Preventing a Binge Spending Cascade

I just spent the weekend on the phone with my friend Katherine.  She is in okay financial shape (no huge piles of credit card debt, understands needs to save for retirement, etc…), but seems to be plagued by spending binges. The real problem is that she will see something she really wants (like a new electronic gadget or new boots), resist the impulse painfully, then give in.  And here’s where things run off the rails, given that she purchases the ‘no-no’ she then rationalizes that her budget is blown for the month and she goes and purchases a couple of other things, and then buys an expensive bottle of wine and maybe spends way too much on dinner out.  I see this behavior with dieting as well, like when a group of us go out to a restaurant and someone on a diet rationalizes that since they tried the bread and butter, they might as well have an extra glass of wine and chocolate cake.  A problem with this is that this kind of thinking can be a minor episode, or it can be the start of an unwinding of newly learned good behaviors. To prevent these episodes from cascading into financial failure, think of the following:

–If you do give in to impulse spending, see if you can reverse it – many times after purchasing an expensive item, Katherine has buyers remorse (it isn’t even the right size).  If possible, see if you can cancel the order or return the item.

–Plan to restore the budget shortfall to next month — I find monthly budgets hard to maintain strictly, but if I overspend in a category one month, I will deliberately aim to underspend the next month to even things out. A cash envelope system works for many people for this.

–Enlist your friends and family to help — I find that compulsive spending and eating is easier to tame if there are supportive friends around who gently encourage you to stay on budget or reassure you that you aren’t evil.

–Create diversionary tactics — I find that spending for many people may be a consequence of boredom, fatigue, stress or other factors, not really an inherent deisre to have an object. Have some diversionary tactics like an exercise session and see if this helps, especially with the stress levels.

–Remember to be kind to yourself — revamping financial behavior is a good long-term life goal, small blips should be expected.

–See if a small fun money allowance would help — some people are too strict with their budget, making it too difficult to stay focused. I have a fun money account each month that I allow myself to spend without guilt (my guilty pleasure is books).

shared at this week’s Carnival of Personal Finance