Impulse spending – what is it and why it be should avoided. Impulse spending is when we spend on impulse and guided by our emotions. For example when we go grocery shopping or go to the mall we will encounter thousands upon thousands of stuff displayed before our eyes. Our intention maybe just to get one thing, but often times we ended up with 10 or more other stuff that we did not plan to buy but rationalized why we bought them. Some of the common ones may be:
• It was on sale
• I could use it as a gift later
• I had always wanted it anyway
• The store is offering a great financing plan.
So why is it so dangerous about impulse spending? After all the above reasons are valid reasons. Impulse spending is an unplanned purchase, we never allocated it in our budget because we had no intention to buy in the first place. This is true for both businesses and personals spending. Impulse spending is one of the reasons that put many of us in unnecessary debt. To make things worse, we often use credit cards for such purchases because we did not have enough cash and then unable to pay it off at the end of the month. Not only do we owe the amount for the item that we purchase, we also owe the interest that credit card charges for the unpaid balance.
How to can we avoid impulse spending? Discipline is the most effective way to avoid it. Don’t have the discipline, then remove that temptation all together using the Profit First Principle. Check out our Profit First Coaching to learn more.