How to limit spending on luxuries

By August 13, 2015 October 20th, 2015 Blog

It may sound easy to limit spending on luxuries, especially if you are someone who doesn’t do much shopping in the first place.

luxury purchase - a new laptop/MacBook ProBut if you have a shopping habit, or a family member who likes to buy luxury items such as high-end laptops or expensive clothes, it’s not so easy. Here are some tactics for taking control of luxury spending:

Set a monthly shopping budget: After determining your income and subtracting rent, food, healthcare, transport, insurance, and other necessities, and setting aside some of the remaining cash for savings and retirement, you should be able to budget the remainder to “other,” including shopping. If shopping is a priority in your life, then allot more — but still stick to the budget. If you need help planning out your monthly shopping budget, consider some of the software tools described in Chapter 4.

Limit shopping trips: My daughter has a thing for shoes. If she steps into a shoe store, there is a 90% chance she is going to leave with a box of new shoes. The easiest way to limit her spending? Reduce the frequency of trips. The second easiest way? Paying with cash — preferably her own!

Use cash: When you use a credit card, you’re using someone else’s coin — usually the bank’s, or the store’s, if it’s a store-issued card. Because the cash is abstracted through plastic and far-off monthly payments, it can seem like you’re not paying anything at the moment of purchase. It’s a mental trick that works against your financial interests. Fortunately, there’s an easy way to counter it: Start paying with cash. The act of handing over a small stack of twenties to buy that fancy-shmancy kitchen gadget sends a pretty clear signal to your brain that your supply of money just got appreciably smaller.

Read the return policy before making a purchase: Think back to any item you’ve bought in the last few months that cost more than $100. Yes, I’m talking about that designer hat that looked good on the store mannequin, but on your head, not so much!

What was the return policy of the store you bought it from? You probably don’t know, or would have to hunt for the receipt and look at the fine print. The next time you make a big purchase, look at the return policy (or ask someone) before you make the purchase … and give preference to merchants who offer the best terms. If you have second thoughts or decide that the hat is not worth it, return it for a refund or store credit before the refund period expires.

This post was excerpted from Personal Finance For Beginners In 30 Minutes, Volume 1:
How to cut expenses, reduce debt, and better align spending & priorities.