Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. These last two years have forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
If you'd like to share your own experience (good or bad) with shopping the sales, we'd love to hear from you.
I love shopping — especially online shopping — and I love snagging a good deal even more. Sales are my weakness, and with all of the holiday deals under the sun coming my way, I’m having a hard time figuring out the right approach. On one hand, I’d love to stock up on things I need for the future, gifts, and other little joys at a discounted price because, to me, that makes the most sense. But I have also found that when a good sale is happening, I’m spending way more than I usually would because I convince myself that the deal is worth it.
Is spending a lot of money on sales ever really worth it? Even if it’s things I would buy in the future, I fear that purchasing a large amount of items all at once hurts my bank account and racks up my credit card bill way more than it would if I waited and paid full price.
Dear for the love of a deal,
There is nothing wrong with loving a good deal and saving money on a sale, but a discount is never worth it if it puts you in a bad financial position. As you navigate the holiday season, which can be a tricky and triggering time, here are some things to keep in mind and actions you can take to protect yourself.
Before we start, I want to recognize that we are all groomed to consume, and to fight against this is to rage against the machine. In the U.S., two-thirds of our economy is driven by consumer spending. We’re constantly seeing media messaging that normalizes overconsumption. According to some marketing experts, we're being fire-hosed with ads to the tune of several thousand a day. A lot of money is spent figuring out how to separate us from our dollars. But despite the forces working against us, we can still find our agency. Let’s dig in.
Mind the hedonic treadmill.
The more I learn about money, the more I inevitably learn about human behavior and our fascinating idiosyncrasies. One in particular may help explain our endless desire to shop. The hedonic treadmill, also called human adaptation, is the natural tendency for humans to return to a baseline level of happiness regardless of our circumstances.
For example, when we experience something that bums us out, like a friend moving away, at first we may feel very sad. Over time, though, our happiness levels tend to return to where they were. This quirk works both ways. For example, you might feel unbridled joy when you make a new purchase, but in time — perhaps even in a shockingly short amount of it — your happiness levels will dip back down.
Understanding the hedonic treadmill can help us better understand ourselves, all the ways we might potentially act outside of our best interest, and how we can fight against our natural tendencies. Before you make a purchase, try to keep this in mind. Remind yourself that while this might feel good at the moment, this too shall pass; not all purchases will change how you feel in the long run.
Beware of your scarcity mindset.
’Tis the season for your glorious human brain to be exploited. According to evolutionary biology, you’ve got some old technology running on your noggin that you might not even be aware of. In particular, evolutionary biology suggests that humans have evolved to pay special attention to scarcity. When something is scarce, we notice it, and we become stressed and for many of us that means our bodies kick us into action.
This makes sense: Paying close attention to water and food supply was essential for early human survival. But in today’s modern world, scarcity can look like limiting sale prices to a 24-hour to 48-hour period, warning that quantities are limited, or creating a general sense you don’t want to miss out on something. According to this theory of evolutionary biology, we’re not only hardwired to pay attention to these triggers, but they are also likely to influence our purchasing behavior by prompting us to take action and buy now.
A sale is only a good deal if you can afford it.
Sometimes a good deal is simply a good deal, but even in those cases, it doesn’t mean you have to buy. For example, let’s say you weren’t planning on spending any money, but you see a good deal for a hat and go for it. Even though you save money on that item, you’re still out some money, so you haven’t really saved because you spent money you weren’t planning to spend.
And if you spend money you can’t afford to spend — or don’t have — it doesn’t matter how good the sale is. If you’re buying a sale item with a credit card that you can’t pay off immediately, you’ll be charged interest. This has the potential to wipe out any discount you receive. Take some time to consider these tradeoffs before buying.
Have a plan.
I know, I hate it too. But having a plan in the form of a buy list before shopping can save you from acting impulsively and going into debt. I had a boss who always used to say, “A failure to plan is a plan to fail.” It’s super corny, but it’s true. This is an important step in taking a mindful approach to shopping. When you already know what you’re looking for, you have a better chance of staying on course with your intentions. You’re less likely to make purchases impulsively. And since you’ve made a plan, you’ve familiarized yourself with pricing, so you’ll know if something is truly on sale or not.
If you’re planning on buying gifts, go full Santa.
Make a list of people you’re buying gifts for and what you plan on gifting them. It might be hard to take the time to sit there and think about a gift that your loved one will appreciate, but doing this will help you resist the urge to walk into Target without a game plan or to impulsively make purchases online. Take a thoughtful and considerate approach. What would this person appreciate? Have they mentioned they needed something lately? This might make you actually enjoy the art of giving a gift that someone will love.
Understand the cost-per-use framework.
You’ll generally save the most money on items you frequently use, like a daily moisturizer or a good pair of shoes that you’ll wear a few times a week. Looking at an item’s cost per use by dividing the amount of times you plan to use an item by the cost can help you understand your purchases from a different perspective.
When comparing sale items or deciding how you’ll budget your sale shopping, going for items with the lower cost per use means you’re getting the better the value. Compare a jacket that’s been marked down 75% and a sweater marked down only 25%. Both end up being $100. At first the jacket seems like the better deal, but let’s say you’ll only really use the jacket five times vs. the sweater that you know you’ll wear way more often, like 50 times. The jacket has a $20 cost per use, while the sweater’s is $2. You’re definitely saving more money on the sweater.
Create a system for non-essential spending.
I’m a huge fan of setting up systems and processes for managing as much of our financial lives as possible. For non-essential spending, try this two-part system: Keep a buy list and a separate checking account for non-essential spending.
Keep a buy list.
Since you’re someone that enjoys the act of shopping, you sound like an excellent candidate for a buy list. A buy list is a running list of all non-essential things you want to purchase. When a targeted ad gets your attention, put the item on your buy list. Make a rule for how long items must stay on the list before you purchase them — I’d recommend no fewer than 24 to 48 hours.
Keeping the list is a way to get the dopamine rush of “shopping” by researching and anticipating the purchase without actually spending money. After you do this with a few things, you might notice that your feelings of anticipation wear off even when you don’t own the object of your desire. Eventually, another thing will catch your eye, and you’ll repeat this entire process. This is how we’re all trapped on the hedonic treadmill and why a buy list can help us step off, even if only momentarily.
Keep a separate checking account for non-essential spending.
Separate your spending by splitting your paycheck into two checking accounts (after automatically saving and investing for the future). One checking account is where you’ll keep your funds for your essential needs — your Bills & Life account — and the other account is for non-essential spending, like gifts and shopping.
By setting aside money for gifts and non-essential spending, you’re creating a guardrail to limit your spending. It’s a way to create a stop loss, to ensure that you don’t spend money you need while also giving you a sense of autonomy and permission to spend a portion of your money freely. It’s a lazy way to budget, but I’ve found it works well for people struggling with budgeting.
Alter your online habits.
Online shopping is wildly easy — too easy, I’d argue. Create inconveniences and redundancies so you have some barriers to spending your money. Regularly unsubscribe from marketing emails. If you want to be next-level organized, consider keeping a separate email for shopping and receipts. It’s a good way to stop getting constantly bombarded with sales emails in your regular inbox. Don’t save your credit card details in your browser. And seriously, form that habit of putting things on a buy list instead of just immediately making a purchase.
Face your feelings.
If you continue to shop despite all your best efforts to change your behavior, it might be time to take a closer look at the emotional reasons that could be fueling your habits. When it comes to facing your feelings, many roads lead to the same destination. You might start by journaling or exploring open-ended questions to uncover stories you learned early on about spending, worth, and value. You may want to seek support from a therapist or a support group specifically for folks that struggle with debt or shopping. It might help to see that you’re not alone and many other folks share the same struggle.
Don’t forget that your potential for change is limitless.
This shopping season, may the sales gods smile upon you. May your highest self guide you in your financial decisions. I wish you blessings on your journey.
Your favorite finance friend,