
I went shopping one weekend in 2009 to buy myself a new pair of comfortable brown leather loafers for work. I'd worn my $60 Timberland loafers from Shoe Pavilion (discount store) for two years. Sadly, they were starting to get holes.
I have to say, when it comes time to shop for work attire, I'm just so uninterested. Back when I was working a traditional office job, shopping for work clothes was a “work expense” I resented.
Dressing reasonably professionally was a necessity at my job. Thus, I felt annoyed that I couldn't spend my money on what I wanted.
Ever since I left my grueling day job, retired early, and blog for fun I get to wear what I want every day. My ideal outfit, which I get to enjoy now, is a t-shirt, a well worn pair of jeans and flip flops.
But back in 2009 I still had to abide by a dress code. That weekend I went shoe shopping, I decided I wasn't going to buy the same old boring shoes anymore. I was on a shoe revolt!
The “I Can Return It Later” Splurge Excuse
Instead of going to DSW Shoe Company or Ross Dress For Less, I went to Barney's New York to buy a $435 pair of Tod's loafers! I'd been eyeing that shoe for more than two years, and just couldn't find my size when it went on sale for “only” $250 last Christmas.
It's a good looking shoe, with beautiful leather and a nice rubber sole. However, there's no way in heck it's worth $435, or 5X what I'd normally pay for shoes.
That said, I bought it anyway, because I wanted to enjoy the shoe, at least temporarily before I'd see the charge come up on my credit card bill online.
On that day I'd really spent $0 dollars, b/c credit cards are wonderful tools to temporarily borrow something without any cash outlay. But of course, that's a dangerous mentality. Where people seem to get in trouble is when they actually keep the item, go figure.
Barney's has a standard 30-day return policy. I thought I could control the urge to splurge. I wanted to wear the shoes in the house and marvel at them for a couple weeks. And then wake up, smack myself and realize that $435 is just an absolutely ridiculous sum of money to spend on loafers and return them.
I was just being lazy, and did not search cheaper stores for equally attractive shoes. In the meantime, I wanted to enjoy those loafers to my heart's content. If I could control the urge to splurge by just temporarily buying them and then return them within 30 days, why not?
Avoid The Temptation To Splurge If You Can't Afford It
Well, in the end, I did not return those expensive loafers! They were so darn comfortable. Fortunately, I had the financial means to pay them off in full when my credit card came due. I got fantastic mileage out of them and they held up extremely well. But I ultimately failed to the control the urge to splurge.
If I had taken the time to search for a similar looking pair of shoes at a discount store, I'm sure I would have been just as happy. Perhaps even more happy since I would have saved 5X as much money.
It's obviously best to avoid the temptation to splurge if you want to save money. And especially so if you can't afford it. Even though you might have every intention of returning an expensive item before the return policy, you may fail to do so.
If you control the urge to splurge, you can invest more. Perhaps one day, your investments might generate enough passive income to cover your living expenses. That would be huge!
Or, if you can't wait that long, then having more investments is always great during a bull market. We've been in a bull market from 2009 – 2021 so far. For some long-term investors, their investment returns have started to consistently surpass their day job income. As a result, they can now splurge a lot more!
How To Control The Urge To Splurge
My system of resisting the urge to splurge is quite simple.
1) Recognize Splurge Euphoria Is Brief
Splurge on things if you really want it, but make sure there is a return policy and that you understand the terms! The initial point of purchase is generally the highest point of euphoria, especially when not paying cash.
The euphoria of a splurge tends to fade over time, and the dread mounts when the bill comes due. If there was a return policy on cars, I'd be all over it! But, as my wife always says when I'm about to buy a new car, “There's no return policy!”
2) Never Miss A Return Policy Deadline
If you are very disciplined, you can try to temporarily enjoy a splurge and return it. Enjoy the item for the life of the return policy minus 1 day. You need to enjoy the good for as long as possible to rid yourself of the desire for that good.
But you better return it one day before it's due at the latest, b/c you may forget, or the store may try and manipulate you into not being able to return the good. However, the safest way to control the urge to splurge is not to buy it in the first place, period.
3) Calculate The Pre-Tax Cost Of A Splurge Before You Pay For It
This is one of my favorite tips to control the urge to splurge. Take the cost of the item and multiply it by 130% to get the approximate pre-tax income you need to make/spend.
Next, take this pre-tax income and divide it by your hourly wage to figure out how many hours you need to work to buy that good.
The first exercise is generally enough to make me not buy anything wasteful. It's the second item that really pushes me over the edge.
Related: The Best Rewards Credit Cards
4) Remind Yourself Never To Pay Full Retail
The reason why luxury goods manufacturer LVMH has 90% gross margins, is because they charge customer 9X their manufacturing cost.
Try your hardest to find a similar good at a much cheaper price. Make it an adventure in savings if you will. There are so many products available today that chances are high you can find something cheaper.
5) Take A Good Look At Your Credit Card Bill
Finally, take a look at that credit card bill on-line and tell yourself how good it'll feel not having to pay such debt and return the darn thing! The reward for not splurging is the cash/savings that remains in your bank account!
Control the urge to splurge by prioritizing your financial goals. Think about the lost investment returns you'll be missing. And remind yourself that any money you spend is less money you'll have for achieving early retirement.
Splurge Within Reason
After all these defenses, there are some things in life you just have to have, such as that fine Rolex watch you've waited 10 years for ever since graduation.
Whatever the case may be, I firmly believe one should be able to treat oneself within reason. For a car, my limit is spending no more than 1/10th my gross income.
It's just when you want to have that 2nd watch, that 5th pair of jeans, or third LV handbag where things start spiraling out of control. I think you'll have fun resisting the urge to splurge with the 5 defenses above.
Don't ever feel guilty returning an item. It is your right, and your early retirement prerogative!
Related: A Savings Guide By Age
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