By Derede Samuel-Whitlock
Financial surprises are a hallmark of the holiday shopping season. SamuelFields Consulting Group (SFCG) believes that there are actions that consumers can take now — make a budget, match purchases with priorities and be creative when spending — to start 2024 in a position of financial power instead of in a financial pinch. At this time of year when many of us face the greatest temptations to spend impulsively, SFCG has launched the Festive Finance eLearning Series. It features educational and motivational content, helpful tools, and literature to encourage consumers to get their financial house in order.
Last Wednesday, as part of their weekly show ‘Likkle Byte Ideas’, the SFCG team explored the topic “The Pitfalls of Spaving: When Saving Means Spending.” The featured speaker was Luana Laurent of Finance Focus in Dominica. This seasoned finance expert, educator and coach joined the panel to discuss behaviors that can lead to crippling debt as consumers can go way over their budgets during the holiday season.
“Many of us are conditioned to hunt for deals and we can’t resist a sale. I admit that I am sometimes guilty of doing this. But if you’re spending money just to save money, spaving has a negative connotation, because it refers to impulse purchases, rather than well thought-out decisions. Just because something is on sale doesn’t mean it’s a good deal…if you don’t need it. If you add another $20 worth of items to your shopping cart just to avoid a $10 shipping charge, then you are spaving, not saving,” Laurent said.
The panelists delved into a range of retailers’ tactics that are used to induce more shopping, especially during the holidays. “Retailers go to great lengths to get you to spend more. They know consumers are emotional and tend to act when there’s a sense of urgency or a deal to be found,” said Derede Whitlock, Chief Marketing Officer of SFCG. She identified a range of sales tactics and price traps that retailers, both on and offline, use to tap into shoppers’ psyche. From free shipping or free gifts that require consumers to spend more. BOGO deals — short for “buy one, get one” — where retailers give a percentage off when you buy similar items. Product bundles, where related products are sold together, and a small discount is offered.
SFCG’s CEO, Megan Samuel-Fields also cautions against spaving. “It’s only a deal if you were going to buy it anyway. Spavers can’t resist a sale as it confuses our brains into thinking that we are saving money in the long term, by spending money now. But the main issue is that we often exceed our intended budget. We also feel a sort of high when we score a deal, but a few extra dollars spent here and there can add up and put a dent in your overall budget. Spaving can also lead to credit card debt, which can mean paying interest that far exceeds how much was saved in the sales deal,” she added.
Tips to avoid spaving
The panelists offered the following advice to avoid spaving:
Dodge Sales Alerts
Retailers bombard potential shoppers through email, texts, app alerts and social media. The easiest way to avoid temptation is by unsubscribing from emails, opting out of text alerts, turning off push notifications in retail apps and unfollowing brands on social media.
Pay With Cash
Studies show that when consumers pay with cash, theyspend less overall and are less likely to buy things they don’t need. Consumers tend to compare prices to the cash in their wallet, rather than their monthly budget, how much they have in a checking account, or their credit card’s credit limit. Wrapping sticky notes around your credit cards can also serve as a reminder of the goals you’re saving toward and help deter unnecessary spending.
Create Purchase Hurdles
One-click buying makes it easy to buy something without thought and leads to buyer’s remorse. By deleting payment details stored in your online retail accounts and social media, you create a purchase hurdle that forces you to think through the actual purchase.
“By the time you enter your credit card information, you may realize that the potential deal is unnecessary. If you’re shopping online, add it to your cart, turn off your phone and walk away. Give yourself at least 24 hours to think about the purchase. This window of time allows you to calm your emotions from the urgency of the sale and determine whether the item fulfills a want or a need,”Samuel-Fields added.
Consider the opportunity costs
You may be saving a few dollars, but are you pursuing a deal that is directing money away from more important financial activities? Have you considered potential ways that you could use this money — buy something else, save, pay down debt or invest? Laurent suggests that consumers ask themselves key questions when faced with the temptation of an impulse purchase. “Is this purchase an indulgence or an investment? Would you spend money on this item without the offer and can it be purchased cheaper elsewhere? The idea is to focus on the bottom-line cost and what you really need vs. what you want at the moment,” she said. The finance guru recommends using an app PayPal Honey that allows consumers to do price matches to determine whether they are getting a good deal.
The panelists cite a few instances where spaving may actually have a positive effect. “It’s worth noting that spending a little more than you planned on a sale or limited-time opportunity could be a good choice,” Laurent explained. “Sometimes spaving in the long run can be a good idea. Perhaps you’re able to lock in savings by purchasing an annual subscription for a service, rather than paying month-by-month. Or you may choose to invest in high-quality products that last decades rather than replacing cheaper, lower-quality products every few years,” she added.
Spending ahead of the ABST hike
During the show, an audience member raised the issue of the pending increase in ABST and questioned what types of items consumers should consider purchasing ahead of the tax hike, to maximize savings. The tax increase goes into effect in January 2024 and Samuel-Fields recommends that consumers consider items that they really need. “They should focus on items that are already on their shopping lists that they would have considered purchasing even without a time limited offer,” she said. She also cautions against using credit cards or higher purchase agreements to take advantage of the reduced ABST weekend or to make purchases ahead of the impending tax increase. “Consumers should keep their budget in mind when financing a large expense over a long period of time because you may be subject to fees for missed payments or interest on remaining debt,” she said.
Thoughts and views expressed in Observations do not necessarily reflect the opinion of Observer Newsco, its management or staff.