Buying is a habit. You can stop or slow down your buying habit by following these methods on how to stop buying things you don’t need. You will have less clutter and more money to invest to achieve financial freedom.
Figure out the Total Cost to Stop Buying Things You Don't Need
Most people just look at the price when they determine whether to buy the item. By adding in the tax and any credit card interest, you can get the total cost. In California, state sales tax is almost 10% and an average credit card interest is about 15%. Let’s say you want to buy a designer purse, which costs $3,800. It will cost you $380 (10% tax) and $620 for credit card interest if it takes you one year to pay it off. The total is $4800.
Hours You Have to Work to Pay for It
Figure out how many hours you have to work to pay off the item. An average American makes $60,000, which is equivalent to $28 per hour ($60,000 divided by 2080). To pay for the $4,800 purse, you would have to work 171 hours, 21 days, or 4.2 weeks. Ask yourself if it’s worth working that many hours/days to pay for the item. It’s an effective way to help you stop buying things you don’t need.
Put It on Hold
Put a 24 hour hold policy for every $100 that the item cost. For a $4,800 purse, put it off for 48 days. After that, if you still want it and have the cash to buy it, then buy it. The point of the exercise is that we buy on emotion. After 48 days, the purse may be a distant memory. Many of us buy to fill a void, whether it is boredom from work, dissatisfaction with our partners or something else. Purchasing a shiny object often makes us feel better. Temporarily. Putting a 24 hour hold will give you a chance to stop buying things you don’t need and find something else to fill the void.
Take an Inventory
Count all your purses or whatever you have a weakness for. By taking an inventory of all your purses, you will soon figure out that it is a want and not a need. Do the same thing for shoes. I have to admit, I have a weakness for shoes. Don’t ask why. So I put my shoes on a display to see how ridiculous it is for me to buy another pair of shoes. This stops me immediately from buying things I don’t need.
Pretend Investing
Figure out how much the sum of money would grow in 30 years if you were to invest it in stocks via Fidelity or TD Ameritrade. If you were to invest the $4,800 in a stock ETF that grows at 10%, you would have $83,000. This exercise helps you stop buying things you don’t need and concentrate things that will appreciate in value. By exercising these steps for 30 years, you will be able to afford as many purses as you want.
“If you buy things you do
NOT NEED,
soon you will have to sell things
You Need.”
Warren Buffet
Avoid Temptation
When you associate with materialistic friends, you’re more likely to see all their shiny objects they buy. This leads to temptation. I use purses as an example because that is what kills a lot of women’s budget. The obvious fact that it is expensive hurts the deep pocket. A designer purse anywhere from $1,500 and upward. A Hermes Birkin bag can cost anywhere from $12,000 to $200,000. Ridiculous, right? If your friends are always displaying the latest Pradas, Hermes, and Louie Vuittons, you’ll be an outcast unless you join in. Keeping up with the Jones is costly. You are the average of five people you associate with. Find new friends to curtail your spending habit and stop buying things you don’t need.
Fill the Void to Stop Buying Things You Don't Need
As mentioned earlier, we buy things we don’t need to fill the void. That may be boredom at work, dissatisfaction with your partner or people you associate with, or something even deeper. I noticed that some people buy things to compensate for what they didn’t have while growing up. They seek external gratification versus internal. This is the reason you often find people driving the most expensive cars and carrying the most expensive purses when instead of investing in something that appreciates. Figure out what your void is and fill it. It may be difficult to believe but once you have enough money to pay your expenses without worrying, stop buying things you don’t need becomes easy.
Find Passion
The best way to stop buying things you don’t need is to find passion in something you really enjoy. Ask yourself what you really want to do. Don’t buy things just to clutter up the space and collect dust. Find your passion and you’ll find you can easily stop buying things you don’t need. Being happy and busy is the best deterrent to buying things you don’t need.
Budget
There are a lot of budget recommendation on how to spread your income but this is the one I think is practical and works for a lot of people:
- 50% on needs like housing, transportation and food
- 20% on savings like 401k, Roth IRA, and after tax brokerage or savings account
- 30% on wants like vacation, travel, purses, and entertainment.
Life isn’t much fun without the ability to spend money on things you want. Give yourself the freedom to buy what you want within the 30% (although I doubt it is on a $4,800 purse).
Discount
People spend more buying things they don’t need because they’re on discount. They spend more money than they would have if it wasn’t on a discount. Buy something you really want because you want it not just because it’s on a discount. If you buy something cheap, you’ll not appreciate it, take care of it or enjoy it. If you’re going to spend the money, you might as well spend it on something you really want and enjoy.
Appreciating Assets
Finally, if you have extra money to spend and you like buying things, how about purchasing appreciating assets? I have to admit, I recently bought a designer purse. It was a Chanel Vintage Quilted Flap Bag. I bought it for $4,000 and is worth $7,000. I would never sell it but I know that I could if I ever needed $7,000 cash. How about a vintage car, coins, or art? This is one way of stop buying things you don’t need and buying things that go up in value.