After buying that new outfit, have you ever felt that you shouldn’t have done it? That you’d wasted your money? That you really didn’t need it anyway? Or did you spend the hour following your purchase running through reasons of rationalisation to justify spending the money?
Buyer’s remorse is the feeling of regret after a purchase. It’s usually associated with the purchase of higher value items such as a home or a car. It may stem from a sense of not wishing to be wrong, of guilt over extravagance or from feeling that you have been persuaded by the sales person.
In the phase before purchasing, a prospective buyer often feels positive emotions associated with a purchase (desire, a sense of heightened possibilities, and an anticipation of the enjoyment that will accompany using the product, for example); afterwards, having made the purchase, they are more fully able to experience the negative aspects: all the opportunity costs of the purchase, and a reduction in purchasing power. Buyer's remorse can also be caused or increased by worrying that other people may later question the purchase or claim to know better alternatives.
Here are my favourite ways of eliminating those feelings of regret.
1. Make a budget. When you know what you earn and what it takes to live, you can determine your discretionary income and make clearer decisions on how you want to spend that money. Ask yourself:
· What’s my current financial picture?
· How do I want to live? How do I want to use my money?
· How can I make the best use of my money?
2. Save for a purpose. Do you spend on your credit card and then scrimp and save for the next month to try and pay it off? Do you just add to your credit card debt? Automatically set aside an allocation of money from every pay check into a separate (high interest savings) account that you can then use to buy those items you’ve had your eye on. This will help you to stop misusing the credit cards and staying locked into a vicious cycle, and start feeling good about your spending habits.
3. Research. Before going out to buy that luxury or expensive item, do some research on the product to understand more about the product, how it will meet your needs and what alternatives are available. Take along a list of questions to ask the sales person to ensure you are fully informed and can make the right decision.
4. Keep a spending diary. I recently asked a new client to start keeping track of her spending by making a note of what she bought, how much it cost, whether she felt it was an essential item and why she did (or didn’t) buy it. It was important to also write down those items she didn’t end up buying. After a couple of months she told me that while she had good intentions to keep the diary, she found that she had stopped spending on discretionary items as she would think about what I would say if she had bought them!! The point to note here is that when you start focusing on whether you really need the item or not and how it makes you feel, you’ll likely stop spending unnecessarily.
5. Apply the three day rule. Which is something along these lines: when you’re thinking of buying something, sit on the idea for a while say for at least 3 days. Many times, the desire to purchase something fades over time; by employing this basic frugal technique, you’ll be able to control your spending much better and feel good about any purchases because you’ve really thought through why you’re buying it.
Phone: 02 9417 6011
In : Cashflow & Budgeting
Tags: budget savings purchases