How a ‘no-spend challenge’ can help your financial goals

What if there was a simple way to change our damaging spending patterns?

Just not spending any money at all isn’t realistic – most of us have repayments, bills and other regular financial commitments that we can’t just shut off.

But we can use a no-spend challenge as a strategy to change our mindset about discretionary spending.

In some ways a no-spend challenge is a blunt re-set tool, simply saving by not spending in certain areas – for example, not spending on eating out, or not spending on cabs.

But it’s more than that.

It’s about bringing attention and awareness to our spending habits and being more intentional with how we spend.

“Much of our spending is done out of habit, driven by emotions or without much awareness,” says Lea Clothier.

“A no-spend challenge is one way to break these cycles.”

Because we make a commitment not to spend in a certain area, we are likely to really notice our resistance to the spending ban when temptation arises.

This creates an exercise in mindful spending. We are forced to pay attention to, and practice moment by moment choices to refrain from spending in a certain area of our budget.

It is a challenge because it can be exactly that – challenging to not spend money.

We are so conditioned in the consumerist model that to not spend can feel uncomfortable for some.

For others, without a concept of how much is enough, constant spending can be one attempt to satiate this impulse to acquire, be and have more.

If you can accept a no-spend challenge, commit to it and surrender to it, you may get a huge sense of relief being freed from obsessive or automatic spending habits.

That is almost certain to reduce problem behaviours with money like compulsive spending and the impacts of financial stress.

What does a no-spend challenge actually look like?

There are endless ways to employ a no-spend challenge.

You may wish to choose one area or multiple areas where you’d like to have more control over your spending.

Some common and useful examples of types of spending we can address with a ‘no spend challenge’ might be:

    • Entertainment – including online games
    • Gambling
    • Eating out
    • Shopping on clothes/shoes
    • Shopping on cosmetics
    • Buying homewares
    • Signing up for personal development/training exercises

By challenging ourselves, we bring an element of ‘gamification’ to help change our habits and behaviours.

Rising to a challenge in this way can feel more rewarding than sticking to a budget.

A no-spend challenge also teaches us to make do with what we have, appreciate and be grateful for the abundance already in our lives, it can also teach us to be more resourceful with the things we do have.

It can also create awareness of the emotions and impulses that typically drive our spending habits. In a similar concept to “Dry July” it is a decision to abstain from something – in this case spending.

When the impulse arises, we can turn our attention towards what emotion or feeling is driving the desire to spend.

Is it a feeling of not having enough and wanting more? Maybe deep down we somehow feel like the product or service we feel so strongly about buying will ‘complete’ us?

Maybe we think it will make us happy or perhaps it’s just about relieving boredom or loneliness?

There are so many reasons that drive our spending apart from just the need for it.

The value of changing our whole approach to spending

‘When we become present to the desire behind the action and impulse, we have more ability to respond to it rather than react,’ Ms Clothier says.

A no-spend challenge offers us a mindful way to bring this awareness to our spending and helps us to retrain automatic spending habits. Ideally, these become savings habits.

It can be hard to change spending habits or even start budgeting if it’s not a habit that you’ve yet mastered.

Choosing one area of spending to focus on makes it easier to manage.

We can develop the skills, build confidence in our ability to make a difference in our spending/savings habits by addressing one area at a time.

Some of the benefits are that we give ourselves time to develop new habits, we make a declaration of our commitment to not spend, and if doing it as part of a group, we can benefit from the support and accountability of others.

Our ability to manage our spending and save money is the foundation of managing our money well and building wealth for the future.

When we are intentional about our spending, it enables us to allocate the money in accordance with our goals and priorities, rather than just mindlessly seeing it disappear.

How to track progress with a no-spend challenge

Tap into the reason why you want to do a challenge.

Is it to get in control of your spending? Reduce it in a particular area? Save money for something else? Find your motivation as this motivation is what will help you when you feel challenged or thinking of giving up.

There are no-spend challenges you can join online, or you can choose to do one individually.

If doing it on your own, I would suggest finding a buddy to do it with as it creates accountability and can be more rewarding to share and achieve together.

A good way to track it is to use a goal achievement chart or calendar.

It’s also good to actually put the money that you choose not to spend in another account (savings or separate bank account) so that you actually save it, otherwise it may be absorbed in other areas of your spending! And if you break a day in the challenge, you can always reset and start again rather than give up completely.

Make it realistic, and if you need to make it more achievable, do that instead of giving up completely.

Even choosing to not spend as little as $5 / day is $150 extra in your pocket at the end of the month!

How to start a no-spend challenge

You need to decide:

    • What is the category of spending you will try to cut out;
    • How long you’ll abstain from this category of spending;
    • What to do when (and not ‘if’) you feel an irresistible urge to buy it anyway;
    • Who you’ll be accountable to as you pursue a no-spend challenge;
    • How to process the uncomfortable feelings that will come up (i.e. in a journal, a spreadsheet, a phone call with your accountability partner or maybe with a money coach);
    • How you will track your no-spend challenge progress; and
    • How you will review the no-spend challenge exercise.

Our guide to last minute Christmas shopping

Because Christmas is a time of family and giving that means it’s a time of decisions.

We have to decide what to give, where to buy, what to choose when we can’t find what we had in mind, and of course how much to pay.

If we’re organised, we’ve well and truly finished buying gifts and they’re all wrapped and delivered or under the tree.

But a lot of us have not. According to some surveys, most of us are just not that organised, with half of us leaving at least some Christmas shopping to the last week and even Christmas Eve.

A new survey finds that 74% of consumers plan to do some last-minute shopping, according to the fast company.

The fact that one study even showed that last-minute gift-buyers actually outspend those who buy earlier says something important about gift-buying and financial stress.

That is, when we are prepared we spend more carefully and when we rush we tend to throw money at gift-buying.

One of the leading pressures on many people’s already-strained financial position is the habit of over-spending on gifts; gifts that don’t necessarily prove our love for others.

Given that many of us will go shopping between now and Christmas, is there any way to avoid putting a major dent in our finances and accruing debt we struggle to shake off later?

We have published several articles lately on the pressure consumers face at this time of year, including a three-part series: the real cost of gift-giving.

We do not wish to discourage giving. Our point is to avoid the financial stress that comes with mindless and impulsive spending.

Financial stress is irrefutably linked to depression, anxiety, and sleep disorders so it’s not a big leap to see that the expensive gifts you buy – whether material or experiential ‐ could paradoxically lead you to feel less likely to connect with other people.

We believe it’s helpful to take a few minutes and double back to some key principles before you enter the mayhem of last-minute Christmas shopping.

Here are some guidelines to help you buy gifts people will love and help you avoid impulse spending that causes you unnecessary damage later.

Giving isn’t only about spending a lot of money

Sounds completely obviously right? Well, it isn’t, evidently as the six weeks from mid-November to Boxing Day has consistently become the biggest-spending time of the year.

Overall, Australian households spent an average of A$6,000 each over the Christmas season in 2020, the six-week spending frenzy from mid-November to the end of December.

All retail spending, including food, alcohol, and gifts amounted to a massive $55 billion spending binge, which made it a record Christmas for retailers.

It’s tempting to get swept up in the spending spree and see low-cost (or no-cost) giving as ‘uncool’ or anachronistic. But consider this: if someone did something incredibly old-fashioned for you like, for example, actually bake cookies for you, how do you think you’d feel?

Only the hard-hearted would not feel pretty good about such a gift.

Here are some ways to give without spending more than $20:

    • Call someone for a long video chat, tell them you love them, ask how their; year had been, how they are doing. Listen to them and don’t offer advice;
    • Write someone a (hand-written, not printed out) letter or card. If you want; to glam it up, put glitter or smarties in the envelope;
    • Give away a favourite book to someone who will appreciate it;
    • Offer help to someone using your best skills;
    • Cook someone their favourite dish; and
    • Bake and deliver home-made cookies, or sweet treats.

Can you afford your increase your debt?

No really. Can you afford to add to your debt?

Will you have trouble paying it off later?

Will your intended spending push you outside of your budget? Is it eating into your buffer or emergency fund?

This is incredibly important if are already laden with debt and under serious pressure meeting your existing obligations.

Some people have a little fat savings-wise and they’re happy to spend a bit more, some don’t. It’s wise to get into reality about money as quickly as possible – and stay there.

If you cannot spend much, that is probably an indisputable fact.

If you have to tell someone you are under financial pressure and couldn’t afford much of a gift, write them a card or letter telling them what they mean to you and fill it with glitter, or stick lollies in the envelope. Spend time thinking about what to write.

They will not forget the effort you went to and your openness and vulnerability may even deepen your relationship.

What is your spending limit for the shopping you still have to do?

If you don’t have a spending limit, you might want to pause before rushing to the shops. Maybe sit down – literally for 10 minutes – and come up with a reasonable and sensible spending limit.

It’s best to come up with a limit of some kind, especially if you have had past issues with compulsive spending.

Putting limits on spending stop us from making expensive mistakes.

What that limit is needs to be up to you, but as a guide, you probably don’t need to buy multiple gifts for people.

Bear in mind too: most loved ones will be happier with one thoughtful gift than three that seem random or maybe as though you were buying to your tastes and not theirs.

If you’re not sure about it, don’t buy it

You know that little voice that says ‘I’m not sure about this’ – listen to it.

Does it say ‘I’m not sure if this is his/her kinda thing but I like it’ or just ‘this is very expensive’. That’s a sign you are about to buy something on an impulse. Take five minutes out before you buy it.

Will they like it? If you can’t answer yes immediately, put it back.

Sometimes the ‘the perfect gift’ does appear before us, but it’s rare. Don’t try to force it.

There are more reliable Christmas gifts out there if you apply some simple logic.

    • What do they like? What is their taste?
    • Have they said they want something?
    • How do they spend their free time?
    • If you can’t easily answer these, a voucher or gift card is more thoughtful than a guess.

Experiences are more memorable than things

Experiential gifts are more memorable than most stocking fillers, which tend to become old within days of going into use. Or maybe they don’t even get opened at all.

Red Balloon is one of the best-known websites that allows you to book hundreds of experiences from diving with sharks to a sleepover at the zoo.

You can even give experience gift vouchers if you aren’t quite sure what experience to choose. Class Bento and Red Balloon have these.

Here are some examples of ‘experiential’ gifts:

    • Book a group activity with family and friends – from an art class to a virtual reality game;
    • A camping trip (without all the luxuries!);
    • Book a mini adventure – from sailing to skydiving or even rock-climbing;
    • Tickets to a live music concert – any genre;
    • Go dancing with friends;
    • Send someone a hand-written letter (no, really); and
    • Host a dinner party and base the menu on your loved ones’ favourite ingredients.

Vouchers are not boring

Boring to who anyway? To us, that’s who – because we want to look like we know how to buy the perfect gift. But the truth is those are not easy to buy.

Besides, people that know us well already know if we care. A gift doesn’t prove it.

We feel the pressure to dazzle someone with our insights and ability to delight and shock, but the truth is that is like throwing a bullseye on a dartboard while blindfolded.

Vouchers are not boring. The reality is people love the excitement of planning how to spend free money, especially if it’s in their favourite store.

The trick with vouchers and gift cards is to buy them for the right store.

If your mother-in-law loves perfume but you aren’t sure which one, you could buy her a voucher for a chemist or Myer. Don’t buy her a Bunnings gift card!

Don’t overspend on food that gets wasted

How often is there food leftover that gets thrown away? Seriously, almost, always right?

The actual numbers are staggering. Nine out of ten households discard over 25 per cent of their food during the festive period.

As you shop, try to be mindful about what’s going in your trolley. Ask yourself:

    • Do you need this item? Is it essential?
    • Is there anything in your trolley that wasn’t on your list? Why?
    • How much of what you are buying is ‘extra’ to try and please people?
    • Are you catering to confirmed guests or for people who might show up?

10 last-minute gift ideas

    1. A hand-written letter or card with glitter or chocolate inside the envelope.
    2. An annual subscription – to a magazine, a streaming service, or an audiobook service.
    3. Home-made date vouchers.
    4. Vouchers/gift cards.
    5. An experience, such as a chance to go rally-driving experience or a day spa.
    6. Tickets to a fun park.
    7. Tickets to a luxury or outdoor cinema.
    8. Flowers.
    9. A luxury journal and quality pen.
    10. Cash!

 

 

 

 

 

 

The real cost of gift giving: financial stress – part 3 of 3

In ancient history giving gifts began as part of the ritual of worship and over the centuries it has morphed into a show of appreciation. In the age of mass consumerism gift-giving has become an expensive habit too, especially in holiday season.

While most of us worry about money to some degree, gift-giving has costs we usually bear without much complaint; giving is a respected value, it feels good and it’s accepted as a cultural obligation. Besides, we have special labels for people who don’t play along with gift-giving: who wants to be labelled Scrooge or the Grinch?

Let’s take a look at one specific festive custom: the excessive expectation everyone will have a present for everyone else who arrives on Christmas Eve or Christmas Day – whether they are young nieces and nephews, twentysomethings, cousins, partners of relatives. Even exes in attendance get a gift. It’s probably no exaggeration to say half the gifts exchanged in these situations are politely put in a cupboard when they arrive home – and forgotten. The obligation to provide a pile of gifts – of appropriate value – across extended families can add tension to what is often already awkward family gathering. It almost certainly adds to seasonal financial stress.

Never mind that in the affluent West that many of us take months to repay debts incurred at Christmas time and in Black Friday and Boxing Day sales. So, at least reasons to buy expensive gifts are out of the way after Christmas, right?

Wrong. February and March tend to have the most weddings in Australia, which means wedding costs and wedding gifts for guests. February and March also have a lot of birthday spending, as those are the second and third most common months to have a baby. From there, the retail calendar kicks in: with gift-giving the norm in Easter, then for Mother’s Day – not to mention birthdays and anniversaries for the rest of the year.

Another type of gift-giving that is anecdotally growing is also worth noting: buying ourselves gifts and treats for our birthdays or just ‘getting through hard times’ such as COVID, often just because we see appealing items in big seasonal sales.

So, how can we avoid the financial stress that comes from adding new debt to existing debt, and the symptoms and impacts of that financial stress?

Some of us at some point have completed a budget (even if we can’t always stick to it) and humble enough to get financial advice to try and do better. We are not clueless.

But without an overhaul in our thinking, choosing gifts will remain stressful for many people. There can be a huge array of options and a nagging temptation to show our appreciation – for ourselves and others – by over‐spending.

If you have tried every trick to rein in spending on gifts it could be time to try something new – using mindfulness with your finances, also known as financial mindfulness. Mindfulness is described as moment‐by‐moment awareness.

Take the example of a teenager who has the iPhone 12, but feels tempted to upgrade to the latest and greatest model with maximum memory. The iPhone 13 Pro Max with 1TB memory will set you back $2,719.

“We all have urges that we really, really want a new gadget like the latest iPhone, including me,” says Financial Mindfulness CEO and Founder, Andrew Fleming.

“It feels good to take it out of the box and start using it. The feeling of having the latest technology makes you feel cool and the children love it. Like anyone else I’ve learned those feelings don’t last long and they certainly don’t improve your life, despite what the ads tell us.

“Always having the latest iPhone won’t make me or anyone else truly happy. In fact always giving in to buying the new iPhone – or the latest of any brand of device – will actually decrease happiness because it will probably contribute to increased financial stress.”

The reason those sentiments feel uncomfortable is because they’re true. Researchers from Washington University and Seoul National University, Joseph Goodman and Sarah Lim, found that giving ‘experiences’ increases the happiness of recipients more than material gifts – even if people are not socially close.

Hence the boom for online companies selling “experiential” gifts: in Australia, RedBalloon; in the UK, Red Letter Days and in the United States, retailers like Cloud 9 Living and Great American Days.

But focusing on experiential as opposed to material gifts is unarguably only half of the answer. While the research shows a hot‐air balloon ride or chocolate‐making course should satisfy the recipient more than boxed gift wrapped with a bow, if you try to please someone with the dollar value of your gift your debt problems could get worse and that is undeniably a problem. Ever looked at the cost of sky‐diving, rodeo‐riding or maybe cage diving with sharks? You will spend hundreds, if not over a thousand dollars on these.

Financial stress is irrefutably linked to  depression, anxiety and sleep disorders so it’s not a big leap to see that the expensive gifts you buy – whether material or experiential ‐ could paradoxically lead you to feel less likely to connect with other people.

Most of us know overspending will put pressure on us, but since when did knowing right from wrong stop human beings from making mistakes? A parent, relative or partner with poor self‐control around money will often buckle to badgering from a child, or give into a yearning to people‐please, and buy that new smartphone, tablet, a holiday or even a car.

A daily mindfulness practice will lead to a more mindful approach to gift‐giving, so we do not drift into autopilot when buying. It’s inevitable this will lead us to confront some fundamental uncomfortable truths about money. “Mindfulness helps to calm the mind and with a calm mind we make better decisions,” Fleming says.

“Sometimes it’s a better decision to treat ourselves to a book or a movie or a massage instead of the latest smartphone.”

It’s important to note mindfulness is no silver bullet – it can however . From there we can make some deep, meaningful changes: when we are forced to face old assumptions about money.

“There’s a big mindset change some of us need to make at times like Christmas, birthdays and weddings: how much we spend on people is not automatically a sign of our value and love for each other.”

Which brings us back to gifts. You can create lasting memories with creativity and your knowledge of a person.

How about home‐made cookies baked with personal messages – each describing why you love the recipient ‐ hidden in the dough? Or a hand‐made recipe book containing meal suggestions from the recipient’s family members? Maybe get a t‐shirt printed with the recipient’s favourite funny saying or if you have time, plan a surprise outing and put thought into favourite stops and a destination, or even fill a tall jar with inspirational quotes written and printed in different colours.

If you have lots of time, learn the guitar then write someone a song and play it for them. If you don’t have much time, spend a couple of hours hand‐writing a letter telling the recipient what they mean to you. Could any gift feel better and teach about the real meaning of value?

Time is a key resource when it comes to gift-giving; you need to know someone or learn about them to know what might make them happy. And time is valuable. Benjamin Franklin was widely credited with the unforgettable line “time is money” in 1748 (although it’s been shown to have much earlier origins, perhaps even ancient Greece). We can spend money and time, but where spending too much money might cause you crippling financial stress, spending a lot of time only enhances relationships – especially on children – by creating last memories.

Andrew Fleming says getting our minds to a state where we can see that spending time is just as valuable as money when it comes to gifts isn’t easy.

“Everyone thinks they are time-poor. One tool I know that can really transform how much time I think I have is mindfulness. Using mindfulness when I’m spending money means I make better decisions – no doubt about it.”

The real cost of gift giving – part 2 of 3

Who wants to buy something special for their child, partner, relative, friend or colleague at this time of year?

Almost everyone does, giving gifts is a powerful signal of who we value in most cultures.

It’s a thoughtful idea too, given how tough 2021 has been. We’ve had the pandemic, lockdowns, fear apparently everywhere, and financial stress coming at Australians in waves for nearly two years now.

It is however important to note that if we are not aware of our underlying financial stress at this time of year, advertising pressure can trick us into an expensive false reality: that our usual safe spending limits don’t apply when buying gifts for loved ones.

It’s sad to think we actually believe that the price of gifts should be in proportion to what people mean to us – and yet our national gift-giving habits suggest we overlook the damaging realities of money stress at the checkout.

Megan McArdle, writing for Bloomberg, argued: “there is a higher logic to the gift economy … that mandates we keep giving and receiving objects of dubious value”.

Gift-giving, she wrote, was connected to “an innate human value called “reciprocal altruism” which makes the costs of gifts “a maintenance fee for your relationship”.

But real-life problems are created when altruism is all about money.

As well-intentioned as gift-giving is, the Christmas rush to buy gifts is sometimes only ‘generous’ financially and not necessarily generous emotionally.

How often is our gift something the recipient really needs and will use?

Think about the concept of ‘re-gifting’. It has arisen as a response to people rushing to buy unnecessary presents for people.

How often will that extra gift, or a last-minute gift, improve a loved one’s life?

Office and friendship group ‘Kris Kringles’ fall firmly into this category. Sure, they seem like harmless fun, but how often do people buy something of real value?

Is a ‘joke present’ really a bit of a waste?

Too often, we believe we are “too busy” to learn and understand our colleagues’ – and even our loved ones’ – real wants and needs.

When we go into this kind of autopilot thinking, we may be setting ourselves up for financial stress and its many impacts on our relationships and our work.

Financial stress can also make existing anxiety and depression worse.

Research by Joseph Goodman (from Washington State University) and Sarah Lim (from Seoul’s Centre for Happiness Studies) found people commonly buy material gifts over experiential gifts, despite the fact that recipients often feel happier receiving experiences.

Material gifts are those we can touch while experiential gifts are those that create a memory.

So, gift-giving becomes a stressful problem which we solve with money – by buying the latest expensive gadget, a heavily-marketed ‘luxury’ or some kind of timeless status symbol. Or some kind of disposable trinket that gets a laugh when it’s opened – and is never thought of again.

Here are some examples of ‘experiential’ gifts:

    • Book a group activity with family and friends – from an art class to a virtual reality game;
    • A camping trip (without all the luxuries!);
    • Book a mini adventure – from sailing to skydiving or even rock-climbing;
    • Tickets to a live music concert – any genre;
    • Go dancing with friends;
    • Send someone a hand-written letter (no, really); and
    • Host a dinner party and base the menu on your loved ones’ favourite ingredients.

If it sounds mean-spirited to question gift-giving, that’s not the intention here. Only narcissists and debt collectors (and the occasional teenager) believe it’s better to receive than to give.

Gift-giving can be important and it can help create feelings of wellbeing in important people around us. It can be a panacea for the very self-centered existence people in western nations live.

The problems raised here are not about gift-giving per se, it’s the headless chook race that gift-giving can resemble – and the financial stress and strain placed on many of us.

Last Christmas Australians splurged a mammoth A$55 billion on the six weeks from mid-November to the end of December.

Add the costs of Valentine’s Day, Easter, Mother’s Day, Father’s Day, birthdays, weddings and anniversaries, and various other retail frenzies and you can see how gift-buying has become a major driver of the retail engine in Western economies.

Of course, it’s a double-edged sword: retail spending is celebrated each year as a measurement of the strength of the economy. To some degree, it’s an accurate reflection.

But at a personal level, buying gifts for everyone beyond our means will cause personal financial stress and all the issues that come with that.

Debt consistently shows up in surveys as a leading cause of financial stress.

It’s now also widely known personal money problems consistently show up in research as a major cause – if not the major cause – of stress in general.

The links between financial stress and poor mental health are well known, but recently the physical symptoms are being acknowledged and links to serious physical illness are emerging.

In the United States, the company Four Seasons Financial Education surveyed 511 employees in a national study and found disturbing correlations between financial stress and health problems.

The respondents rated their level of financial stress, then the prevalence of health issues between the two groups was compared.

People with high financial stress had a higher reported incidence of health issues across all nine illnesses identified – heart attack, high blood pressure, depression, anxiety, infertility, gastrointestinal issues and sleeplessness, migraines/headaches, and memory loss.

“The greatest disparities were found with anxiety and depression between these two groups,” the study findings said. In the groups with lower financial stress, 19 per cent reported depression and anxiety, but amongst the more financially stressed respondents, 55 per cent were depressed and 68 per cent had anxiety.

When the survey responses were further broken down, into the very highest and lowest levels of financial stress, people under extreme financial stress were five times more likely to have memory loss issues, more than three times as likely to report depression, and nearly twice as likely to have anxiety.

They were also twice as likely to have gastrointestinal problems.

Debt is a major cause of financial stress and the search for an answer has become a popular google search term in its own right, with variations of ‘how do I relieve my financial stress?’ common.

If you’ve tried all the usual advice and methods, it might be time to investigate a new approach, or at least, new tools to supplement what you are already doing.

In the final part of our series on the real cost of gift-giving, we look at how mindfulness can help reign in over-spending and the financial stress that often comes from increasing your debt burden at this time of year.

The real cost of gift giving – part 1 of 3

The tinsel and decorations might still be in a box under the stairs, but now is the time to think ahead so that you don’t join millions of Australians saddled repaying holiday debt well into 2022.

One of the leading pressures on many people’s already-strained financial position is the habit of over-spending on gifts; gifts that don’t necessarily prove our love for others.

In this three-part series, we will explore the size of our national gift-buying obsession, look at the health impacts of the financial stress that follows, and then explore how a targeted mindfulness practice can help change the auto-pilot approach to gift-giving while potentially bringing us even closer to loved ones.

There is also a real likelihood that gift-giving becomes retail therapy in these uncertain times – a set of behaviours we use to try and feel a bit better. But as Financial Mindfulness has found, overspending has the opposite effect on our stress levels.

Overall, Australian households spent an average of A$6,000 each over the Christmas season in 2020, the six-week spending frenzy from mid-November to the end of December. All retail spending, including food, alcohol, and gifts totalled a massive $55 billion spending binge, which made it a record Christmas for retailers.

The Reserve Bank of Australia estimated that over the four weeks of December 2020, $24.3billion was splurged just on credit cards. Tens of millions more were spent on so-called buy now, pay later accounts.

This year Christmas spending will follow similar patterns, possibly slightly exceeding spending in 2021, although there is expected to be a shift towards online spending.

What all this means is that nearly half a million of us will take up to six months of 2022 to pay off debts incurred in November and December 2021.

Those debt repayments will be on top of juggling usual repayments and bills, such as home loans, student loans and/or car instalments, insurances, and rent.

The national home loan bill in 2019 topped A$2 trillion for the first time, according to Illion, with an estimated 42 per cent of Sydneysiders with a home loan under mortgage stress.

But while we are dealing with debt repayments, the perceived pressure to buy gifts and to get a little retail therapy never lets up for long.

Retailers are so creative now they tend to attach a major sale to almost all significant dates in the calendar, including milestones that have not traditionally been associated with gift-giving and spending.

So Boxing Day and New Year’s Day become days to buy and even treat others. Australia Day sales will advertise Aussie memorability in the form of clothing, flags, food, and trinkets.

Back-to-school sales in mid-January are no longer just about what our kids need, increasingly they market to parents what children want.

In theory that sounds reasonable, but in practice, it can mean excessive spending on gifts such as technology, bags, and clothing as children try to maintain or create an image to garner popularity with their peers.

Without clear boundaries, pressure to indulge in this kind of gift-giving to materially bolster children’s self-esteem can occur whenever kids are set to return to school after holidays – so several times a year.

On February 14, Valentine’s Day is of course a major date on the retail calendar.

On average Aussies spent around $180 each for their significant others, while the nation splurged over $1 billion on Valentine’s Day gifts.

A new arrival on the retail calendar is ‘Cash Mob Day’ which falls on March 24 in 2022.

Cash Mobs are based on the viral trend of ‘Flash Mobs’, but instead encourage people to spend up to support local businesses. It’s a worthy idea, but again, a retail trend that creates a reason to buy something you actually don’t need.

Easter is next, in April. Luckily the major supermarkets stock around 50 lines of chocolate each, not counting millions of Easter buns.

In recent years retailers are encouraging consumers to buy more than chocolate or buns though.

In 2021 marketing heavily pushed the idea of ‘Easter baskets for adults and children’. Adult basket ideas included jewelry and kitchen accessories, while kids’ baskets could include collectibles, toys, egg-decorating kits, and activity books.

Aussies spent up to $250 each at Easter in 2021.

On May 8 comes Mother’s Day, when consumer spending spikes to around $2 billion, according to the Australian Retail Association.

From mid-year there’s often a string of birthdays to buy for: the most popular months for birthdays in Australia include May, July, August, September, and October, according to the Australian Institute of Health and Welfare.

Anyone who has hosted a children’s birthday party knows how expensive and high pressure they can be, with parents forking out anywhere between A$300 and A$3000.

Then there’s the angst over how to please teenagers and other loved ones, a worry which is almost always settled by spending at or above our absolute limit.

Winter sales ramp up in May and June too, with major advertising campaigns.

In recent years end-of-financial year sales, which were only significant for businesses, have been repackaged as major consumer events, usually with the prominent capitalised acronym EOFYS, on promoted on large banners.

Then comes Father’s Day is September 4 (on which about A$900 million is spent), followed by weddings and wedding anniversaries galore as the weather warms up.

Spring and autumn are the most popular seasons, with April, September, October, and November the most popular months to get married.

At the end of November comes the frenzy that is Black Friday and Cyber Monday. In 2021 early figures suggested we spent over $5.4 billion, nearly double what was spent over that weekend in 2020.

While it seems like the right thing to show our love by buying new toys, trinkets, treats, and gadgets for children, family, and friends the cost is in black and white in our online statements.

We spend thousands upon thousands of dollars each year to try and please loved ones, when if the tables were turned, most of us would be happy receiving thoughtful, inexpensive gifts – or even just spending time with friends and loved ones if we knew they were battling financially.

According to data from the Financial Mindfulness – Financial Stress Index (FSI) Report – the vast majority (89%) of us are worried about money.

Digging deeper, we are completely overwhelmed (79%), downhearted (82%), and distracted (77%) by our financial situation.

Financial Mindfulness estimates the resulting lost productivity costs Australian businesses is $32.14 billion per annum.

AMP’s 2020 Financial Wellness Report in November 2020 found financially stressed employees are ineffective at work for approximately 7.7 hours a week, and absent for a further 1.2 hours a week through sick days.

The report said nearly half of Australian workers are feeling financially stressed for an average of six and a half years or more.

To find out how financial stress affects our health, check out part two in this three part series.

How to avoid impulse spending during Black Friday and Cyber Monday sales

Black Friday and Cyber Monday sales are upon us, with a marketing onslaught that can be hard to resist.

The ideal mindset when faced with the temptation to spend is to be financially mindful – fully aware of your financial position and real needs.

The word ‘frenzy’ is not the optimal environment to maintain financial mindfulness and avoid financial stress. But a shopping frenzy is exactly what is being expected, beginning next week.

‘Australian retailers can look forward to a sales frenzy over the Black Friday and Cyber Monday shopping period, with a record $5.4 billion predicted to be spent in stores and online according to research from the Australian Retailers Association’, research firm Roy Morgan reported.

The four-day shopping period from November 26 (when Black Friday sales begin) to November 29 (Cyber Monday) began in the United States and has gone from strength to strength in Australia.

The marketing for ‘hot deals’, designed to draw in shoppers, has already began, with Amazon among companies already seeking to entice spending.

Consumer spending is good for the economy, but with a frenzy about to hit, ‘strength’ is being replaced by ‘mania’.

Frenzied behaviour when shopping, especially when the payment methods are the deferred – such as buy now, pay later accounts or the ever-popular credit card – can mean sustained impulse spending.

Impulse spending is a recipe for financial stress, especially when bills begin to fall due.

Let’s drill down to the specifics of why we should pull ourselves – and our households – back to a mindset of mindful spending next week – and keep that mindset right through Christmas and beyond January sales.

The first thing to get real about is whether you already have disorganised finances. If you – or your household – does, then a period of sustained impulse spending is likely to cause problems.

What is impulse spending?

Impulse spending is when you purchase something that you weren’t planning to.

It is your unplanned spending, or when you purchase something without considering the consequences of the purchase and are acting on ‘impulse’, i.e. a sudden strong and unreflective urge or desire to act.

At this time of year that could range from extra Christmas decorations to hotel deals to the latest smartphone or putting a deposit on a brand-new car.

Everyone behaves impulsively at times and it’s not always bad. It can be fun and harmless, so long as it’s measured and your finances are in order.

But we need to be clear. Regular impulse and unplanned spending can ruin your budget, create a debt spiral and impact on your ability to achieve your financial goals.

If your goal is getting out of debt, then impulsive spending is damaging.

The same goes for goals like paying off your mortgage, saving for a holiday or investing for your future.

Buying on impulse and overspending will use up money you could otherwise put toward your goals.

Let’s look at spending via social media, which has been growing in recent years.

According to a study by Finder, the average Australian spends $860 per annum on purchases made through social media , that’s $71.66 per month.

Investing $71.66 for 10 years at 8 per cent pa would grow nearly $13,000 over 10 years.

That type of equation is known as ‘opportunity cost’ – the cost of one item is the lost opportunity to do or consume something else.

Impulse spending is one of the main underlying money habits that creates financial stress – which we know from research creates feelings of shame, guilt, confusion, anxiety, fear – and relationship issues.

If we cannot deal with these feelings and an emerging issue in our finances, some people turn to dysfunctional strategies like using short-term loans or even gambling to try and solve their problems. Or they may begin to drink more alcohol or return to smoking cigarettes to cope.

What drives impulse spending

Your emotions play a huge part in what you buy and how you buy.

Impulse spending occurs when we make spending decisions based on pure emotion.

Knowing your personal motivations and main triggers to impulse spend will help you to better manage your money and impulse spending habits.

Your personal finances are just that: personal, so it makes sense that when something’s going on in your personal life it is likely to show up in your spending habits too.

Triggers that can lead to impulsive shopping include:

  • Excitement, including ‘bargain’ revelations
  • Avoiding reality
  • Stressed, overwhelmed
  • Bored, distracted
  • Celebration
  • Comparing self (as inadequate) to others, jealousy
  • Frustration
  • Guilt, feelings of failure
  • Loneliness
  • Rebellion

Research suggests that more extroverted personality types, status or image conscious people, those who prefer to live in the moment, and make quick decisions are more likely to be impulse shoppers.

Regular social media users and those who treat shopping as a hobby are more likely to have impulse shopping tendencies.

There is also evidence that people who are cautious, have self-confidence, feelings of fulfilment and a sense of being ‘in control’ of one’s life are less likely to spend impulsively.

Red flags pointing to impulse spending tendences include:

  • Regularly buying without planning to
  • A chronic inability to save money
  • Trouble with regular financial responsibilities
  • Tendency to use money to change feelings
  • Guilt and regret over shopping decisions
  • Owning items that barely get used
  • Regularly return items due to a change of heart

How to manage impulse spending

The key mindsets to develop – and hold on to – are based in awareness and planning.

To begin with, we need to be in reality. So, you do need to get real.

A great place to start is to review your last three month’s spending, comparing how much of it was planned and how much was impulse spending.

It’s essential to acknowledge which habits are helpful and which are not.

Creating a budget and knowing what you spend should be your first priority.

Knowing where your money is going will help you to determine where you need to cut back.

Budgeting is not a ‘set and forget’ task. A budget needs to be reviewed and revised. Maintaining your budget is an essential skill to learn.

You need to directly deal with temptation too. We’d suggest unsubscribing from store email lists that tend to flood you with ‘on sale now’ messages and try to make you feel like you’ll miss out on something important.

If an item on sale was something you truly needed, you would already be aware of it.

Clearing your computer cookies is a good move too. Otherwise they will any online retailers you have browsed will constantly remind you.

It’s also important not to attempt to totally deny yourself any spending. It won’t work.

Build some splurge/ fun money into your budget that allows for occasional spontaneous spending.

Providing a limit for this type of spending allows you to give in to an impulse buy every now and then without feeling guilty or worrying about overspending.

The amount of money you set aside should be determined only after you’ve taken all the essentials like rent, groceries and bills into account and will depend on what your budget can reasonably afford.

But it’s essential to track all spending to ensure you can see patterns in your spending that might need to be reined in or reversed.

Weekly check-ins to stay accountable will help support this.

How to deal with the ‘need’ to shop

Whenever you feel the urge to buy something new, or spend money, replace the urge with something that brings you joy.

Making a list of healthy activities and rewards that you enjoy or feel satisfying.

Things like seeing a loved one, cooking your favourite meal, walking by the ocean or in the bush, gardening, or phoning a great friend you haven’t seen for ages are almost certainly more rewarding than impulsively spending.

If your impulse spending is driven by your comparison of what you have (or don’t have) to others, take a step back and be thankful.

Learn to be grateful for what you do have and see from this more abundant perspective.

There’s plenty of science and practical suggestions out there on gratitude – but in essence it’s about feeling thankful for simple things in your life, which in turn creates feelings of wellbeing and contentment.

Try to adjust your behaviour with money towards medium-term and long-term thinking.

Rather than just saying: “I can’t buy that because I’m saving money.”  Think in terms of the opportunity cost i.e. “If I spend $100 on this, I can’t put that money towards the trip next year”.

This reframing makes it a choice rather than a feeling of missing out.

Create reminders for yourself to act as reinforcement of your goals and encouragement towards saving. I.e. if you’re saving for a holiday, save images of your dream destination in places you’ll see them: your screensaver on the phone, or computer, rename your password for internet banking to your savings goal.

Some other strategies to reduce impulsive spending

Try avoiding use of credit – its not easy but it’s a great aim.

Credit cards aren’t inherently bad, but if you’re prone to impulse shopping, they may make your situation worse.

Getting rid of your credit card is equivalent to getting rid of the thing that enables you.

Learn to spend within your means and only use money you have i.e. use your debit card or cash for purchases instead.

Buy now, pay later is essentially another form of credit. BNPL platforms allow you to enjoy your purchase straight away but defer the payments down the track.

There’s a reason some experts dub them ‘buy now, pain later’.

One way to begin radically changing our money behaviour is to experiment with a ‘no spend challenge’.

A no spend challenge is a personal spending challenge where you cannot spend any money on non-essential items.

They can be a good strategy to implement to break spending habits. You can choose a category such as eating out, clothes or going out, or you can make it for all non-essential spending. You set the time frame and challenge.

Accountability is always a useful tool when changing behaviour – especially reducing potentially harmful behaviours.

The people you live with or spend the most time with can be a support for you. Be open and share with them that you’re trying to spend less and ask them to support you if they see you making an unnecessary purchase.

See of you can think of someone non-judgemental in your life that you trust who might be an ‘accountability buddy’ for you around your spending.

Do you have a sibling or friend who’s willing to get in your face and tell you not to buy something? Bring them on your shopping trip. Tell them what you plan to buy and ask them to talk some sense into you if you start straying from the strategy.

Practice financial mindfulness

When you are feeling a strong pull to spend money, try to take a mindful pause by asking yourself these questions:

  1. Why am I here? (In this store/ or at my computer, online shopping)
  2. How do I feel?
  3. Do I need this?
  4. What if I wait?
  5. Can I afford it?
  6. Where will I put it?
  7. Do I really need it, or is it a want?

If you find your impulsive shopping behaviour returns or is uncontrollable despite your best intentions and attempted actions, you may be dealing with a genuine shopping addiction.

Sometimes this is known as ‘oniomania’. Yes, there’s a word for it – that means it’s real.

That might take some more help, but it’s not impossible to get under control. A good place to start is a therapist trained in treating addictive behaviours.

Don’t blow your savings

The endless restrictions and lockdowns Australians experienced during the pandemic did more to us than make us want to socialise and dine out.

In many people, they create a pent-up sense of not being able – or allowed – to spend money on the things we want and love.

Compounded by the increased savings stored up by months of lockdowns, many commentators and financial experts are now expecting consumers to go on a sustained spending binge.

Online sales over the coming months – from Black Friday and Cyber Monday through Christmas past Boxing Day and right up to New year sales – are expected to hit record levels.

On top of that, hotels and restaurants have re-opened and the borders are re-opening. Airlines and tourist operators are tooling up to increase capacity – and that means a flood of overseas and inter-state travel marketing is about to hit the public.

Millions of Australians’ credit cards and buy now, pay later accounts look set to blow out.

But the resulting temptations – and pressure – to spend up holds a serious threat to something incredibly important to anyone wanting to improve their financial wellbeing and reduce their financial stress.

That precious asset is our savings.

Why shouldn’t I spend my savings?

Of course, you can spend your savings – especially if it’s yours alone.

But should you?

There are powerful reasons it’s very unwise to spend your savings.

Draining savings is a sure way to begin an unhealthy habit of living beyond your means – exactly the opposite behaviour that allowed us to grow savings in the first place.

Saving from a low base is hard, it’s like struggling up a tall ladder.

Living beyond our means has an inevitable outcome too: without the capacity to continually increase your income, it will lead to acute and probably chronic financial stress.

In other words, living beyond our means is trying to live in a fantasy.

Splurging from our savings is akin to tumbling down that ladder.

If it’s joint savings we are talking about, then spending from that without the consent of your partner is a breach of a relationship boundary.

What if you both agree to splurge your joint savings? See the opening point above – you can, but it’s unwise.

Why do I need to safeguard my savings?

A big reason spending your savings is a negative is you will fall further and further behind in wealth creation goals.

‘Hanging onto savings is an opportunity to get ahead financially which generally is what the wealthy are doing,’ says Hamish Ferguson, of Vision Property and Finance.

“They are purchasing assets and not spending as much proportionally on consumption,” he says.

Paying attention to successful wealth creation strategies is crucial for people who wish to do more than survive.

To put it crudely, how we save and what we do with those savings may determine which one of these two categories we fall into: the ‘haves’ or the ‘have nots’.

“If our desire is to be in the earlier category then we need to limit our consumption and ensure that a savings/investment plan is part of our budgeting,’ Mr. Ferguson says.

“If this is not the case, then we will end up in the have nots and as suggested only have enough to survive.”

Mr. Ferguson says there are financial ‘headwinds’ coming so keeping a buffer now is a sensible idea.

These include the bogeyman of the economy: a rise in inflation.

“Inflation is expected to rise so the cost of living is going up, interest rates are expected to rise which as well means mortgages and probably rent will go up over the next few years,” he says.

The power of a financial ‘buffer’

The final reason to hang onto savings seems intangible – but also something most of us can relate to.

Having a financial buffer or emergency fund improves our confidence, stress levels and gives us choices in life.

“The research suggests our stress levels are lower when we have a healthy buffer,” Mr. Ferguson says.

‘This, in turn, helps us to make better future decisions and have better relationships.’

Government guidelines are that a useful financial buffer is around three months’ worth of expenses.

‘Even if you can only save a little, make a start and keep saving. The more you can regularly save, the better,’ according to moneysmart.com.au

If you put $20 a week into a savings account, you’ll have over $1,040 by the end of the year. That’s the start of a good amount of savings to give you some financial breathing space.

Choice is an important concept in all this.

“Choice is powerful, but with choice comes the discipline and responsibility to make wise decisions,’ Mr. Ferguson says.

The power to choose wisely is something that comes to us when we can practice financial mindfulness.

Is there a way I can spend or treat myself safely?

This is a great point and an important one. Life should not be relentlessly difficult and it is not meant to comprise only self-denial.

But before we prepare to treat ourselves it’s important to understand one of the universal truths of wealth creation:

“’Save then spend, don’t spend than save’,” is a great famous quote that might be helpful here, Mr. Ferguson says.

The key is having a plan to reward yourself, that is the healthy way to go.

But what does that look like?

Here’s an example. If you can set a goal and boundary to save $12,000 before rewarding yourself with a $2,000 holiday, your net benefit is $10,000.

But that benefit disappears if you ‘spend then save’.

Don’t play catch-up with money, it’s fraught with danger: it’s far better to save than spend.

Returning to the above example, once you reach $22,000 savings you can have another $2,000 holiday, or reward yourself to the tune of $2,000.

Saving before spending can be a win: win strategy.

For this strategy to work, you must – must – prioritise savings over spending, every day, every week, every month.

Mindful shopping

The pandemic has placed enormous pressure on the global supply chain, which has led to retailers warning goods will take longer to arrive than they would have before the pandemic.

This message has been distilled in recent weeks and days into attention-grabbing headlines, such as ‘start Christmas shopping NOW, retailers warn’.

Another one, is ‘Christmas is just around the corner’. Or maybe you’re seeing ‘don’t miss out!’ reminders about the upcoming Black Friday/Cyber Monday shopping period, from November 26 to 29.

While it’s a fact that the movement of goods will be slower than usual, it is not an objective fact that people need to rush, ‘get in early’ or even panic about their shopping and gift-giving as some people do.

This week we look at the sense of urgency created by warnings to ‘get shopping’ – why this happens, how it can affect us – and our personal finances – and why we need to exercise caution and practice a little healthy scepticism.

Understanding what is behind public messages from retailers

Public messages from retailers about buying anything originate from marketing department.

While it is true that good marketing identifies consumer needs and brings buyers and sellers together, as a discipline marketing falls short if it doesn’t increase sales.

Ultimately the main point of almost messages about shopping is to encourage you to increase or at least maintain your spending.

“Marketing tactics such as one time only sales offerings, promotions and discounts are all designed to get us to spend big,” says Lea Clothier, a money behaviour coach who helped design the Financial Mindfulness program.

“Tactics such as the use of time, or volume-based limitations and ‘buy now or miss out’ messages create a sense of scarcity and trigger a fear of missing out (FOMO).”

Creating a perception of scarcity is a successful way of making goods and services seem more appealing. Big companies spend millions unlocking the psychology of shoppers, because doing so is worth billions.

Generally, red flags include words, phrases and images such as:

    • for a limited time only;
    • 24-hour sale;
    • hurry;
    • don’t miss out; and
    • any symbol suggesting a countdown, such as a clock.

The consequences of shopping with high urgency

When we are rushed into any decision, we are more likely to base that decision on emotion, rather than logic.

“Scarcity and FOMO are emotional triggers that play on our sense of not having enough and our fears of missing out and therefore not ‘fitting in’ or belonging,” Ms Clothier says.

Any financial decision made from a place of emotion or fear, particularly when spending, can bring negative consequences to our finances.

For a decision to be rational and balanced, it requires time and consideration of whether we truly need or want it, whether we can actually afford it, and whether it is planned purchase or not.

This is the essence of mindful shopping online.

When we are rushing to shop online, or we are emotionally driven to purchase, we are more likely to impulse buy.

Impulse buying is exactly as it suggests, when our impulses or urges drive our spending habits.

Impulse spending can lead to many consequences such as overspending, ‘buyer’s remorse’ leading to emotions such as guilt and shame, difficulty paying bills, financial disagreements and financial stress as well as increased credit card debit or buy now pay later debt hangovers.

These kinds of consequences will invariably create financial stress in our lives.

Financial stress is complex, but when it is a constant in our lives it can put pressure on relationships .

Mindful behaviour with money

Faced with such powerful sales and marketing strategies, it’s important to be mindful of how they can drive our spending habits.

Why? Because we much as you might trust a brand or a store, or online retailer, it is not their brief to help you avoid financial chaos, let alone build wealth. That is up to you.

What does being mindful with money mean?

We refer to it as financial mindfulness.

Financial mindfulness means being aware and paying attention to your finances, and that may mean seeking help.

The help required will vary from individuals. It may be practical financial support, or learning budgeting skills, or seeking assistance to manage the stress of money worries.

The first step to being financially aware is to determine how stressed you are by your finances.

You can do this by measuring your current financial stress using our Financial Stress Indicator, which you can access in the Financial Mindfulness app.

You can read more about the Financial Mindfulness app here and download it from the Apple Store or Google Play store.

You can also read more detail about the complex problem of financial stress here.

We also have more information about techniques to lower financial stress and stress in general.

But what about those supply chain issues?

Marketing messages often do contain universal truths, or real facts about the world, that is partly what makes them seem important.

News of supply chain difficulties in late 2021 caused by the pandemic are not fake news.

Deliveries of gifts may take more time to arrive and no-one wants to have to say ‘sorry your present is in the mail’ at Christmas.

There is a balance to be struck with online shopping – which applies any time of the year.

“The key is to plan ahead,” Ms Clothier says.

“There is still plenty of time between now and Christmas.  The better planned you are, the more chances you have of being able to shop around and find the item you’re looking for.”

It can pay to have a plan “b” or “c” for gifts for your loved ones. That way you won’t feel pressured into purchasing something purely on urgency or scarcity basis.

Ms Clothier suggests getting creative about gift-giving.

There are many ways you can give a gift.

“Gifts don’t necessarily have to be product or something you purchase brand new.”

“In fact, there is a lot of research to say that the best gifts are shared activities and experiences that create memories and a sense of longer lasting happiness.”

Some of these ideas might include:

    • Booking a fun holiday with loved ones;
    • Teaching them to do something;
    • Creating a photo album for them; and
    • Making something meaningful for them.

There is also a considerable amount of research that shows how highly we value something that has no pricetag – time. So even if you are broke, calling someone regularly and making time to visit someone, listen and talk together, will almost certainly strengthen relationships with loved ones.

The Golden Rules of mindful shopping

If you are paying attention to the real purpose of marketing, open to becoming more financially mindful and to examining your behaviours with money, positive changes are possible.

You will hopefully be able to start shopping for what you really want and need rather than be dragged into buying by emotions, or hooked by urgent-sounding messages.

We’ve come up with a checklist of ‘Golden Rules’ to use when online shopping that may be useful as you try to navigate the busy shopping season ahead.

    • Remember to slow down and try to operate without that sense of urgency and excitement. Even if you cannot get a particular item, remember that there are plenty of great gifts out there for everyone. You’re not going to miss out altogether.
    • Be mindful of how marketing tactics such as scarcity and urgency might be influencing your purchasing decisions.
    • Plan ahead. Having a list for shopping whether in person or online, and sticking to it can help avoid impulse and emotional spending.
    • Set a budget for your online shopping each time you shop.
    • Track your spending to ensure you stick to the amount you’ve set as your spending limit. Remember to check your bank statements.
    • Shop around. There are so many retailers and competitive offers available but oddly we can easily forget this.
    • If you’re not sure about a purchase – just wait! You can always add a product to the online shopping cart and come back an hour or two, even a day or two later.
    • Check return policies. If you are prone to online shopping and aren’t always happy with your purchases, make sure you can return the items and get your money back.
    • Check your emotional state before shopping. Don’t shop to make yourself ‘feel better’, or if you’re over-excited. Our emotions can cause us to make unnecessary or excessive purchases in an attempt to make ourselves feel better. We all like nice things, but it’s also a universal truth that you can’t spend your way to happiness.
    • Don’t drink and shop. It’s a thing! Late night purchases after a few glasses of wine can lead to weak boundaries – forgetting sensible limits we made because they matter – and easily blowing the budget.
    • Do a quick stocktake of what you already own before you go and purchase more. This is particularly relevant to clothes!

Being mindful with online shopping is about being awake and alert and aware of what we are doing before we do it and while we are doing it.

When we can do that, we tend to buy what we actually need or truly want and almost certainly spend less than we do when we are mindlessly spending.

And we avoid painful regret around money.

Good luck with your online shopping, enjoy!

Why you need to stay mindful with your use of ‘buy now pay later’ services

Popular new payment services like Afterpay, Openpay, Zip Pay and soon, Paypal’s ‘Pay in 4’ – collectively known as ‘buy now pay later’ services – perform something of a trick in the minds of consumers.

The trick results in people walking out of a store with a television, a carry bag of clothes, and high-end vacuum cleaners before they have fully paid partially switches off a healthy fear of debt.

But like credit cards, they are a form of credit – basically a loan – and with the real potential to increase financial stress in users.

With buy now pay later services, the consumer can purchase items with only paying the first instalment of the purchase value, then paying the remaining instalments in the future over the next 6 – 8 weeks. It’s like a cross between a layby service and credit cards but you get the product or service now.

The appeal of BNPL payment services

Buy now pay later is attractive for the buyer because the buyer had to only pay a portion of the item before they could take it home.

This appeal combined with clever marketing has become hugely popular.

In one recent Afterpay ad, Hollywood actor Rebel Wilson tells her on-screen boyfriend Afterpay is like eating a whole tub of ice cream at once but spreading the calories over six weeks.

This brilliantly captures the allure of the ‘instant gratification’ culture that is not just popular with millennials but with many people in nearly all age groups.

Afterpay boasts on their website they let customers get what they want when they want it, increasing average order value by up to 40%.

It is estimated one-in-five Australian consumers use a buy now pay later service, with over six million active accounts. The Reserve Bank of Australia says Afterpay is most popular with 3.4 million accounts, ahead of Zip Pay with 2.5 million.

The value of purchases made nearly tripled in Australia between 2017-18 and 2019-20, from just over $3 billion to over $9 billion.

Retailers love the services because they give the appearance of a new, cool, easy option when paying for your shopping – one that lets you walk out with products after spending just a quarter or one-fifth of its value.

How BNPL taps into the psychology of consumer spending

Buy now pay later have cleverly tapped into the consumer spending psychology and convinced shoppers to open their wallets – even though they don’t realise that is what they are doing.

Deferring payments is a relief to consumers, a positive feeling that reduces the pain of paying cold hard cash and even the nagging ‘I shouldn’t be doing this’ feeling that comes with using credit cards.

According to Dr Carey Morewedge, Asst. Professor at Carnegie Mellon University, the ‘pain’ of paying feels like it is reduced when using a buy now pay later service because we actually equate an imagined ‘pool of resources’ to having more cash.

M2P’s fintech blog explains the idea in an article titled ‘Factors and Psychology Behind the Great BNPL Allure’.

The larger your resource, the greater will be the inclination to make costlier purchases. For example, when shopping using BNPL, you feel like spending a small fraction of money from a large reserve with no immediate deadline.

So, the pain of paying becomes dramatically less with BNPL.

Whereas drawing a few currency notes out of your pocket seems like you are consuming a large portion of the available fund. Thus the pain of paying in immediate cash payment is more significant.’

Of course, buy now pay later providers know exactly what they are doing.

If a consumer cannot meet their end of the deal – and repay the full price within the agreed number of instalments, they are hit with late fees and charges, which vary depending on the fine print in the terms and conditions of each BNPL service.

It’s a very different mindset to using credit cards, which were first launched in Australia in 1974 and have peaked in usage in the past decade.

In 2020, there were 14.8 million consumer and business credit cards in Australia – more than one for every adult.

As credit card use has declined, the card companies have tried various marketing ploys to boost the use of their services, such as loyalty points schemes to 0% balance transfers.

But because so many people got into trouble with the complex and expensive interest payments on credit card companies, providers go out of their way to make it clear how repayments work.

According to Illion, Millennials under the age of 30 are twice as likely as their parents to fall more than two months behind in their credit card payments, suggesting they have greater difficulty balancing spending and debt, regardless of their credit limit.

The perils of buy now pay later services

The perils of credit card misuse are now well-known and widely understood. But the perils of buy now pay later are still developing as they are relatively new.

Afterpay, Zip pay, Openpay and equivalents remain relatively unregulated compared to the banks – meaning the gloss has not yet come off the services.

The perceived ‘win: win’ does not consider that our spending behaviour sometimes doesn’t make sense – for instance, how we can spend money based on our need to distract or ‘feel’ better rather than our need to stay within our limits.

Who could say they have never spent without thinking through all the consequences of a purchase? Probably none of us.

While it is entirely human to do so, it is the definition of mindless spending.

According to the Australian Financial Review, in 2020, Afterpay made $70 million from late fees, representing 20 per cent of its revenue.

The Australian Securities and Investment Commission also found that one in five buy now pay later customers were regularly missing payments.

An alarming half of users aged under 29 had taken out other loans to pay their buy now pay later debts.

How to use BNPL payment services safely

Just because buy now pay later services are relatively new, and the mixed impacts don’t make them bad news for everyone.

Andrew Fleming, Founder and CEO of Financial Mindfulness, says; ‘the way to avoid trouble with these payment services is the same as using any type of credit.’

‘Budgeting and sticking to your budget is key to ensure you do not get into trouble with BNPL products, but it also relates to any type of credit product, impulse spending is not wise’ he said.

‘Understand the product properly, including the fine print. Use BNPL services following your spending budget.’

‘The line between safe and unsafe use of these services is the difference between spending according to your budget and ‘reckless spending and not paying on-time’, he said.

You’ll have to decide for yourself what constitutes reckless, but it’s safe to assume that putting everyday shopping on instalments is not sensible.

To make the most of buy now pay later services, the optimum state of mind is one of financial mindfulness, which we define as ‘having awareness and paying attention to your finances and financial behaviours’.

But you have to hand it to the Founders of Afterpay, who discovered early the behaviour change with Millennials preferring to engage in cashless and credit-free spending lifestyles. They have become a huge success story. The company was started 7 years ago and recently sold to Twitter founder Jack Dorsey’s Square for $39 billion making it the largest deal in Australian corporate history.

New clinical help on the horizon for ‘shopalcoholics’

We all instinctively know that compulsive, mindless spending can be a problem.

We see it in those around us and even in ourselves at times – especially when stress drives the perceived need to ‘escape’ mentally.

Whatever is behind compulsive shopping, buying, spending, even shopalcoholism – whatever we call it – it can and does result in unnecessary financial stress and even distress if the behaviour goes on uninterrupted.

Financial stress is a condition that can respond positively to a mindfulness program, especially when coupled with other interventions, such as improved goal-setting, financial literacy, and behavioural tools.

These combined can help sufferers produce a preferred state of financial mindfulness.

But not many people realise compulsive shopping has also been described in clinical settings since the early 20th century – more than 100 years.

Despite this, until now there has been no officially recognised diagnosis for the disorder.

That seems surprising how commonplace it appears to be, and how it is widely accepted as growing and as a contributor to issues like personal debt and overconsumption at personal and even macro levels.

Now science has moved a step closer to being able to help people with this behaviour – which is finally being recognised as a condition to be treated.

Flinders University reports that for the first time, world experts in psychology have built a framework to diagnose Compulsive Buying-Shopping Disorder.

This means there could be new pathways for help for people struggling to manage their spending behaviour and mental wellbeing.

The framework, published in the internationally recognised Journal of Behavioral Addictions, confirms that compulsive over-spending can be regarded as a disorder.

The news gives researchers and clinicians tools to design targeted interventions for this potentially devastating condition.

The new guidelines, published in the Journal of Behavioral Addictions, confirm that excessive buying and shopping can be so serious as to constitute a disorder, giving researchers and clinicians new powers to develop more targeted interventions for this debilitating condition.

Evidence-based criteria for Compulsive Buying-Shopping Disorder (CBSD) will be developed by an international team, including Professor Mike Kyrios from Flinders University’s Órama Institute for Mental Health and Wellbeing and Professor Astrid Müller from the Hannover Medical School in Germany.

A study of 138 researchers and clinicians from 35 countries has begun the work.

The research was a collaboration with researchers from the Hannover Medical School at the University of Duisburg-Essen and University of Dresden in Germany funded by the German Academic Exchange Service and Universities Australia.

Professor Kyrios described the new work as a “game-changer” for research into the issue, which could underpin the development of much-needed treatments and improved diagnostic processes to follow.

“In over 20 years, since I started investigating excessive buying, there has been an absence of commonly agreed diagnostic criteria which has hampered the perceived seriousness of the problem, as well as research efforts and consequently the development of evidence-based treatments,” Professor Kyrios said.

Evidence-based treatments should now be possible with agreement on diagnostic criteria.

New diagnostic criteria include the recognition of “excessive purchasing of items without utilising them for their intended purposes”.

In the context of the criteria, excessiveness is described as “diminished control over buying/shopping”.

Another feature of the disorder is that “buying/shopping is used to regulate internal states, e.g., generating positive emotions or relieving negative mood”.

“Clients who show excessive buying behaviour commonly have difficulties in regulating their emotions, so buying or shopping is then used to feel better. Paradoxically, if someone with Compulsive Buying-Shopping Disorder goes on a shopping trip, this will briefly improve their negative feelings, but will soon lead to strong feelings of shame, guilt and embarrassment.”

The Delphi research method was used to reach a consensus from the researchers and clinicians involved in a complex psychological disorder.

“The Delphi technique is an ideal method to integrate diverse perspectives from international and interdisciplinary experts in the field of Compulsive Buying-Shopping Disorder,” says co-investigator Dr. Dan Fassnacht, Senior Lecturer in Psychology at Flinders University.

“This helped us to developed diagnostic criteria featuring large agreement among experts in the field, and is an important milestone to better understand and treat this behaviour.”

Dr. Kathina Ali, Research Fellow at Flinders University and co-investigator of the study adds: “Previously, it was difficult to compare studies without agreed criteria.”

“Now for the first time, we can start examining Compulsive Buying-Shopping Disorder more precisely which should help us improve our treatments for this disabling condition.”