Did you know that Inflation can actually cause you to buy more? Studies have shown that consumers who expect inflation to increase in the next year are 8% more likely and willing to buy durable goods compared to people who think inflation will decrease. This eagerness to buy now and get ahead of rising prices can lead to poor purchasing decisions, speaking from experience. Here are some tips on how to make more mindful purchasing decisions so you don’t impulse buy due to inflation.
Avoid Inflation, The Best Alternative Investments Right Now
Why Do People Buy More In Response To Inflation?
Emotions play a big role in financial decisions. The logical response to inflation would be to buy less to minimize the impact of rising prices on your finances. But inflation can trigger feelings of urgency that may push you to buy more than you would’ve otherwise. You might think that if you don’t Purchase the things you want or need now, you’ll have to pay more for them later, which may make it harder to afford them.
This line of thought is technically correct. If inflation keeps increasing, goods and services will continue to get more and more expensive. However, when you make purchasing decisions from this emotional place of urgency and scarcity, you’re more likely to buy things you don’t really need and regret it later. It’s better for your finances to be in a clear headspace when you decide whether or not to buy something, speaking from experience!
One place this sense of urgency shows up for me is at the grocery store. When I see a good sale or clearance deal, I feel tempted to grab all the items off the shelf in an attempt to get ahead of rising food prices. According to an article from Yale, this is a common behavior during periods of high inflation. Many consumers start buying items like groceries and cleaning products in bulk because they believe it’s cheaper and will save them money.
But I have to stop and ask myself how much tomato sauce or pasta I really need in order to avoid food and monetary waste. After all, I’m only shopping for two people, not an army! Here are the strategies I use to curb this inflation-induced overspending so I don’t end up feeling buyer’s remorse about my purchases.
2022 Inflation and Your Retirement Plans
How To Prevent Inflation-Induced Overspending
Avoid The News
Inflation has been in the news for months, so at this point, I know how bad it is. Reading updates about it just makes me anxious. The more I catastrophize the situation, the more I want to stock up on groceries and other items just in case. To Avoid Panic Buying, I try to avoid inflation-related news as much as possible.
Take Inflation Out Of The Equation
Another strategy I use to avoid panic buying is taking inflation out of the equation. Before I purchase something, I ask myself, would I still buy this if inflation wasn’t a factor? This helps me avoid purchasing something just because I’m afraid the price might go up.
I also ask myself if now is the right time to purchase the item, especially if it’s on the expensive side. If I haven’t set aside any money to buy it yet and have to take the cash out of my savings, that’s a sign I’m not ready and need to think on it and plan more.
The last question that helps me figure out if a purchase is a good move is, would I be willing to pay more for this item in a few months if it does increase in price? The fact of the matter is, if I really want or need something, I’d be willing to buy it for 10% to 20% more a few months from now. If I’m unwilling to pay more for an item, that signals it’s not important to me. The purchase is probably driven by a desire to beat inflation rather than a genuine want or need, so I shouldn’t buy it.
Generally, slowing down and thinking your purchases through will help you save money, whether your temptation to spend is caused by inflation or not. Has inflation made you or anyone you know purchase more durable goods? Share your experiences in the comments section below!
This article How To Stop Inflation-Induced Overspending originally appeared on Rick Orford - Invest, Earn More Income & Save Money.
This post first appeared on The Financially Independent Millennial, please read the originial post: here