Have you ever bought something and shortly afterward wished you had your money back instead of the purchase? I know I have. I am referring, of course, to buyer’s remorse – that sinking feeling you get when you buy something you don’t need or can’t afford.
It can come in all shapes and sizes – such as splurging on a candy bar at the grocery store, to buying a new pair of shoes when you have several pairs at home that are still in good repair, to buying a new car when you only wanted to see what the new models look like. The following tips can help you avoid buyer’s remorse, regardless of whether it is a small purchase or a large item that could put you in debt.
Avoiding Buyer’s Remorse
The easy response to avoiding buyer’s remorse is to tell someone not to buy something they don’t need or can’t afford. But it doesn’t always work that way in the real world. It’s all too easy to give into impulse shopping, or even a full-blown spending addiction. I’ve found the following steps helpful to curb my spending and make sure I only buy items that fit my budget and needs.
Do you need it?
The first step is establishing need. It’s easy to “want” a new house, or car, or washer and dryer, or computer, or… fill in the blank. But it’s another thing to need one.
You may be able to renovate your house instead of buying a new one. For example, you could put an addition on your house, convert a storage room into a bedroom, or clear out a lot of physical clutter to make more room.
You may also decide that renting is a more prudent option than spending a few hundred thousand dollars on a new home. You may be able to repair your car or appliance to extend the life, or you may be able to upgrade the hardware or software on your computer instead of buying new.
Solution: The key here is to examine your specific situation, then try to determine how it will change in the next few years and decide if the purchase you are considering fits your needs. If so, research the purchase and go on with it, and if not, then skip the purchase now and address the situation later if it comes up again.
Establish a waiting period.
Making a major purchase on a whim is a recipe for disaster and is almost sure to cause buyer’s remorse and possibly financial hardship. Many items fit into the “impulse buy” category, including a new car, TV, appliances, or anything else you can buy at a moment’s notice.
Buying a new car is a classic example since it’s easy to get financing and purchase a new car in a matter of hours and drive off the lot that day. And therein lies the problem – new cars are nice, new car payments are not. It’s never a good idea to walk onto a car lot to look at new models and drive away in one unless you had clearly planned and researched the purchase well in advance.
Solution: Sit down with your spouse or whoever you manage money with (or a trusted friend if you are on your own) and discuss how long you should wait when making a major purchase. Many people establish a 24 hour waiting period before making an single purchase over $100. Choose whichever threshold you are comfortable with and go from there.
Does it fit in your budget?
How much can you afford to spend? And don’t focus on monthly payments, focus on the bottom line. Thinking in terms of monthly payments is an easy way to get trapped into paying more for an item than you need to. Determine how much car you can afford, then limit the purchase price to that amount. Don’t focus on the monthly payment because that can be easily distorted by extending payments out beyond the life of the car (lower payments = longer time frame.)
Solution: Establish your budget and stick to it. You don’t want to create a burden for yourself and your family because you didn’t have the discipline to keep your spending within limits.
Additional Tip: Use Software to Track Your Budget & Spending
Try using budgeting software to help keep your budget in line. There are many popular money management programs such as Quicken, or an alternative, some of which are even free.
Personal Capital is my favorite because it combines budgeting with tracking your investments. While others, like Mint or YNAB, primarily focus on budgeting. This article compares Mint and Personal Capital for a more in-depth view.
Using one of these programs (or even something else) can help you become more aware of your spending and help you to make better informed and more conscious spending decisions. That is a win in my book!
Do you have any tips for avoiding buyer’s remorse?