Smart Shopping: 5 Tricks to Avoid Impulse Buys

We’ve all done it: splurging on an impulse buy, only to come home to a “what was I thinking?” reality check.
A new survey by Harris Interactive and the National Endowment for Financial Education says a whopping 80% of American adults admit to making impulse purchases in the past year, either for themselves or for their home. Not surprisingly, two-thirds say they later regretted the purchase.
The fact is, the pressure is on when we shop. There are numerous factors at play - from loud, fast music to the beautifully packaged products to attractive smelling fragrances in the store. All excite the dopamine (aka “happiness”) levels in the brain and entice us to buy that very chic, but unnecessary leather jacket. We also tend to shop at the last minute, particularly around the holidays, which leaves us with little time to debate whether a purchase is really worth it.
Here are five tips to help you gain control during your next shopping trip.

1. Stick to Your List

When you narrow your options, you simplify the decision making process. Making a shopping list - and sticking to it - can be one of the best ways to avoid impulse shopping. And be specific: Instead of considering all 200 winter coats in the department store, zero in on the few that meet your needs and fall within your budget. Otherwise, you may be tempted to spend more than  you should.

2. Get Some Air

Give yourself at least 10 to 15 minutes to disassociate your mind from whatever it is you’re considering purchasing, whether you’re shopping online or in a store. Put the item in your shopping basket online, or leave it at the sales counter while you take a lap around the mall. Without a sense of urgency or the pressure to buy, you can make a more rational decision.

3. Be Critical

Before you pull out your wallet, ask, “What are the trade-offs?” If you have ample cash in the bank, then you can afford the purchase. But what if buying a new laptop is the difference between going to the Bahamas for spring break or a staycation?

4. Phone a Friend

For big-ticket items, it sometimes helps to grab a second opinion. (And no, the salesperson’s doesn’t count.) You want to ask someone who understands your goals and can give you honest advice on whether that new sofa is worth the $1,200 price tag.

5. Use Cash

Using cash, rather than a credit card, may seem more painful. But if you can’t afford to pay cash, you might not be able to afford your new splurge, period. Actually watching our funds shrinking can be the very wake-up call we need to beat the impulse buy.

Free Online Courses from Top Schools

In the current economic climate, many of us are considering going back to school or getting an advanced degree, with the hopes of becoming more employable.  But it’s not always necessary to go back to school full or even part-time and spend tens of thousands of dollars to earn a degree. Sometimes all you need is a couple courses or a few weeks of instruction to enhance your resume.
To that end, there are numerous ways you can advance your skills for free, via online courses offered by some of the top schools and institutions in the country. That’s right - free. I rounded up some of the best courses and programs, smart ways to invest in yourself, learn something new and boost your bottom line.

Liberal Arts and Sciences

Whether you want to brush up on evolutionary biology, macroeconomics or international relations private, top-ranked universities from Harvard and Yale to Carnegie Mellon and MIT offer free online lectures - and, in some cases, full classes.

App Development

All the lectures from Stanford University’s 2010 winter course on how to develop iPhone applications are available online for free.  Stanford also posts several other courses and faculty lectures for free on iTunes.

Engineering

From chemical and biological engineering to electrical, mechanical and nuclear science, MIT posts undergraduate and graduate courses online for free. You can also download UC Berkeley’s undergrad lectures on mechanical engineering design.

Writing

Got a novel that you’re dying to write? The University of Utah has a free course on creative writing and MIT will teach you the basics of fiction. Aspiring journalists can also take advantage of Poynter’s News University’s free e-learning program that covers writing, editing,

Holiday Shopping Procrastinators: Stick to Your List

I’ve yet to start my holiday gift buying and don’t anticipate starting until well into December. I know...tsk tsk. But like it or not, procrastination is pretty widespread, especially this time of year. In fact more than 25% of us shoppers plan to be buying presents until the last minute this year, according to the NPD Group.
Partly to blame for our procrastinating ways is that we’re overly confident in our ability to find everything we need in a timely fashion. Behavioral experts call this a “planning fallacy.” We overestimate how successful our shopping will be and underestimate how much time it will take to complete our shopping. At least, that was the conclusion in a 2003 study published by Canadian researchers Roger Buelher and Dale Griffin specifically about Christmas shopping and procrastination. (Others might just call us “delusional.”)
Also adding to our last-minute holiday rush: busy schedules and the belief that we’ll necessarily snag the best deals in the wee hours of holiday shopping.

Stick To Your List

As Atul Gawande writes in his best-selling book The Checklist Manifesto, a simple checklist “overcomes failure … and makes up for our inevitable human inadequacies.” Hey, if lists have helped the rise of modern science and surgery as Gawande describes, then they can certainly help us accomplish our shopping goals both when we have ample time and when in a hurry.
Lists help us narrow our options. And that’s a good thing, especially when the clock is ticking. Studies show that when we give ourselves too many options it’s easy to get confused. We make irrational choices that we might end up regretting. Pulling from my experience as that kid in the candy store hurrying to pick something as mom tapped her feet, I can tell you that having rows of options is no fun - even if it’s rows of chocolatey goodness. With limited time and an abundance of choices, I almost always made a regretful decision, whining I should have gone for Milky Way instead of Three Musketeers on the car ride home. And I recall more than one Mother’s Day when I desperately opted for the perfume basket from Macy’s because I felt overwhelmed by the last-minute shopping experience. I paid more than I had planned, all for a gift that was just OK.
So before you head out to begin your holiday shopping - whether tomorrow, Black Friday or Christmas Eve, invest half an hour to create a thorough checklist: who you want to buy gifts for, the types of gifts you have in mind and a price range per gift. Have back-up gift ideas, as well, especially if you’re a procrastinator: By December 24 you’re sure to have fewer desirable options. Rather than springing for that $80 perfume basket in the department store because it’s already wrapped and you have no other ideas, you can refer to alternatives ideas on your list that you jotted down when you weren’t in a frenzy.
A few budget-friendly mobile apps that can help you manage your lists this holiday shopping season include Holiday Gift List ($1.99), Christmas Shopping List (99 cents), Juicy Christmas ($2.99).

New Year’s Resolutions: 7 for Your Money

Americans apparently have a bit more confidence in their own financial health (as if we couldn’t tell by the shopping stampede on Black Friday).

The evidence: A new survey by TD Ameritrade finds that 27% of us are less likely to make New Year’s resolutions about our personal finances this year than last year, saying health and relaxing are more important. Rather than “save more money” - a common goal for 2010 and 2009 - Americans now say they feel confident enough to return to a more balanced take on life, to focus on their families, career and health, in addition to their finances.

While that sounds good, it’s still important to save. And we don’t have to sacrifice our health or happiness to do so. Here are seven money resolutions that can improve your mind, spirit and bank account.

1. Be More Charitable

Studies show charitable giving fell in 2010. Whether donating to charity or treating your friend to a cupcake, giving is not only thoughtful but can make you happy. A survey of more than 600 volunteers by researchers at Harvard Business School and The University of British Columbia concluded that spending just $5 a day on someone else would make you more happy than spending that money on yourself. Not to sound selfish, but how does this help our bottom lines? Well, there’s always the tax deduction! Give to a legitimate charity and pay less to Uncle Sam on April 15.

2. Find a Money Buddy

It’s key to have a partner in your financial life who can knock some sense into you when you feel the impulse to spend or when you are ignoring your bills. It might be your best friend, sibling, or parent. Relay your goals to this person so that he or she can help remind you of them when your judgment gets cloudy. Turn to them for advice. We often assume that our financial strife is unique – the sooner you begin networking and discussing your problems with others, the sooner you’ll realize that others have been in your shoes and have persevered.

3. Stick to Cash

While it’s important to maintain good credit and using our credit cards responsibly helps to achieve that, keep in mind that credit card users tend to spend more money than if they used cash.  A recent Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. (Another study found that people who paid cash at the grocery store were healthier than their plastic-wielding counterparts.) And McDonald’s found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash.

The other reason I insist on using cash is because it keeps us honest with our money. We make better choices because we are forced to think twice or three times about our purchases, especially if we have to break big bills like a $50 bill. Bye-bye, impulse purchases!

4. Create a Money Zone

This is all about staying organized and clear of financial clutter. Find a space in your home - it could be a table in your kitchen, sunroom, bedroom, wherever - and design this space so that you actually want to go there to set goals, pay your bills and deal with budgeting. Surround your “money zone” with images of your goals, family and inspirations - all the reasons you should stay motivated. Have folders for all your monthly statements. Have a safety box for secure papers like insurance certificates, your deed, etc. And have smaller boxes for business expense receipts and warranties.

5. Establish a Rule of Thumb

As humans, we like rules of thumb because they’re handy. They help when we have trouble making decisions. We have diet rules of thumb - “no sweets during the week” or “no midnight snacking”  - and they help us stay on track. Some good money rules could be: “I won’t buy anything over $100 without consulting with my spouse or partner” or “No more open tabs at the bar!”

6. Automate

Save and pay your bills automatically. You’ll sleep better at night knowing you did. It’s less painful than taking money out of your paycheck yourself and depositing it in a savings account or handing it to your utility company. According to a recent survey by the Consumer Federation of America and the Financial Services Roundtable, 83% Americans say the most effective way to build personal savings is to automatically transfer funds from your paycheck to a savings account. Research also finds that people with the highest level of well-being had a high level of financial security. Many of them automated their payments so they didn’t feel the sting of the pain of payments.

7. Turn a Passion or Pastime into a Paycheck

Who doesn’t want to make more money in the New Year? One of the best ways to do that is to identify a skill or hobby that you’re passionate about and turn that into a revenue stream - teaching a foreign language, designing web sites, making jewelry. When you work a job you love, it won’t feel like work.

Save More, Spend Less: A 3-Step Plan

I recently received an email from a thoughtful reader struggling to kick his credit card habit and save money. I thought it would be helpful to share his plight, which I think many can relate to, and my advice.
Dear Farnoosh,
I have a bit of a problem with credit cards. My partner uses a credit card to purchase everything and pays it in full each month. I do that, too, however I scrimp everything I have at the end of the month to make the full payment. Basically $0 goes into savings, as a result. Using credit cards is also primarily how we spend when we travel as we earn miles on every purchase and then redeem them for travel flights … I want to feel like I’m contributing to our trips … What can I do to change my mindset to stay out of debt and stay on track?

-Christopher

Here is my three-step plan for Christopher, as he tries to cope with his credit card dependency issues and find room to save.

Step 1: Pay Yourself First - and Automatically

Make sure your employer is automatically depositing your paycheck into your savings or checking account. Then schedule a regular transfer of either an account percentage or a fixed amount (say, $200) to a separate online account each time.  This way you save automatically, before you get caught up with everything during the month. It’s painless.
I like online accounts for two reasons. One, they typically offer a higher savings rate than traditional banks. And second, because they’re virtual, it’s a little harder to access your funds. It’s like having a built-in savings motivator.  Some examples: SmartyPig.com, INGDirect and HSBCDirect. You can also comparison shop for the best savings rates at BankRate.com.

Step 2: Challenge Yourself to an All-Cash Existence

Give your credit cards a breather. For the next couple of weeks, when you go out shopping or out to dinner, leave your credit card at home. Go to the ATM on Sunday night and take out just enough for the week, then spend that amount and only that amount. Do this for 14 days. You’ll be challenged, but you’ll find you will make better spending choices when you give yourself limitations.
To make it more fun, challenge your partner to join you for a week of living on cash. You can both take out an equal amount of money - say, $100 - and the person who ends up with more money at the end of the week gets a prize (you two pick the prize).
Remember: Cash not only limits how much we spend, it helps us save an average 20% compared with when we use credit cards, according to year-long trials conducted by the National Foundation for Credit Counseling. And McDonald’s has found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash.

Step 3: Have a Talk With Your Honey

Talk to  your partner about your savings dilemma.  When you’re in a relationship, especially one where you are sharing some expenses, communication is critical. Ask for his advice. Ask for his support. It’s in both of your best interests if you are able build up your savings. He may have no idea that you are losing sleep over this. And who knows? He may have similar concerns.

Wedding Planning: 3 Financial Deal Breakers

For years I’ve been preaching to brides and grooms-to-be on the importance of staying within a reasonable wedding budget. Now, newly engaged, I feel some pressure to stick to my own advice and prove that it can be done.
As I type, my fiance and I are headed to the City of Brotherly Love, Philadelphia, to check out five potential event spaces in which to hold both our ceremony and reception. I’ve done some homework in advance of our trip and have a checklist of questions to ask each event manager, so that we can compare apples to apples. I’ve already made some interesting discoveries, which may become financial deal breakers … unless, of course, there’s room for negotiation.
Here are three specific questions  you definitely want to ask as you research reception spaces.

1. Can We Choose Our Own Caterer?

Out of the 10 or so event spaces we’ve looked into - from museums to hotels and restaurants - all have told us that they work with an exclusive catering service. (The restaurants, I get - but the museums?) This isn’t the end of the world, since many of the caterers had exceptional reviews, but it also means you can’t comparison shop - or taste - for the best service, since not all of the caterers offer tastings before you sign your contract.  Also, if you have special dietary needs, not being able to pick your own caterer may pose a problem. For example, a Jewish friend of mine who’s getting married next winter, fell in love with one event space - but because the caterers didn’t have a kosher menu, she and her fiance had to continue searching.

2. Does the Catering Include a Wedding Cake?

We found many catering services include the cost of a wedding cake - that you must choose from their bakery, at $10 to $12 per slice. What if you have a relative or friend who wants to make you a cake for your reception? Or what if you want to select your own bakery? We’re not even sure we want a wedding cake, anyway - I would be happy with cupcakes. Why must we pay for something that, to us, is discretionary? Can it be deducted from the cost? We shall see.

3. What Are the Ceremony Fees?

Space fees tend to run the gamut, anywhere from $1,500 to $5,000 and up. But don’t stop your research there. Ask what other fees apply. I discovered one place charges a ceremony space fee plus $25 per chair and an additional fee for using their sound system or speakers to play your ceremony music. That just seemed a wee bit predatory to me. Like, what is my alternative here? A standing-room-only ceremony with music playing from my iPod speaker?

Meanwhile: This story is to be continued. I look forward to posting more of my wedding planning discoveries in this blog. Please share your wedding financial successes (or disasters). We could all benefit!