Battle of the Impulses
Our daughter AnnaMay is ridiculously impulsive. She flitters from one activity to another, often leaving a trail of unfinished activities in her wake. Some days it's like a human tornado tore through our house.
And she can rarely walk by Jill or me without some form of physical contact. Maybe a touch on the back, a little "love" punch on the arm, or some type of quasi kung fu maneuver. She *has* to touch us. We love her unconditionally and we realize this is who she is, part of her DNA. She's impulsive.
While it can be slightly annoying for Jill and me, we also know it's her way of showing love. She likes to touch. The problem is it also causes issues in other areas of her life. Like with her siblings. Her impulsive nature leads her to act out without thinking through the consequences. This can be a hit or kick or pinch. You know, sibling stuff. Sometimes it can be simply because her brother looked in her general direction. Weird, right?!
In our financial lives, impulses can also get the best of us. Here are a few examples:
We rush into the latest trend or craze (think bitcoin, real estate, or going even further back, tulips) without researching or understanding it. Maybe because a talking head on tv was ranting and raving about it. Or we buy an investment because we tend to gravitate toward or like that particular company. Or we let the day's headlines or political events influence our opinion(s) of the markets regardless of our long term investment plan.
DBD's aka Daily Buying Decisions
We face a lot of pressure on where our dollars go. In our house, Amazon is perhaps the single biggest opponent of our Spending Plans. The ease in which we are able to purchase products from this company is astounding. Plus, it perfectly satisfies our ever growing desire to have it RIGHT NOW with same day delivery (this feature both impresses and baffles me, btw).
Wants vs. Needs
For practical purposes, a "need" is something you have to have. Think oxygen, a roof over your head, food and water, basic health care and hygiene, and some basic clothing. That's it. Those are needs. Everything beyond that = a want. And the vast majority of our purchases within our Spending Plan fall on the want side of the ledger.
Imagine with me for a minute…
You've had a busy week at work, maybe growing your new company. You've coached baseball three nights in a row. It's Friday night and you have a delicious dinner on the menu for that night. But you just don't have the energy or desire to cook. Maybe your impulses get the best of you so you scrap the dinner plans and go out for dinner. Then you spend all day Saturday & Sunday at the ballfields coaching and watching your kids play. Sunday night rolls around…and again you find yourself drained from a long weekend in the sun.
Out to dinner. Again.
Remember, this example is purely hypothetical. We're just imagining something like this could happen. LOL.
At the end of the day we are all guilty of these and many other types of impulsivity, present company included.
It's hard work, balancing our wants vs. our needs. It doesn't make us bad human beings. Far from it, actually. It makes us…human.
So how can we get better when it comes to managing our financial impulses? Here's a few tips:
Implement a Hold Time
Amazon has free 2-day shipping (conveniently amazing, right?). As I wrote in this article, put a 24-48 hour hold on your purchases. By delaying the instant gratification and putting your impulses "on hold" you'll either still want it or it will become "ehh, don't really want it any longer." And if you decide you still want [insert shiny new object here] after a day or two, Amazon will still get it to you in 2 days or less!
*BTW, I've used this tip many, many times. It works!
Follow A Spending Plan
Budgets are out. Spending Plans are in. Need a simple Spending Plan? I got one for you here.
Eliminate Free Money
Auto-transfer money out of your checking account into a non-connected savings or investment account. And by non-connected, I mean an account you cannot access and transfer money back into your checking account instantly. By doing this, we eliminate what I call "free money" or money we can freely spend…aka spend impulsively. There's no quicker way to save more money than to only hold in your checking account the amount of money you "need" for that month/pay period/etc.
Have An Investment Plan
I talked about this just last week. Having an Investment Plan and an Investment Policy Statement can help you stay the course. It can help keep your impulses at bay, especially at the right (or wrong?) times.
If you've been following along, you know I love accountability in our financial lives. I think the biggest factor in managing our financial impulses is to create accountability. A good financial planner can hold you accountable to your financial decisions (where your money goes, and why) and help keep you on the right track.
Just like AnnaMay's impulses can get her into trouble, our own impulsivity can lead us to trouble in our financial lives. Implementing the tips above can help you keep your financial impulses at bay.
Have questions? Drop me a line or schedule a time to chat here.