Impulse buying is the act of purchasing items without thinking through the potential financial consequences. Impulse spending can range from stopping to buy coffee on a whim to taking a last-minute vacation. An estimated 40 to 80% of all purchases come from impulse spending, with impulses causing 40% of consumers to spend more than they planned in physical stores.
Impulse spending can be a serious issue for young adults who are new to managing their finances. They might not realize how small impulse purchases can add up over time. Younger consumers might also think they have more time to recoup lost income before they need to set it aside for retirement or to reach their homeownership goals.
It’s time to dive into the psychology of impulse spending to learn more about this bad habit. Once you know why you impulsively buy things, you can take time to stop making unnecessary purchases.
The Psychology Behind Impulse Spending
Several factors contribute to impulse buying. First, buying items gives shoppers a dopamine rush, releasing feel-good chemicals in the reward center of the brain. If you had a rough week at work, you may feel like you deserve a reward in the form of an impulse purchase, which could range from buying cookies on the way home to stopping to pick up a collectible item you’ve had your eye on.
Research shows that impulse buys give consumers a sense of control, making them feel powerful in a world where work, bills, and society can leave them feeling stressed or helpless.
That said, everyone has their own triggers. Some people feel pressured to keep up with the Joneses and spend beyond their means to keep up with their peers. Others fall for FOMO or fear-of-missing-out advertisements and make impulse purchases so they don’t lose opportunities that seem limited.
Modern technology — like AI tools that market to consumers — appeals to you at specific times to trigger impulse purchases. Tools like product recommendations and online ads want to encourage impulse buying and reward you for agreeing to these spending decisions.
Recognizing Impulse Spending Tendencies
It’s OK if you have a bad impulse spending habit at the moment. You can take steps to identify your triggers and avoid making impulse purchases, reducing the effects of unplanned buying over time. Here are a few steps to take:
- Evaluate your mental state when you are tempted to impulse buy: For example, some consumers “doom spend” when they feel anxious about life of the world as a whole. Recognize when your emotions are controlling you.
- Identify upsells and impulsive marketing: Online and physical retailers specialize in getting customers to impulse buy. Know when a store is trying to get you to spend more.
- Review your receipts: Look at what you bought and highlight any unplanned purchases. Instead of focusing on the potential joy those items bring, think about their cost.
- Step back from peer pressure: Pause when you feel pressured to make bad spending choices. Know that peer pressure continues into adulthood.
Some people may be susceptible to advertising and add extra items to their carts. Others might be emotional shoppers. Reflect on your triggers and how they affect your finances.
Techniques for Combating Impulse Spending
Impulse spending is one of the biggest budget busters that can reduce your saving abilities. Fortunately, you can take multiple small steps to reclaim your spending habits and reduce your impulse purchases. Here are a few best practices to embrace.
Creating a Budget
A budget is a roadmap for how you plan to spend your monthly income. A budget doesn’t have to be limiting and you can create space for fun purchases that fall within a specific range. Budgeting can also provide transparency in your purchase decisions, so you no longer have to ask where your money went. Here are a few money management tips to create a budget that you are likely to stick to.
- Track your monthly income: Start by identifying how much you can spend after taxes.
- Set aside a portion for savings: Make saving a priority, even if you can only set aside $20 per month.
- Identify your recurring expenses: These are the first items to plan for and include static costs like rent, car payments, student loans, and health insurance.
- Budget for essential costs: These expenses may fluctuate from month to month but should stay within a similar range. They include your groceries, gas, and utilities costs.
- Create a line item for fun costs: Allow yourself a little excitement each month with money set aside for activities, hobbies, and nights out with friends.
- Make adjustments as needed: Know that some months might have more expenses, like your air conditioning bill going up in the summer, and account for these costs. You might have a bigger “fun budget” during some parts of the year than others.
Focus on your fun budget when you are tempted to make an impulse purchase. Ask yourself whether a $5 cupcake is worth eating into the $100 you allowed for impulsive and exciting purchases.
Practicing Delayed Gratification
Delayed gratification means withholding joy in the moment so you can feel it in the future. It’s often defined by the marshmallow test, where kids decide between eating one marshmallow in the moment or waiting to enjoy several marshmallows later. You can practice this with your budgeting. An impulse buy like a new dress or online game is a singular marshmallow, but saving for a goal, like a cruise or reliable car, is your bag of marshmallows.
Consider creating a "waiting period" before making a purchase. This can range from 12 hours to two days. During that time, you will either confirm that the purchase is valuable or decide you don’t need it. The more purchases you walk away from, the more you can save to enjoy that money later. You might be surprised how even short waiting periods can help you reconsider your purchases.
Avoiding Temptation Triggers
Once you identify your triggers, walk away from them. For example, if you are guilty of adding extra items to your cart when you shop online, consider switching to curbside pickup. If your impulse buys come from influencer recommendations or marketing emails, unsubscribe from those messages. Removing temptation is one of the best ways to forget about potential purchases.
Seeking Support
If you are still having a hard time curbing your impulse spending, talk to your friends and family members about the issue. You can even reach out to a financial advisor for help setting a budget and implementing risk management policies.
Your close friends can become accountability partners who hold you to your budgets and ask about your spending. They also might want to save money, too, and could appreciate your reaching out. You don’t have to curb your impulse spending alone. When others know you want to save, they can support your journey.
A small impulse purchase seems harmless, but one impulse buy each week could result in thousands of dollars lost each year. Take steps to identify your triggers and step back from impulse buying. Reducing unnecessary purchases is one of the easiest ways to save.