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When barriers can be good…

How many people want to be responsible with money? How many people want to control impulse buying? Yet, how many people actually do it? When it comes to personal finance, the concept is really simple. Even a kid can understand it. Spend less than you earn, save the rest. Simple, isn’t it?  But how many of us do it? If finances are as easy as this , there wouldn’t be 1000s of personal finance blogs. It is more than money.

In the past whenever I thought of friends or colleagues who were not enrolled in a 401k or spoke about increasing their contribution but never did, I always felt that they were being irresponsible and lacked a desire to do better. But I have since figured out that it is not so simple. Let me explain.

Impulse buying and impulse eating

I struggle with weight issues. I want to lose weight but I always end up eating more than I should. We had a bag of chips from a dinner party a month ago. I asked my husband to put it away. He hid it on the top shelf of the pantry. Usually when there is a bag of chips sitting on my kitchen counter, I will eat some every time I walk by the bag. But this time, even though I saw the bag, I couldn’t reach it. I made a mental note to bring the step ladder the next time I went to the kitchen. But by the time I reached the bedroom I had 10 other things on my mind and totally forgot about the chips. Two days ago, my husband found the unopened bag of chips and commented that he has found a way to keep me from eating junk – keep it out of my reach :) That 2 second barrier was enough for me to not eat junk. Do I not know that eating junk is bad for health? Of course I do. Do I not want to lose weight? I most certainly do. But sometimes, I don’t even know that I am eating junk until it is too late. It is not a rational decision, it is more like an addiction.

I have always been responsible with money. So I never really understood the difficulty of impulse buying. If you want to rebalance your portfolio or open an IRA or increase your contribution… just do it. I never understood why folks always talk about wanting to do stuff but never really do. Now I understand. People who are not weak in a particular area might easily dismiss other’s problems in these areas as laziness or irresponsibility. That is true for the most part but that is not the whole story. There is a psychological element to this equation. That is the most difficult factor to overcome, because we are not fully aware of this factor. We ALL have this psychological barrier to getting things done. Yes, ALL of us. The areas in which we have these barriers might differ – finance, diet, career, travel… But it exists. None of us are perfect.  We have to accept this and turn it to our advantage. How you ask?

  1. For things we should be doing – we could intentionally remove the barrier.
  2. For things that are not good for us – we could intentionally add a barrier.

A simple change can make or break the barrier. Coming back to our finances, this passive barrier is a great way to curb impulse buying.

How passive barriers can curb impulse buying?

  1. Let’s buy it next month: Whenever my husband asks me if he could buy something, I tell him we will buy that in the next billing cycle (we use credit cards). If he still remembers after a month, I know he really needs it. So far he has forgotten about 95% of the stuff he asked for.  This is also called the 30 day rule. You can have whatever waiting time you want but always have a “waiting” period.
  2. Be little barriers for each other: In a good way :) I have a problem with curbing my appetite. My husband likes cool electronics. It is good that we don’t have the same spending habits. Before he buys something, I always ask him a few questions on how he is planning to use whatever he wants to buy, how is it better than what we already have, etc.  He asks me similar questions when I want to binge.
  3. Use a wish list: This works great for curbing impulse spending on the Internet. Instead of actually buying, put that in the cart or the wish list. Follow the waiting period and come back to it. Most of the impulse buying is fueled by the thought that we might forget about this useful item later. By putting the item in the wish list or the cart, you know you won’t forget.
  4. Sell something to buy something: This is a good policy for any purchase that is non-esssential & is something we follow ourselves. If I want to get an iPad I have to “raise” money. This forces me to do 2 things
    1. Gives me time to evaluate if I really need the toy.
    2. Get rid of some of the clutter we already have.
  5. Carry larger bills: I hate spending larger bills and having a lot of coins/dollar bills. If this is you, you can curb your impulse buying by carrying larger bills.
  6. Freeze your credit card in ice: A classic get out of debt tip. This tip is given by a lot of pros, but the actual reason is that thawing and then using the card is barrier enough to impulse buying. So, freezing the card, not taking the card when going on shopping trips… all work.
  7. Don’t use a shopping cart: Do you know why a well planned store has shopping baskets or carts all around the store?It fuels impulse buying. If you went to the store to get one thing, without a shopping basket, most of the time, just because you have to balance the other stuff in your hands, you won’t buy anything else.
  8. Never buy anything without further research: You can give yourself permission to buy, but only after researching. This gives you more information about the product and also gives you some time to think about it.
  9. Have a splurge bucket list: Have a separate budget line item for $x. Put all the items in your own wish list and pick one thing from your bucket list to buy/splurge on every month.

How passive barriers can improve our finances?

  1. Automate your retirement: Enroll in a 401k as soon as you join the company. When you sign that insurance paper work, sign up for 401k and put the money in an index fund. Don’t wait to research and then join.
  2. Automate your savings: Our paycheck follows this path payroll-> retirement -> FSA -> taxes -> savings for each of our goals -> spending money hits the checking account. So savings are taken care of first.
  3. Cook in bulk: A lot of us are not disciplined enough to cook every day. Cook larger portions when you make something and freeze the rest. This way you will have something for those tired evenings when you want to eat something but don’t want to cook.

Many of you may say that if I really want to lose weight I should control myself, after all I am not a kid. I agree. And I am trying but in the meantime, if there are simple tricks like having it out of my reach or hiding it from plain view to reduce my impulse eating (or impulse buying), why can’t I start with that?

Most of the times we don’t know these barriers exist. We have to keep asking why until we know the real reason we are/are not doing something. If you always wanted to pay off that debt, why are you not doing it? Is there anything you could do now, like creating an automated payment that could make it easier?

If you really want a perfect financial situation or six pack abs, the only way forward is to have burning passion and take personal responsibility. No question about it. But until we get that burning passion, we can at least do these small mind hacks and get to a reasonably good situation, right?

Can you identify one thing today that you have been putting off or one weakness and dig deeper into what you can do now to make it easier?

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