Learn how to keep more of your money.
Why unconscious spending tempts
For many people, all the external pressures encouraging us to spend, and the internal ones that make resisting difficult add up to a life of Unconscious Spending. All of these pressures result in a culture where many people live for today without really considering the impact on the future. This means that many people do not save enough for retirement, get into debt, and effectively work today to pay for what they consumed yesterday.
Conscious Spending makes sense: You work hard so you should get what is best for you and your household with the money you earn. Yet most people don't spend in a way that is in their own best interests. Why? The simple fact is that it often feels easier to be an Unconscious Spender. Let's take a minute to look at what we are up against.
The external pressures that encourage you to spend
Although no one makes you spend money, a lot of time and money is spent by experts who make it hard not to spend.
- They tell you what to want.
First, there's the advertising and marketing industry. Imagine hundreds of highly paid psychologists, statisticians, filmmakers, marketers, copywriters, and artists hired to influence your buying decisions. Every ad that makes it on to prime-time TV and every item that makes it to the stores is the product of years of research into what you like, what values you hold, what aspirations you have, and what emotional buttons to push to get you to make a purchase. Think you can pit your self-will against their sophisticated marketing? It's tough. You are bombarded with marketing messages and offers that are designed to push your buttons. And if they are successful, they will lead you to want something you never wanted before.
- They dangle it in front of you.
The second external pressure comes from merchandisers who know how to turn a browse into a buy. Retail consultants can boost a store's sales by determining where and how to display products, what signage to use, and how to make the transaction enjoyable. The good news is that all this data collected about you means that you get information about things that you are somewhat likely to want: If you're a Velveeta type of household, you get Velveeta coupons; if you're a Brie household, you get flyers from your local gourmet market. The end result is a whole lot of consumption that drives the economy. If we went into stores only when we needed to buy something, and if once there we bought only what we needed, the economy would collapse, boom. What is bad is if the marketers sleep well while you struggle to make ends meet, pay for a house full of stuff that never gets used, or face your future with little saved for a rainy day and a sunny retirement.
- They offer anything you can think of.
The next external pressure comes from the incredible range of things to choose from. Today, in most developed nations, you can buy almost anything you can imagine almost anytime of day. If someone imagines a need and a marketer believes that others have the same need, then there's a good chance that you will find it in a store near you one day soon. Flipping through the many catalogs that come through my door, I can find hundreds of items that I survived without for years but that clearly serve a purpose: from special clips that close bags of chips to storage containers for all the remote controls that have flourished. Someone buys these things, proving that the wealth of the economy is being used to satisfy more and more subtle and obscure wants.
- They build in obsolescence.
Another external pressure that adds to the drive to buy is that times change. A lot of what you buy becomes obsolete or out of date. The product life cycle-the time between when a product is first released on the market and when it goes into decline-is getting shorter. Most households harbor a museum of technologies past: a BetaMax video recorder, a computer that is more than 5 years old, a rotary phone that still works but no one has the patience to use anymore, or perhaps a black and white television. People who always try the latest thing, a group that marketers call "early adopters," feel this cost more than most. They were quick to move from vinyl records to CDs, from CDs to minidiscs, and now to downloadable music players that are making minidiscs old hat. Additionally, the length of time that a durable good lasts is shrinking, redefining durable to mean "it lasts until just after the warranty expires."
- They make the money easy to get.
The final external pressure that fuels the trend to spend is having more access to money, whether or not it has been earned yet. Credit cards, home-equity loans, store cards, even advances on paychecks through check cashing stores allow people at most financial levels to have unprecedented access to borrowed funds. Living on debt is not just a possibility; it is a reality for many.
The internal pressures that make it hard to resist spending
As nice as it would be to place the whole blame on the evil marketing industry, we, the consumers, are hardly blameless. The fact is we want to buy. Many of us have unwritten shopping lists that would make Santa roll his eyes.
- We want more.
The fundamental challenge for most of us is that we want more than we can afford. One of the reasons is that our culture has blurred the line between wants and needs. Part of this has occurred because we no longer keep up with the Joneses, but rather aim to keep up with a composite person who doesn't exist. The composite picture may include the dress standards of your boss, the gardening and maintenance expenses of your neighbors, the social life of a new romantic interest, and the car of your best friend. It may also include fictional benchmarks, such as the great apartment that the characters on the TV show Friends live in even though they seem to barely ever work. The result is that most of us have an infinite shopping list in our heads. When we manage to afford the things on the top of the list, we find that there are more wants just underneath.
- We want what they have.
Another way that we try to fit in is by following trends. We have all fallen prey to it at one time or another: buying something, upgrading something, just because almost everyone we know is doing the same thing. Is it wrong to want to keep up? Not at all. Wanting to fit in is a normal human desire. Plus, luxury cars are more comfortable than regular ones. Expensive clothes are usually cut better than cheap ones. The problems arise, however, when we consume more than we can afford.
- We want it now.
Life is faster than it used to be, and we are used to getting what we want sooner. With easy credit and readily available goods, it is easy to act on our wish list today. For many people, waiting seems unwarranted and planning for the future unnecessary. Stacy, 26, recently changed jobs. She cashed out her small retirement savings account, getting several thousand dollars after tax was deducted. "I cashed out my retirement savings because I have more need for the money now than in the future. My friends say I'm crazy and that if I left it alone, I could have a whole lot in the future, but saving for retirement now seems pessimistic."
- We are on the consumption escalator.
Another internal pressure arises as earnings rise. People have more money than ever before so why don't we feel any richer? It's often because Unconscious Spenders have jumped on the consumption escalator: When their salaries increase, their lifestyles become more expensive. If you have seen your pay rise over the years, you probably are having just as much (or as little) trouble living within your means at your current earnings as you did when you earned half as much. Escalating your standard of living is fine when it is a conscious choice. Unconsciously escalating your standard of living can cost you the ability to choose the life you really want.
- Shopping is not just about shopping.
As if all this temptation were not enough, shopping has moved from the realm of fulfilling basic needs to entertainment. I bet I'm not the only woman who has used "retail therapy" to get over a broken heart or gone shopping to avoid studying for exams. Shopping malls have become places that are as much about socializing and entertainment as they are about shopping for many people, from the elders who use malls as indoor walking tracks, to the teens who are not old enough to hang out elsewhere. One high-end gourmet grocery chain near where I live even has singles nights, where the store stays open late and has samplings of food and various displays to break the ice among the single people who would otherwise just gaze longingly at each other over the broccolini.
- Money simply evaporates.
Evaporation of money is another internal pressure. Most of us don't like the tedious work of tracking where our money goes, and it seems to evaporate. Hundreds of insignificant purchases add up to a significant amount. For some people, having cash on hand means that it simply gets spent on little things. Others find that credit cards result in the same evaporation, with a surprisingly large bill coming at the end of the month, summing up numerous small purchases that have faded into the background by the time the bill arrives. Conscious Spending is an antidote to evaporation because it focuses on what you want and is more motivating than nickel-and-diming yourself.
Exercise: Getting out of your own way
Take 5 minutes to make a list of all the influences on your financial life that you are most aware of. Think of where you are, whom you are with, and what you are doing when you start to want something. Remember some of the unnecessary purchases you have made recently. What prompted them? How did you decide on that purchase versus everything else on your list? Where did you first hear about the product you bought? Did you make the decision alone, with other members of your household, or with the support of friends or colleagues? Do you know someone who has something similar?
Over the next few weeks, begin to watch for the triggers that start the process of wanting. What do you see and hear that impacts what you want? Who do you compare yourself to? Where is your danger zone: in front of the TV, in a mall, reading magazines, talking with friends? As you begin to understand your behavior patterns better, make some decisions that will help you become a Conscious Spender. Are there friends with whom you are better off not shopping? Are there catalogs or cable channels that lead you into temptation?
Excerpted with permission of the publisher John Wiley & Sons, Inc. from The Ms. Spent Money Guide: Get More of What You Want with What You Earn by Deborah Knuckey. Copyright © 2001 by Deborah Knuckey. This book is available at all bookstores, online booksellers and from the Wiley web site at www.wiley.com or 1-800-CALL WILEY.
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