Consumer debt hit $4 trillion this year. There are a few things consumers can do to rein in unsustainable spending habits. Below are a few tips:
Consider the true cost: If a Roomba is advertised as 50% off of $900, that is still $450 you could have spent on something else - necessities like food, utilities, or home supplies - or $450 you could have put into a savings or growth account. If your favorite clothing store is offering BOGO (Buy One Get One) shirts, consider whether you really need two new shirts, or if your wardrobe is sufficient without them. Chances are, your wardrobe is just fine. If you really would like to update your wardrobe, set aside a monthly budget and earn the money before you go shopping. This will give you an idea of how much you can afford and prevent you from accumulating interest-heavy credit card debt.
Unsubscribe from all marketing emails: Existing in a consumerist society with an email address, it is inevitable that your email will become inundated with promotional offers. Email accounts like Gmail separate those automatically into a Promotions tab, but there is still a good chance your eyeballs will glance over those offers. Remove the temptation, and unsubscribe.
Resist the urge to compare, and consider the effect of peers on your shopping habits: This is likely more of the case for younger consumers, though older consumers can certainly still be influenced by their peers (if the popularity of Facebook is any indication). Instagram is a popular app among younger users and as a visual-heavy medium, it can have an outsize impact on people’s spending habits. These social media platforms are ultimately funded by advertisers dollars, and there’s a reason these apps are pulling in record profits: The advertising works. Consider setting a social media limit for yourself (once a day, instead of several times a day, or 1-3 times a week if you already go on even less). Like marketing emails, advertisers bet they can get sales by getting their product in front of as many eyeballs as possible. As it turns out, it’s a safe bet.
And resist the urge to compare yourself to your peers--consider that many people do not have healthy spending habits. Overhearing your coworkers order the latest dress from J. Crew or rush out to purchase the latest sale item from Nordstorm during lunch may encourage you to likewise spend on luxury items. If you would describe clothing as your “kryptonite” and are not currently saving at least 15% of your pay to retirement and adequately towards any additional savings goals, then it’s time to reconsider the clothes shopping’s relative importance (and drain on your bank account). Building wealth in a consumerist society means learning how to distinguish between needs and wants, and whether buying something will really fulfill a need, or a want that only delivers a temporary dopamine boost until your credit card bill is due. It’s a balancing act that requires self discipline.
Create goals and use them as motivation: As with any difficult yet rewarding endeavor in life, it is important to create financial goals to keep yourself motivated and accountable. The first step is to pay down interest-heavy debt (like credit cards). Since student loans or mortgages are larger chunks of money with more reasonable interest rates, the goal is to create a sustainable plan of paying these back, one that fits in with other expenses and savings. If you have a full-time job, you should be contributing to a retirement account regardless of whether your employer offers a matching contribution. If there are any additional goals - buying a house, saving for a child’s education, traveling - those should be factored into your monthly budget and used as motivation to avoid ancillary spending.
If you would like to learn more about creating wealth and how to grow your money, please contact us at 515-557-1860 or email us at email@example.com. TABER Asset Management is a fiduciary, investment management and financial planning firm serving clients from across the U.S..