Saturday, December 24, 2011

5 money lies that make us overspend

How many times have you wondered where that $50 in your wallet went, or why your wallet feels incredibly lighter, or why the numbers in your bank account are getting lower and lower.

Start thinking back to the last purchases that you've made, and you would probably say that you didn't really spend much at all. Or that you spent "smartly".

Sometimes, these "smart" ways of spending are actually what's causing you to lose money.

According to the website mintlife, we sometimes tell ourselves "money lies", or what it says are not too accurate statements to justify unnecessary purchases that lead to unneeded spending.

Find out what these top money lies are, according to the financial website, and how to fight back.

#1 "If I don't buy it now, I might miss out"

We usually say this when we see ads or banners screaming out "Last three days of sale" or "Sale! This weekend only!"

Who wouldn't be tempted, especially when they're coupled with statements like "Discount of up to 70 per cent off!"

A consumer adviser, Andrea Woroch, told the site that deals like this 'create a sense of urgency' among consumers who feel that if they don't grab the opportunity, they 'could miss out on the value later down the road'. That's why they end up buying items even when they don't particularly need them.

FIGHT BACK: Remind yourself that you don't need these items, and that sales like these happen all the time.

#2 "I need it"
Scenario: You see a cute top in the mall, or a high-end camera with better specs than the one you're using. In your head, you're thinking - I need that! I need that to keep up my appearance at work, or I need that to take better photos of my growing toddler. But do you really?

Dr. James Roberts, author of "Shiny Objects: Why We Spend Money We Don't Have in Search of Happiness We Can't Buy, tells mintlife: "Pretty much everything we buy is a discretionary purchase, not something we need."

FIGHT BACK: Dr Roberts' advice: Remember that the only things we truly need are food, shelter, and clothing. Remember though that this doesn't give you licence to splurge on lobster and truffles, an exorbitantly expensive property, or that Gucci frock that you swear had your name written on it when you saw it through the window.

Beyond the basics, spend only what you can truly afford. Make sure that you have the means to pay before splurging beyond what you really need.

#3 "I can always return it"

When shopping at a place with return policies, it's easy to think that if you change your mind after you purchase an item, you can always return it.

However, remember that not all stores have return policies, and those that do can be quite strict about the conditions of return, or will only give you in-store credit, or an exchange for items of the same price or less. Bottomline: You might not get your money back.

FIGHT BACK: Apart from buying only the items you need, if you really must return something, make sure you remember when you'll have to return it by, advises the website.

#4 "I should buy it since it's for charity"

A growing number of companies are saying that a portion of the proceeds from certain items will go to charity. And for most, this could easily be the tipping point to decide whether to buy an item or not.

FIGHT BACK: If you really don't need an item and you feel it's not worth it despite the charity tag, remember that you can always donate to the charity on your own whether you buy the item or not.

#5 "It's worth it for the freebies"

You're in the supermarket and you find out that you're about four dollars away from the minimum purchase needed to get a coupon that will go towards that pastry dish you've been eyeing. You then hurriedly try to see what you can buy to top up the amount to qualify for the coupon.

Sounds familiar? A lot of times, these impulse purchases can be completely unnecessary, or in the case of the extra bag of chocolates that you add to your shopping bag to meet the purchase amount, bad for your hips.

Or think about those times when you've seen items bundled together and proclaim it's discounted by a certain amount. You might only need one or two of the items in the bundle, but because you see the discount, you feel like you're getting a better deal.

FIGHT BACK: According to mintlife, you should not let the freebie sway your decision, particularly if you would not have paid good money for it on its own. Think about how much you would have paid for the items in the bundle that you would really use, and if it's worth more than the price of the bundle - don't buy it.

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