Avoid the Pitfalls of Impulse Buying
The way today's society is structured it is pretty easy to outspend your means if you are not careful. Between the ease of technology and the availability of buying on credit, nowadays commercial promotions are designed to get people to spend. Between credit and debit cards, pay later plans, and other forms of deferred payment, it is tempting to make purchases and worry about making payment later.
With these many conveniences available today, on the surface they might seem like terrific options for consumers. In many ways they are - as is anything designed with convenience in mind. However, the big drawback is due to the ease of purchase without worrying about payment right away, debt has a tendency to sneak right up on you. And, if you're not paying attention, interest begins piling on your balances and before you know it you could have creditors knocking at your door demanding payments you cannot afford to make. Ways impulse buying could easily get you into debt include:
You Outspend Your Income
Continuously purchasing items without planning for them financially can lead to debt if spending exceeds income. Chances are most people have a specific monthly income, or at the very least, earn the same average amount each month.
To avoid this pitfall, prior to spending your available credit on non-necessary and non-budgeted items, it is important to pay all outstanding bills first to ensure spending does not amount to more than income does. Debt can creep up if bills are not paid first; however paying bills can give a clear indicator of how much money, if any, is left over for spontaneous shopping adventures.
Overuse of Credit Cards
Many individuals who are compelled to impulse shop frequently use their credit cards. Credit cards are a terrific convenience, however the drawback is using credit cards can lead the spender on a very slippery slope, one that will land the consumer right in heavy debt if he or she is not careful.
When impulse shopping leads to credit cards bills that cannot be paid off at the end of the billing cycle, this means interest charges will be tacked on to the original expense. Depending on the card's interest rate, this could get costly - quickly.
Impulse spenders have to be extra careful when using credit cards because it could lead to excess debt which may be hard to dig up out from.
You Lose Track of Expenses
People who tend to impulse buy also often have a predisposition to not track expenditures until it is too late. As shoppers go from store to store or website to website to make purchases without really paying as close attention to spending, debt can tally up quick.
If you don't watch your spending, you might find yourself shocked when you receive your next credit card bill
The growth of e-commerce, and now mobile commerce (or “m-commerce), in many ways helps contribute to overspending because it is so convenient. With customized ads hand-delivered to pretty much any web page, including social media and flash sales designed to get people to buy impulsively with deals that (the companies are hoping) cannot be resisted. Then there are daily deal sites and other enticements all over the web.
Online shopping is quick, and this alone makes it much easier to compile debt because a consumer can visit many stores within the matter of minutes. Add location trackers and other geo-location details and retailers may send targeted ads or deals on the spot to mobile that people accept in the fear of missing out on such a deal. In April 2015, Mobile Commerce Daily reported on the ways Twitter's "buy button" can change the dynamics of m-commerce. 4
Mobile opens up all sorts of opportunities for marketers, it'll be interesting to see how these technologies contribute to impulse spending over the long-term. If current statistics are any indicator, not good.
Statistics on Debt
According to figures put out by the U.S. Federal Reserve, in the United States, total outstanding consumer debt was said to be $3.34 trillion. This figure includes car loans, student loans and revolving debt. Mortgages were excluded. Reports also indicate credit card debt is steadily on the rise. CardHub reports on American spending:
"Consumers ended 2014 with a $57.1 billion net gain in credit card debt, and CardHub now projects that we will incur more than $60 billion in new credit card debt during 2015 – a 5% increase. We’ve now had six consecutive quarters of year over year increases in our credit card debt load." 2
Revolving debt, which is primarily composed of credit card outstanding balances was said to be $884.8 billion as of January 2015. 1 On the plus side, the number of people who carry credit card balances from month-to-month in the United States is decreasing.
In Canada, statistics indicate total consumer debt as of Nov. 30, 2014 is $1.810 trillion (unlike U.S. statistics, this does include mortgages). Fifty-two percent of Canadian households carried credit card debt in 2014. This is down 2 percent from 2013. 3
For many, impulse buying plays a strong role. As a result, it can lead to serious financial problems and, due to this reason, it is important to be sure to spend only within your means in order to avoid the financial hardship that comes along with excess debt. Even if you have to plan a budget. If not, they'll be financial consequences to pay.
Impulse buying can lead to excessive debt, but the good news is recognizing and avoiding the pitfalls of on-the-fly shopping can help allow you to spend and remain within your budget.
[ Related reading: 5 Tips to Get Out of Debt ]
The bottom line - "Do not spend the money that you don't have." If you can do this, you can avoid falling into the debt trap.