“Put your hands up if you’ve ever regretted an impulse purchase.”
Every hand in the small recording studio went up, except mine.
“Really?!” Looking at the surprise on my fellow panelists’ faces, I figured there’s something I could say about the topic.
You could say being stingy comes naturally to me. I don’t know why, but I have a weird fascination with getting maximum benefit for the least cost. The guy you call to learn about the best deals.
At the same time, it’s not all nature. In my early 20s, I remember struggling with urges to buy stuff on my entry-level salary. There were mindsets and habits I had to build to retain control, even though they weren’t comfortable.
Today, through this combo of nature + nurture, I feel like I’m in a good place. Financially secure and intentional with money. Confident that even when I do splurge on things, I won’t turn around and feel bad about it.
How did I get here?
If you’ve ever struggled to control your spending, I hope some of these ideas can help.
1. Make More Money
People joke that being broke is the best way to curb impulse spending.
No money, no honey, right? Mo’ money, mo’ problems.
I think, being broke leads to impulse spending.
Research agrees. Here’s an excerpt from the American Psychological Association:
“Growing up poor can influence people’s sense of control and in turn may lead them to more impulsive decision-making.”
This is opposite to what people normally think: Poor people make bad decisions. But actually, poor people aren’t poor because they lack self-control. They lack self-control because they’re poor.
Living in poverty has taught them to grab immediate opportunities, instead of waiting for long-term rewards.
Of course, you’re probably not poor. Most likely middle-class and moving upwards. But understanding how poverty affects self-control has lessons for all of us: lacking money makes it easier to make bad decisions.
I know this, because like most young people, I was once broke.
1A. Earning Enough To Be Comfortable
At the beginning of my career, with a net worth hovering around zero, I was horribly insecure. I felt I needed to validate myself by buying expensive stuff. I’d spend weekends window shopping, peeking at the intentionally-hidden price tags of luxury watches, dreaming how I’d afford them someday.
I wanted status.
And so, my mid 20s were a constant battle, trying to balance my desire for status with my meagre salary.
15 years on, most of those desires have gone away. The first step was getting to financial security
(I say “financial security” because while I’m on track to retire at 55, I don’t have F.U. Money either. I wear a Seiko and drive a second-hand car.)
The point is, you need some money to have a baseline standard of living. In Kuala Lumpur, Malaysia where I’m based, the central bank estimates this to be RM 2,700 (~USD 640) for a single person. Depending on where you live, this number is gonna be different. And to be comfortable, you’re gonna need more.
If you haven’t reached this income level, your best action isn’t subscribing to five expense-tracking apps, swearing off artisan coffee, and studying Stoic philosophy. It’s finding ways to increase your income.
For example: working for a promotion, applying for higher-paid jobs, or starting a side hustle.
“But what if I’m already earning a good income, but still struggling with impulse spending?” Glad you asked, because that’s no longer a numbers game, but a mental game.
1B. Growing Your Income Beyond Your Desires
It’s natural to wanna indulge your desires when you make more money. To scratch some itch you’ve put off because you couldn’t afford it — whether it’s a trip to Bali or dinner at Gordon Ramsay’s latest grill. Go ahead, live a little.
What’s more important is making sure your desires don’t grow faster than your income.
- If your income grows faster than your desires, you’ll save and invest more. This leads to freedom.
- On the other hand, if your desires grow faster than your income, you’ll spend more. This leads to going broke.
The dream state is consistently growing your income (Part 1A above), while keeping your desires reasonable. That’s 90% of the game. If you’re already here, you don’t actually need to change anything; you’ll probably be fine.
If you need more details on “how?” though, let’s first look at building systems to guide you.
2. Build Systems To Guide Behavior
Google “How to stop impulse spending,” and the top results will contain some variation of:
- Set up a reasonable budget.
- Track your expenses. Review them against your budget every month.
- Wait 24-72 hours before you purchase anything big.
- Use the cash envelope system.
- Cut up your credit cards, or give them to someone with a lot of discipline.
- Limit time with certain types of friends. Limit social media.
- Have a BLOW budget. Money you absolutely need to spend on fun stuff.
Systems are good because they help guide our behavior even at our lowest points. They take all the hard work and motivation out of the equation. You don’t have to think — just follow the rules.
That being said, I believe there’s a point where people overemphasize tactical actions, and miss the bigger picture. Some rules are useful to develop financial discipline, especially at the start. But be careful about taking it too far. What good is all the savings in the world, if you’re miserable?
Looking back on my own journey, I’ve used some of the above, but don’t follow any of them religiously today. Just a bit of budgeting and tracking my expenses. And when it comes to credit cards — often portrayed as the spawn of Satan — they’ve actually helped me, instead of hurting me.
Systems are good, but once you’ve built a certain level of discipline, you can actually “break the rules.” You can be flexible with building a lifestyle that works for you. The spirit of the law over the letter of the law.
I view earning a good income (Part 1) and having financial discipline (this part) as basics to prevent impulse spending. But to take your game to the next level, it’s time to go deeper into mindset.
Here are mental decisions you can make that’ll help:
3. Choose What’s Important to You and Focus
There’s an urban legend about Warren Buffett giving advice to his pilot about life goals using the 25/5 Rule:
- Make a list of the top 25 things you wanna achieve in life.
- Choose the 5 most important ones and focus on them.
- The remaining 20? Avoid them at all costs. They’ll just distract you from your top 5.
I often think about this story in the context of spending money. The majority of us aren’t gonna be billionaires who can afford everything we want. And even if you could, you wouldn’t have enough mental capacity and time to enjoy everything anyways.
The rational path is to figure out what brings most meaning to your life, and invest heavily in those things.
For most people, your top priority is gonna be family. Lots of evidence that investing in your family is the best way to spend money. Other common priorities are health, career and friends. So maybe you have space for 2-3 other interests. What will you focus on?
Whether you wanna be a foodie, traveler or an iPhone connoisseur is up to you. No judgment. I’m fine eating economy rice every day, but have spent thousands on NFTs. Just find something you love.
Dive deep and drink greedily in the waters of your chosen discipline. And the shallow temptations of others will fade away.
4. Reduce Effects of the Comparison Game
So you’re feeling fine, but then Sharon shows up to brunch in a new Range Rover with a smug smile.
Outer game says: “Stop spending time with status-seeking friends. And stop using Instagram.”
Inner game says: “Let’s deal with that annoying need to compare your life to others.”
I’d love to say “don’t compare” but that’s impossible. Comparison seems ingrained in our human nature. Here are some ways you can hack the comparison game though:
- Focus on yourself. Compare mainly to younger versions of you. Look how far you’ve come over the last five years.
- Choose good role models. I aspire to be rich, and use that wealth to help others. Reading about philanthropists like Chuck Feeney inspires me to use my money wisely.
- Compare downwards. Instead of comparing yourself with Beyonce and feeling like shit, compare your life with someone who’s 10x poorer than you. Of course, don’t be an asshole and think: “I’m better than them.” Think: “I’ve been blessed with so much. Be grateful.”
And remember, everyone’s mostly thinking about themselves. As Morgan Housel explains in the “Rich Man in the Car Paradox,” you’re not really thinking about the bitch in the Ferrari. You’re thinking how cool you’d be if you had the Ferrari.
You want status. You think spending money on certain things will get you status. But actually, nobody really cares.
The ones who care? The ones you want on your side? They’d love you even if you were carless.
5. Be Kind and Give It Time
Time changes everything. But not immediately.
Assume you have an impulse spending problem today. Even if you religiously follow everything in this post, you won’t be immune to flash sales tomorrow. Instead, think of it as a start of a journey.
You’ll probably give in to temptation along the way. Don’t beat yourself up. You can’t change the past, but you can reframe the way you think: Not “regrets,” but “lessons learned.”
Besides, some things only come with experience. I could preach: “You don’t need the latest iPhone Pro to feel good about yourself,” but perhaps the best way to learn that is to get the latest iPhone Pro, then examine how you feel one year later.
Likewise, I’m older now so I can say with confidence: You’ll get better with time.
As you become more comfortable in your own skin; as you decide what kind of person you wanna be, and the type of life you wanna live.
Stay on the path of examining yourself — you’re gonna be just fine.
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Pic from Pexels: Andrea Piacquadio