Spending impulsively and without a sense of a bigger financial picture can lead to over indebtedness. Eunice Sibiya, head of consumer education at FNB suggests asking yourself three questions before making any purchase.
1. Have I planned for this?
Unplanned purchases are usually the reason that you are unexpectedly living on credit or dipping into savings at month-end.
“No matter how perfectly you budget, it is very easy to blow it through just a few unplanned impulsive purchases,” says Sibiya. “It feels great at the time, but will quickly derail you financially, and if you make a habit of splurging it can quickly escalate extending your debt responsibilities.”
If you are prone to buying on a whim, avoid going to places such as the mall, where you might buy items that are not in your budget. Better still, leave all forms of payment, credit and debit cards, at home unless it is planned shopping, this will quickly put a stop to this.
Unfortunately, there are also other unplanned for expenses, such as medical, or a car problem that can also wreck your budget.
“This can only be managed through a separate savings account that is set up solely for these unexpected purchases,” says Sibiya. “It is also very important not to dip into these for luxuries, as tempting as it may be.”
2. Do I have it already?
One unnecessary expense is buying items you already have.
“It is usually the smaller items, such as a type of spice you can’t recall if you have at home or something that has been mislaid, such as sunglasses that are needless purchases,” says Sibiya.
The only way to combat building up double or even triple sets of paprika or rebuying an item that seems to go missing habitually, is to be disciplined.
“Make a list of everything that you currently have in your household, this may seem tedious but it will help when trying to recall if you have that item or not,” says Sibiya. “Keep a list with you, whether printed out and in your wallet or saved in your cellphone.”
The second way is just being more organised. Keep items you generally lose, such as sunglasses, in a specific place in the house.
“If the kids are constantly losing items at school, start to make them accountable,” says Sibiya. “This means that you won’t just buy another school jersey, they will have to pay towards it with their own money or chores at home.”
3. Could I have something better if I don’t purchase this?
One cappuccino or a pair of jeans may seem immaterial, when considered in isolation; however, if you stop and really examine your spending, these small items could contribute to something far greater.
“You don’t usually consider a deposit for a home or money towards studying in smaller everyday purchases, but that is exactly what they are,” says Sibiya. “Every rand builds up over time and forgoing a smaller purchase now can mean great things for you later. So consider this when you are next in a queue to buy something that you don’t really need.”
Alan Straton
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