Setting up a household budget and sticking to it can be challenging. Impulse shopping doesn’t make it any easier.
About 42% of consumers say they are worsening their financial situation by doing things like making impulse purchases and carrying more debt, according to a recent survey from BMO Harris Bank. Half of respondents said they often spend more money than they know they should, up from 45% in the bank’s April survey.
Credit card debt also is rising. After consumers shed about $130 billion worth of such debt between April 2020 (when it was above $1 trillion) and January 2021 (when it was $961 billion), the amount owed has climbed back up to $998.4 billion, according to the latest Federal Reserve data.
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Often, the hardest part of financial planning is “managing a budget and getting cash flows into a surplus,” said certified financial planner Michael Kelly, founder of Switchback Financial in Madison, Connecticut.
“Impulse spending is one of the biggest hindrances,” Kelly said.
If you’re among those who find such purchases are causing credit card debt to pile up or are limiting you in other ways, there are some steps you can take that may help the situation.
You can start by creating a goals-based budget, said CFP Judson Meinhart, a financial advisor and manager of financial planning for Parsec Financial in Winston-Salem, North Carolina.
“You might be striving for financial independence, or maybe your goals are more immediate and revolve around becoming debt-free or taking a dream vacation,” Meinhart said.
“Whatever they are, write them down,” he said. “You are [far] more likely to act on your goals if you write them down.”
Then, keep goal-oriented money where you’re less likely to use it.
“If you want to cut down on impulse buys, put more of your money in the accounts where you’re saving for goals, and keep less of it readily available to spend,” Meinhart said.
