Is emotional spending sabotaging your future?
We have all heard of hoarders, and binge drinkers and shopaholics and emotional eaters.
Just about all of the research on these subjects talks about the underlying emotions that drive these behaviours; you seldom find anyone discussing the financial aspect.
I think that’s a mistake.
Studies have proven that one of the most motivating ways to get someone to change their behaviour is to help them realise the true consequences of their actions.
In Bermuda for example, the average cost of a package of cigarettes is $12. This means that if you smoke a pack a week your habit is costing you approximately $624 a year. Taken to the extreme, a person who smokes a package a day is investing nearly $4,400 in their decision to feed their addiction.
Now what about beer? According to the 2019 Cost of Living in Bermuda Guide, a domestic beer costs about $3 at the grocery store. If you have a beer a day, your habit is costing approximately $1,095 a year. Add a six-pack each weekend to this tally and your beverage investment jumps to about $2,030 per annum (and your total would be significantly higher if you are consuming a premium beer, wine or spirits).
Moving on to shopping, a poll conducted in North America by Harris Interactive concluded that 31 per cent of women have shopped to elevate their mood, and many people congratulate themselves for being clever or frugal anytime they purchase an item on sale. But let’s think about this for a moment — if the item was not on sale would you have purchased it in the first place?
If your three primary reasons for making a purchase are that either you crave the item, the act of shopping makes you feel good or simply that the item is on sale — are you being a savvy shopper or simply spending money on items that you did not really need and sabotaging your efforts to stick to a budget or save for the future?
The same thing goes for buying in bulk. Given the high import duties on most goods and the rate at which many items spoil, rot or deteriorate in our subtropical climate, bigger is not necessarily better or cheaper.
Tempting as it is to do a “Costco-style haul” on island, the first thing everyone ought to do is figure out the unit price of purchasing just one item in the volume pack that they are lusting after.
While there will be exceptions, in a shocking number of instances it is not even less expensive to buy in bulk in Bermuda. All you are really doing is converting your hard-earned money into some large-scale packages that you then have to figure out how to lug home and store in such a way that your goods are not ruined by insects, humidity or sunlight before you can use them up.
Life on this rock might well be paradise, but paradise comes at a fairly hefty price. It’s time that we all learn how to switch from being emotional spenders to strategic savers.
Learn a better way to manage your money at Money Matters, a workshop sponsored by Butterfield Bank that takes place on Thursday from 5.30pm to 7.30pm at its Reid Street branch. Register for a free ticket here: bit.ly/2JFvVFa
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