Personal Finance

Impulse Control for Healthy Personal Finances

I love coffee. Well, to be specific, I love white chocolate mochas. In a pinch, Starbucks makes a decent white chocolate mocha, but at $4 a cup, it’s a temptation I try to avoid. Unfortunately, there seems to be a Starbucks popping up in every store I frequent and as I pass the Starbucks on my way into the store and the way our of the store, I’m tempted to grab a drink. I get the impulse to buy a drink, it’s just $4, right?

Yet, I resist the urge to buy one.

A couple of years ago, I probably would have picked one up. I would just grab a drink thinking, well, I deserve it and I need a drink. It’s only $4 after all! Today though, I know that $4 could go a long way. I walk right past that Starbucks store-within-a-store and make myself a drink at home for a fraction of the cost.

What’s changed? My perspective on the “little things” that add up and eat away at our money each month. These unbudgeted little costs add up. If I were to buy just 3 drinks a week, it could easily add up to $60 with a tip each month!

Here are some of the tactical things you can do to help avoid the impulsive purchases and stay financially healthy.

Avoid impulsive moments

It’s hard to avoid a Starbucks – they seem to be everywhere – but I can avoid going near the kiosk. Also, I create my own white mocha creation at home each morning so I do not need to stop for coffee. Changing your activities can reduce the chance you’ll need to spend money. For example, hiking might replace golf as a hobby to keep your impulsive golf club purchase. Re-evaluate what you do to change your activities in order to change your behaviors. This will help you break the cycle of impulsive buying.

Minimize your stress

When you’re stressed, you’re more impulsive. I certainly observe this in my own life – when I feel a lot of pressure and stress, I usually just seek immediate ways to relieve it, even if it’s not a good long-term choice. A cup of coffee or fast food snack feels good, so I’ll sometimes fall right into that. Thus, it’s useful to seek out ways to reduce the amount of stress in your life. I pray, watch a movie, read, and play with my children – all of these help me de-stress.

Allow yourself some impulsiveness – but keep boundaries on it from the start

You’re not perfect and need some flexibility in your budget for impulsive buys – but you need to make sure you budget for it – versus impulsively purchasing it. In our house, we budget for some impulse buys and I always treat my girls to a hot cocoa while I get a white mocha on our date nights to Borders (plus the coffee is better at Borders!) Build an allowance in your budget for you and your mate to have a little blow money each month.  The allowance often gives the freedom you need to not have a sense of being deprived while also keeping very good control over your personal finances.

Reflect on the times when you give into your impulses

If you do discover that you’ve given into an impulse, spend some time thinking about that event and why it happened. Why did you spend that money? Are you really happy with that purchase? What can you do to make sure it doesn’t happen again? You don’t need to beat yourself up over it, but you will find great reward in thinking about the “why” of the matter, as it will lead you towards not repeating the mistake.

Use the twenty second rule and the thirty day rule

The twenty second rule basically means that you should spend twenty seconds thinking about any purchase you’re about to make before making it. This helps you to reflect on potential impulse purchases and often put them directly back on the shelf. The “thirty day rule” means that you should spend thirty days before buying any item that costs more than a certain threshold – say, $25. This prevents you from drowning yourself on an expensive impulse buy.

Be accountable to someone else

Accountability is a strong motivator to keeping your budget. We recommend having completely open bills if you have a spouse – credit card statements, bank statements, and other such things are reviewed by both spouses. Because of this, it’s impossible to “hide” things – you have to be fully honest with each other.

If you are not married, try finding an accountability partner that can help you be accountable to your budget.

What’s your impulse?

Most of us have impulses that work in opposition to our financial goals. We buy a cup of coffee or perhaps a candy bar or a bottle of soda at the checkout. We pick up a DVD. We buy some new clothes.We pick up the newest iPod, DVD player, or video game . Most of the time, these decisions are heavily impulsive – done on the spur of the moment – and we often feel bad about them later, particularly when we find we’re not using them much and now we’re facing a bill that we can’t easily handle.

Breaking free of such impulses can have a very large and dramatic effect on your finances. It becomes easier to budget and plan ahead. You suddenly have more resources each month with which you can save, pay off debts, or invest for the future. Best of all, you find that you value the things that you do buy a lot more than you used to.

Impulse control is an essential tool for personal finance success.