I had to be out of the office this week at an off-site training in the City.
Normally, I get in, I get out, I get on with my life. But New York City summers are something I marvel and savor.
I took the long way to the train and found myself outside a thrift store whose mission is to raise money for the homeless and for AIDS patients.
I really had no intention of purchasing a $45 soft leather tan bag, but after much internal debate and a a quick financial rundown, I decided it was okay to indulge in this impulse buy.
Now, the only reason I walked out of that store with that bag and no guilt was because I had financial structures in place that would allow for such a purchase.
When considering whether you should buy on impulse, ask yourself the following questions to determine if you can justify the purchase with a clear conscience:
1. If I charge it on a credit card, could I pay it off right away?
If you don’t have the money to pay your impulse buy in cash, then you can’t afford to splurge.
Sixty-five percent of your credit score comes from your ability to pay on time and pay in full.
If you are thinking about robbing Peter to pay Paul for a fashion must-have, it’s better to wait and purchase with cash.
2. Have I contributed to my emergency fund?
If your impulse money is coming from your emergency fund money, then you can’t afford to indulge.
Every pay period you should aim to stash away at least 20% of your income for a rainy day. When you have at least six months worth of living expenses or net income, then you can graduate to extra expenditures.
3. Have I contributed to my retirement fund?
Please don’t fix your face to say that you can’t squeeze out $45 a month to put away for your financial future at the same time that you are fixing to splurge on something that is not a need.
Splurging is a privilege and a want.
A solid retirement is a necessity.
So if you are in the mood to buy what the heart desires, make sure there’s at least 10% of your pre-tax income that is earmarked for your twilight years.
4. Can I pay this month’s bills in full?
As a personal finance coach, I’ve read absurd accounts of women using their rent money to pay for a trip to Paris, going to Paris, and ruining their trips worrying themselves about how they were going to find the money to pay their rent.
If Paris is on your vision board, then a budget for Paris shouldn’t be far behind.
Online banks like Ally Bank offer services that allow you to save for specific goals such as travel.
Open an account and systematically save your passage to delightful Paris.
5. How often do I do this?
If you are in the habit of impulse buying, then we should call it something else.
It’s a pattern. It’s chronic. It’s not on a whim.
If your MO is to buy without thinking all the time, then mustering up some discipline or limits to how much you spend will be a saving grace and possibly give you more courage and confidence than you might think.
Impulse buys aren’t dangerous when you have a strong financial foundation.
When the timing is right, they are life’s way of rewarding you for all of your hard work and solid financial commitment.
BMWK- When have you found it is OK to splurge?