Decoding Spending

If you have been putting the seemingly simple concepts shared so far to practice, you must be facing considerable discomfort. And if, despite that, you are staying true to your path, you have my respect.

I left you with an exercise in my last blog – to help you identify the two key frailties we humans suffer from in our spending behavior. One, Impulse Spending and two, Buying to Impress. And these eat into our ever elusive ‘investible surplus’. In the next blog we will be addressing this erroneous formula of Income-Spending-Saving, which usually is at the heart of our ‘savings’ problem. But for now, let’s focus on our human frailties, which are leaving us in this state of financial want.

Impulse Spending

Please stop making impulse purchases. In an impulse purchase our human mind experiences the same “Dopamine” surge that a drug addict experiences after a hit. As a natural next step, the experience of guilt is equally strong once the Dopamine has worn off. Impulse purchase is similar to addiction and both are harmful. So please STOP.

Buying to Impress

The need to look sexier, fairer, stronger, richer, more desirable are the emotions advertisers and brands play with to sell us things we don’t need. And our buying into these dreams results not only in cluttering our lives but also in our growing financially poorer in the process (I will not delve into emotional and personal ramifications as that is not my area of expertise). So please STOP trying to impress.

The Unconscious Spend

This is the third kind of (over)spending that we usually sleep-walk through and which goes un-noticed. After recording and classifying your expenses diligently, take a careful look at each spend to find less expensive yet equally good solutions for each. I share a couple of examples in this section.

1. Do you really need to watch First day/First show of a latest release when the ticket prices are at a premium? Or would you rather watch it on a non-peak day and save 15-20% in the process? Or better still, provide equally satisfying (and less costly) refreshment to yourself and family by visiting a friend’s place or inviting someone over.

2. Shop for your winter clothes in summers when you can get bargains and vice versa. Same goes for electronics and gadgets… buy during festive or off-season for better deals.

It all adds up

These may seem small savings if you look at them as individual transactions but the list of such spends is endless and they all add up to a significant saving, which ultimately adds to your ‘investible surplus’.

I have given you plenty to chew over for the next couple of weeks, when I return to focus on the flawed formula of income, spending and saving that we have become accustomed to. Till then, become aware of your spending behavior and of opportunities to save on each purchase, that is if you really need to purchase at all.