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7.9 IMPULSE BUYING, THE GREAT BUDGET BUSTER; UNPLANNED EXPENSES AND PERSONAL FINANCE, THE MAIN REASON PEOPLE GO INTO DEBT

The best planned budgets can be destroyed by impulse buying. Impulse purchases are almost a way of life in the U.S. We enjoy it. It makes a dreary day of shopping fun to buy something unexpected. Everyone seems to have a weakness for certain things. You may be able to stick to your budget for most of the items on your list, but when it comes to your weakness look out! I am as guilty as the next person; I tend to buy books and computer software on impulse.

There is a way to master this. If you do like to buy on impulse occasionally, then make impulsive purchases an item in your budget. For example, you could allow yourself $5 each week to buy something extra at the grocery store.

The other important tool, of course, is to have a list. Studies have shown that people who bring a list to the grocery store buy less impulsively. With no list you are at the mercy of all the fancy displays.

Other tricks: If you see something you might be interested in but that is not on your list, look at it but don't pick it up. Studies have shown that if you pick it up you are more likely to buy. And don't bring your children or your spouse with you. They will just slow you down and be impulsive buyers.

However, if you don't become aware of these purchases and if you do not control this spending, it can put you in the poor house. Since very few of us know where every cent is going, this "small change" is hardly noticed. Economists have a metaphor for such spending. It can be compared to a leaky bucket. You carry the bucket (your salary) from the beginning of the month to the end and find you had less than you thought because it leaked out.

There is much more to this habit of impulse buying. We are bombarded with messages from the TV, radio, newspapers, magazines and highway billboards to buy, buy, buy. Then when we get to the store we are often surrounded by colorful, cleverly designed displays designed to sell.

Advertisers spend about $550 per person per year or about $2000 per household per year. Much of this advertising is spent to encourage us to buy impulsively when we shop.

Supermarkets, drug stores, department stores, hardware stores, etc. are all designed to sell us more than we had planned on buying. In particular, they stuff the area around the check out counter with impulse items such as candy, magazines, and gadgets. This section can bring three times the sales per square foot as the rest of the store.

Stores have done elaborate studies which show that for every minute they can delay you, you will spend more money. Some stores estimate that impulse buying goes as high as 50%, even in grocery and hardware stores! If you buy an item on impulse, chances are you didn't need it (or it would have been on your list), and you paid much too much.

Notice that supermarket stores are starting to accept charge cards. Why? Studies have shown that people spend much more with charge cards than with a check or cash. Estimates are that people buy 23% more with a credit card, than with cash or checks.

But wait, there's more!! Advertising tries to get us to spend extra money on our kids since we feel guilty about not spending more time with them. (Of course, if we spent less money, we'd have more time.) And a host of products from deodorants to laundry detergents and softeners tries to convince us that we can avoid embarrassment if we will only buy their product.

Products lure customers with rebates. Advertisers know that many will take the bait but never get around to actually sending off for the refund. (It's called "slippage.")

Who pays for all of this? You do. When you buy a heavily advertised product, in a shiny box, that you always find at eye level on the shelf, you are paying for the advertising, the packaging, the shelf space and the special promotions.

So what do you do? You can't avoid the stores or advertising, but you can be aware that merchants want you to spend more than you can afford. A few dollars a day adds up to $10,000s over time.

It's a small fortune that could be saved for your child's college, or your new house, or your retirement, or your dream vacation, or starting your own business.

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