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People often like to act without thinking about the consequences. While that feeling is definitely liberating, it may not be so wise. That’s why I advocate a system of saving for purchases and then waiting for a period of time (say 30 days) before making any significant purchases.
Resist your impulses
First let’s take a look at why we should save for purchases instead of going with our first impulses. There are two clear dangers of buying now and paying later: The risk of building up credit card debt, and the risk of becoming disconnected from our money and making purchases that we might not otherwise have made.
With respect to the former, it’s true that the personal savings rate in this country is higher than it used to be, but there are still plenty of people playing fast and loose with their credit cards and piling up debt. And no, the fact that you’ll (hopefully) be making more money in the future isn’t a valid reason to over-extend yourself.
With respect to the latter, it’s been suggested that people who use cash spend less than those who use credit. In other words, by reaching for plastic, you might end up spending significantly more than you would have with cash.
No matter how you look at it, it’s clear that rash decisions can hurt us financially and drive us to not only spend more than we expect, but more than we can afford. Beyond the immediate financial benefits of saving before spending, this practice also creates a built-in delay in our spending habits which can have beneficial effects.
Buy yourself some extra time
When setting goals and saving for purchases, we force ourselves to prioritize and think about what we really want to spend our money on. For example, I recently saved up for a nice new pair of headphones. While waiting for the money to build up, I realized just how much I valued them and how much use I’d get out of them (on the subway, at work, exercising, and so on). I ended up working harder to save for them, and now that I have them, I couldn’t be happier.
Similarly, by saving up for and holding off on major purchases, we have time to reconsider our decisions. Instead of making impulsive decisions about buying the latest gadget, the time spent saving, plus whatever waiting period you may have instituted, is often enough to realize that you really can live without it.
For example, I’ve had an old clunky TV for years, and there have been several times when I thought that getting a new LCD was the most important thing in the world. When I’ve had such an impulse, I’ve simply told myself that if I waited 30 days and still thought it was necessary, I’d pull the trigger. Each time, I’ve realized within days that not only does my old TV work fine, but there are a lot of other things on which I’d rather spend that money.
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