I want to be conscious of the impact my blog might have and it is important to me that I encourage responsible spending so today I’m sharing some thoughts on shopping and some tricks that might help you spend a little less and save a little more. While this may seem unrelated to travel and home – it really is related because your ability to do anything travel or home ties directly back to your money. So stick with me on this one.
Congratulations! You survived another Amazon Prime Day! How did your bank account fare?
I love to shop online, usually for home goods and travel gear. I’m particularly susceptible to recommendations by my favorite Instagram Influencers, and all the Influencers posting their Prime Day picks had me scrolling through deals like it was my job. I wish I could tell you that I resisted the temptation and didn’t buy anything but that would be a lie.
My husband and I spent close to $500 on Prime Day after planning to spend zero.
Realistically, I know this happens for different reasons for people but I do think that regardless of the reasons that each of us shop – it’s not unusual for people to overspend.
So today we’re going to talk about why we shop, why we feel more compelled to shop when things are on sale, what the impact of shopping is, and finally, some strategies that I use to better set myself up for financial success especially as it relates to shopping. Disclaimer: I’m not a psychologist and this is all just opinions and reflection on my own thoughts and behaviors and observations of those around me. Hopefully there’s some value in it for you.
Why do we shop?
- We shop out of necessity. Now, to be fair, if we want to really get to the root of the matter, we COULD make all our own clothes and live off the land. People do. But the fact that you’re reading this blog post means that you own or have access to a computer or smart phone, which leads me to believe you are participating in society in some way. So you probably don’t make your own clothes and grow your own food and would have to radically change your time-for-money model if you were going to do so and I doubt my blog is something you would spend your time on. Let’s just agree that we shop out of necessity for some things and our definition of necessity will factor in reasonableness to make or obtain without shopping.
- We shop for things that are going to improve our efficiency in some way. Example: You got a new job and you’re working more hours so you decide to buy yourself a dishwasher. These purchases aren’t necessarily frivolous or bad, because at the core of most of our lives is the fact that we are trading our time for money and these purchases reduce the amount of time you spend doing non-fun things.
- We shop for new stuff that we don’t need and won’t necessarily improve our lives. Why do we do this? I don’t really have an answer. Examples like new clothes and shoes when my existing clothes and shoes function perfectly well come to mind for me. New furniture for my master bedroom when I’ve already got perfectly functional stuff falls into this category as well.
- I think sometimes we do this because we feel a need to have what we see other people have because something else about them inspires us. Example: My favorite influencers house looks like heaven and she has this bed, so maybe my house will feel like heaven if I get the same bed. Or: My favorite influencer is traveling the world and says these pants are the most comfortable pants to wear on long flights. Maybe if I buy these pants, I won’t hate long flights so much and therefore will travel more. In some cases, this is probably true. The bed might make me happier and the pants might make me travel more comfortably, but the (paid) opinion of another human that I’ve never actually met is very little evidence to base a purchase decision on. Still, I make those purchases, too.
- Another reason is that we think that new things are going to make us feel better or happier. Sometimes they do, but usually temporarily.
- Sometimes we have “extra money” (I don’t believe there is such a thing as “extra money”) so we decide we deserve to treat yo’self. YOLO and all that.
- Sometimes we’re interested in a hobby or activity and we purchase things that allow us the ability to participate in that new thing and learn.
Why do we shop even more when things are on sale?
One thing that I want to state outright – it’s only savings if you save it. My husband and I said we were going to spend zero on Prime Day and we spent nearly $500. If we had purchased the exact same items at full price, we would have spent closer to $1,000.
So did we save money? No. No, we did not. We spent nearly $500. The regular price of the items is completely irrelevant because I spent money. Period. Now, if I had budgeted to spend $500 and spent $200, did I save money? Not technically yet. It’s not saved until it’s put somewhere to increase my net worth, like my savings account, an Index fund, or paid towards the principle on my mortgage, etc. If I budgeted to spend $500, actually spent $200, then put that $300 towards some new clothes, did I save money? NO. I STILL SPENT $500. It doesn’t matter how many items I can get for that money. Unless I’m somehow taking those items and turning them into more than $500 which I then put somewhere to grow….its NOT saving.
Did we get good stuff? Yes. The Homeowners (my dogs) shed like beasts and WE GOT A NEW ROOMBA YESSSSSSS. Also, a hammer drill so I can demo some old tile out of my house! YESSSSSSSSS again!
Do I regret my purchases? No. I’m very grateful to be in a place in my life where I can make discretionary purchases like this occasionally without having a major negative impact on my day to day life. This wasn’t always the case for me and I am grateful every single day for the life I have.
Did I need the stuff we bought? No. But that Roomba will make me more efficient because I spend a lot of time vacuuming.
Okay, I’ll stop crying happy tears about my Roomba. Let’s go back to the original question: Why do we shop even more when things are on sale? Obviously the strategy of marking things down to get people to buy more stuff works or stores wouldn’t have sales. The house always wins, right? Anyone else notice that Prime Day is all the sudden two days long? Amazon is winning. Retailers wouldn’t have sales unless it resulted in more money for them. It either draws out more people to make smaller purchases than would normally do so, or the people purchasing end up purchasing more because the price of each item is lower. I’m guessing it’s a combination of both.
I think that we shop for the exact same reasons when things go on sale, but we’re more likely to purchase things that we would normally end up deciding against purchasing. The idea of a time constraint makes us evaluate a choice less carefully and adds an emotional factor (FOMO) to the decision. When things aren’t on sale, you can sit on that decision for as long as you want because it’s highly unlikely that the price of a consumer item is going to go up. Also, it might go on a sale and become considerably cheaper.
What is the impact of shopping?
Every single dollar you spend is one more dollar that you have to earn plus interest. I’m not just talking about interest if you charge it on a credit card although I can’t not say it – DON’T SHOP ON A CREDIT CARD UNLESS YOU PLAN ON PAYING IT OFF IMMEDIATELY. I’m talking about the lost interest if you had actually saved that money by putting it someplace where it would grow. I get that credit card points for travel are awesome, I use credit card points for travel but you HAVE to pay them off immediately, or you’re better off just paying for the travel out of pocket. Seriously. Do the math.
Here’s a snapshot of an investment account I have as an example. This is the power of saving. I have been putting my savings in other places in the past few years, so I stopped making contributions to this one a few years ago. I contributed to it from mid-2011 to mid-2014 and haven’t touched it since. My $26K has almost doubled in 5 years and this is in a fairly conservative portfolio of index funds. Want to guess how much the crap I bought between 2011 and 2014 is currently worth? It’s probably all worth absolutely nothing because I don’t even know of anything I bought during that time period that I still own.
Okay, you say, that’s obvious, investing is great but I like stuff so I’m going to buy stuff. Fair enough, we all buy stuff sometimes. I spent $500 on Amazon Prime Day, so in order to come out on budget for the month, I need to not eat out and shop for the rest of the month and probably cut back on some other costs like driving less to reduce fuel expense, etc. All of our line-item budgets are different so these items that we can cut out or reduce will be different for each of us.
That’s just not the way I think about spending and saving. That thinking isn’t enough because it still leaves me spending all my money every month and not finding ways to save more.
In order to frame this up, I’m going to tell you a little about my background.
I grew up poor. Not like “We can’t go to Disneyworld this year” poor. Like trailer parks, saltines for dinner, power got shut off, living with relatives because we couldn’t afford or own place, hand me down everything poor. I knew this wasn’t a life I wanted to lead forever, so I worked multiple jobs in high school and all through college. I got a few small scholarships for college which I was so grateful for and thankfully also quite a bit of financial aid that reduced the amount I had to borrow down to what a lot of people borrow in a single year.
When I first graduated from college, I was broke but swore I wouldn’t stay that way. I had student loans and rent to pay but even then, I put 15% of my income in my 401K. I remember HR scheduling a meeting with me to make sure I hadn’t made an error on my benefit elections sheet because they didn’t believe I could have meant to put 15% of my truly tiny paycheck into savings. It was important to me so I did it but I had absolutely no money to spare. I called in sick to work one time in my early 20s because I had been driving with my E light on for a day and less than $4 in my bank account. I didn’t have enough gas to get to work until the following day when I got paid. Thankfully I was a salary employee so I used my P.T.O. and my paycheck wasn’t any smaller due to missing a day but man oh man, for people who are paid hourly and don’t have paid time off…..I can see how that would become a vicious cycle of needing more money to be able to get to work to get more money.
Anyway, I grew up poor and accumulated more debt than what I made in a year before I could even legally buy a beer. I graduated from college in 2009 in the middle of the Great Recession and there weren’t a lot of jobs to be had, especially for new college grads. I was competing for entry level positions with other entry level candidates as well as people with 20 years of experience. I was so very lucky to land a job right out of college that was in my desired industry but it paid peanuts. The pay didn’t really matter though because there just weren’t high paying jobs available – I was at least gaining valuable experience in the industry that I went to college for and that was the best I could hope for. Times were tough but I’m grateful that this was part of my experience in my formative years because I think it’s had a profound impact on me.
Because I came of age in a time where people were losing their jobs and homes and cars, I constantly worry about that happening to me. I probably worry a little more than is healthy but I’m working hard at accepting it for what it is and learning to appreciate it. Because of that, I think carefully about purchases and I’m grateful for that perspective.
My perspective is that saving enough money to be able to live without a 9 to 5 is the only fool proof safety net there is. This doesn’t mean that I plan to quit my 9 to 5 when I save up enough money. This doesn’t mean that I am going to live on a tenth of my income and eat Ramen so I can retire and eat Ramen forever. It just means that my ultimate goal is financial independence and I’m working hard to balance that with my other passions such as travel and home improvement and sometimes I need a reality check about finance when I want to make improvements to my home.
I’ve gotten a little loosey goosey with my money in the past few years because I’ve gotten super comfortable. Marriage makes money so much easier. Being a DINK (Dual Income No Kids) is seriously financially comfy. But my autopilot savings plan is about to get powered up as I make this a major focus in coming months. I’m hoping that posts like this (and feedback from readers) will help me stay focused on it.
That leads me into my next topic.
How to set yourself up for financial success when you love to shop sales:
- I almost never buy something the first time I see it on sale. I put it on a tracking spreadsheet and make sure to include the date and “type” of sale, like Semi Annual or Premier Day, and the price. Then I track it over time to make sure I’m getting the best deal possible. I also end up talking myself out of a lot of purchases this way. It completely removes the emotional aspect for me.
- I divide the cost by my “hourly” pay. I’m a salary employee so to get this number I take my annual salary, divided by 52 (the # of weeks in a year), divided by 40 (number of work hours in a week). You could also just take your pay divided by 2,080 but I like to drill the thought of allll that time into my brain so I do it manually every time. My company has a strict policy that I can’t disclose my salary so I’m going to make up numbers as an example in case one of my coworkers stumbles on this blog.
Let’s say I make $50,000 a year.
Let’s say I want to buy a new phone that costs $500.
I take my salary and divide it by 2,080 annual work hours to come up with my “hourly rate” of $24.03.
I then divide the cost of the phone by my hourly rate
$500 divided by $24.03 = 20.8
Is that phone worth 21 hours of work? Maybe, it’s a pretty integral thing to have in today’s society and we use a phone so much that over time they do break and stop working so maybe a new phone is high on the priority list to help you be a more efficient person.
But now let’s try that exercise for a new lamp that works exactly the same as your existing lamp but is better looking.
We’ll stick with my (fake) $50,000 salary and “hourly rate” of $24.03.
Now let’s say I want to buy a new lamp from West Elm for $350.
I divide the cost of the lamp by my hourly rate.
$350 divided by $24.03 =14.56
Basically two work days. To replace one totally functional item with another. And most lamps are pairs – so am I willing to spend almost one whole week of my life at work to replace the lamps on my bedside tables with lamps of equal functionality but slightly more appealing look? Yikes. I probably won’t buy those lamps.
This equation doesn’t even factor in the interest that could be gained by saving the money instead, or the interest I could be shelling out if I put one of these items on a credit card.
- Don’t fall for the emotional trap that is a sale. Here’s something that I remind myself of whenever I’m evaluating a sale purchase and feel myself worrying that the sale will end….
Name a single retailer that’s only ever had one sale. Maybe there’s an item at a retailer that you just discovered and so you’ve personally never seen it on sale before…..but think about it. That item WILL go on sale again.
I started tracking sale prices years ago and I can tell you that there is not one single item that I’ve ever tracked that has only gone on sale one time. There is also not a single consumer good that I have tracked over the years that has increased in price over time. Not. One. Single. Item. In fact, most decrease in price over time because a new version comes out or a competitor starts making something comparable for less. So – if you reallllly want to get the best price, waiting is hands down the best strategy.
- Be transparent with a friend or spouse about what you bought. If you feel defensive or the need to lie about the purchase, it’s probably for good reason. If you feel judged – first take a deep breathe and step back from the situation because you probably aren’t being judged, you’re probably projecting – then ask yourself what the judgement would be and would it be fair?
- I make myself wait one week for every hundred dollars I want to spend on non-routine things. If I want to spend $100 on something, I have to wait a week. If I want to spend $500 on something, I have to wait five weeks. Obviously this rule doesn’t apply to things like utilities and groceries. This is for shopping.
- Ask yourself what percentage of your annual or monthly income that item represents. Want to buy a $500 purse? Is it worth 1% of your annual income? Want to go on a $5000 vacation? Is it worth 10% of your annual income? Want to buy a $15,000 boat? Is it worth 30% of your annual income?
- ALWAYS look back at your spending over time to see how much you spend on shopping. I use Mint but there are tons of tools out there for this, or you could just export your credit card or bank statement to excel and add it up.
I hope this post has provided you some perspective on shopping and wanting things. We all do it. We’re human. But the more you stop and think about it, the easier it is to break the pattern, and once you’ve broken the pattern once, it gets easier every single time.
In closing, here are a few of my favorite money blogs that I use for inspiration, data, formulas, and fun.
- The king of frugal living, Mr Money Mustache: https://www.mrmoneymustache.com/
- Jason Fieber, a dividend investor and now expat: https://www.mrfreeat33.com/
- Paula Pant, whose approach to budgeting and saving is my fave: https://affordanything.com/about/
- Jay Money, I don’t know his real name, but he’s the yin to Paula Pant’s yang: https://www.budgetsaresexy.com/