You can take photos on your phone, or you can buy an expensive camera without taking photos professionally. You can buy a simple guitar and play it for fun, or you can splurge on a Gibson, knowing that it will never pay off. There’s no right choice here, and everyone is guided by their own priorities. Is it worth it to give up irrational spending in favor of the purse? Let’s sort it out together with the experts.
When the Purchase Becomes Irrational
Purchases, which are sincerely liked, but which don’t bring real value, are called irrational. A bicycle, which you ride only twice, or a guitar, on which you don’t even know how to play.
Any irrational purchase becomes unjustified in two cases:
- The buyer doesn’t use it and regrets the money spent.
- It leads to financial hardship and will never be repaid.
Everything else is acceptable spending. If they bring pleasure and do not blow a huge hole in the budget, there is definitely nothing to worry about.
How to Approach Irrational Purchases Rationally
Make Lists of What You Want to Buy
When you have a financial goal, it’s easier to resist spontaneous purchases, spending too much on playing at https://www.playamo.com/en-CA/games/live-casino, and save up for irrational ones. For example, you planned to buy a guitar and started saving for it, at some point you saw an advertisement for a game console, but you remembered in time that there is a more important goal.
Take Time out and Think
For example, if you just started playing sports, you may have an irrational desire to buy a very expensive uniform. At this point, take a break and wait. Go for a couple of months in a simple and inexpensive outfit, try to “live” with your needs, put it in your spending plan and start saving. If it doesn’t go away, then quietly buy the uniforms you want. The rule is universal for all irrational purchases.
Calculate the “Return on Investment” of the Purchase
For a more informed buying decision, use the “monetary equivalent of one day’s worth of use” method. It’s actually quite simple. This method will help you understand whether a purchase is really as irrational as it seems at first glance.
Allocate Part of Your Budget to Emotions
To prevent irrational purchases from hitting your wallet, you should budget them in advance. In this case, you should use the “50-20-30” method:
- Spend 50% of your income on mandatory spending: groceries, mortgages, utilities, and everything else.
- 20% should be invested or put aside for a safety cushion.
- 30% should be spent on “wants” and entertainment.
In personal finance, as in the diet – a balance is important. If you eat right all week, and then overeat at the weekend, it’s unlikely that you will lose weight. But it’s okay to have a cheat meal once in a while. That’s why you should budget 30% of your budget.
How can I improve my buying behavior?
Improving your buying behavior can help you make better purchasing decisions and ultimately lead to greater financial well-being. Here are some tips to help you improve your buying behavior:
- Set a budget: Before making any purchase, set a budget for yourself. This will help you avoid overspending and ensure that you only buy what you need.
- Make a shopping list: Make a list of what you need before you go shopping. This will help you stay focused on your needs and avoid impulse purchases.
- Do your research: Before making a purchase, do your research to compare prices and quality. This will help you make an informed decision and ensure that you get the best value for your money.
- Wait for sales: Consider waiting for sales or discounts before making a purchase. This will help you save money and avoid paying full price.
- Avoid emotional shopping: Don’t let your emotions dictate your purchasing decisions. Avoid making impulsive purchases based on your mood or feelings.
By following these tips, you can improve your buying behavior and make better purchasing decisions. With a little practice, you’ll be on your way to financial success.