impulse buys

3 Money Arguments That Can Hurt Your Relationships

Emily Guy Birken — Mon, 04 Nov 2019 08:00:07 +0000

Money has a funny way of sparking a number of disagreements, arguments, and even lifelong grudge-matches. No two people are going to see eye-to-eye on every aspect of money management, and since finances can be such a volatile topic, any money misalignment between two people can cause a great deal of friction.

Unfortunately, money arguments can often be much harder to navigate than your garden-variety disagreements.

Here are some of the most common money arguments you may have to deal with, and how you can nip them in the bud before they interfere with your relationships. (See also: 4 Money Fights Married Couples Have (And How to Avoid Them))

Friends with expensive tastes

We've all had the experience of not feeling like you can keep up with high-rolling friends. They might propose going out to eat at Cafe Riche where cocktails are $25 each and the entrees don't even have prices listed — while you were hoping to share a pitcher of beer and a plate of nachos at the local dive bar where no one blinks when you pay with sofa-cushion change.

It can feel awkward to ask your monocle-wearing friends if you can change the venue, but going to their preferred spot to pick at the cheapest side salad on the menu is a recipe for resentment. Especially if they suggest splitting the bill evenly at the end of the night.

You may worry that you're in for a fight no matter what you do, since pointing out the differences in your spending habits can end with hurt feelings. However, it is possible to get ahead of these potential arguments before they become a problem.

To start, you could simply state out loud that you're working with a tighter budget than you'd like, so you're hoping to have fun on the cheap. If that doesn't feel comfortable — not all friends are at the "sharing their financial reality" level of intimacy, after all — then consider suggesting fun activities that are free or cheap, and simply bowing out of the reservations at Chateau du Moolah.

Finally, if you do end up tagging along to some of the expensive restaurants, ask for separate checks when you order, rather than wait for the awkward moment at the end of the meal. (See also: 5 Friend Types That Can Hurt Your Finances)

Misaligned spending priorities

A surefire path to an argument between married or cohabitating couples is when one person spends money on something the other person thinks is unnecessary. Whether the money is going toward education, a new gadget, groceries, or clothes, one person may feel that the other is being completely irrational. The spender might feel like the saver is either a buzzkill or unsupportive, while the saver may think the spender is irresponsible and doesn't care about their future.

This kind of argument can be easily averted with separate fun money funds. Making sure each person has their own fun money can allow them to make purchases the other might see as unnecessary, without it becoming an issue.

It gets much thornier when larger spending priorities are misaligned. If you and your partner cannot agree on how much to spend on things like education, career needs, food, or the like, then having separate funds cannot solve the problem.

This is when it makes sense to talk about the basis of your spending priorities. If you feel strongly that you should pay for your child's education and your spouse disagrees, taking the time to talk about what those actions would mean for each of you can help you figure out what you're each trying to accomplish. Knowing the why behind your spending priorities can help you find common ground that will lead to a compromise. (See also: 4 Ways Couples Can Tackle Money Goals Together)

Loaning money

One of the most awkward money issues you can face is when a friend or family member asks to borrow money. You may find yourself feeling anything from shame at being unable or unwilling to help financially, to resentment for being asked in the first place. And if you do decide to loan money, you may find yourself silently judging every financial choice they make while you wait for repayment, and wondering when and how you can ask for the money back.

The best way to nip arguments about loans in the bud is to set clear expectations in advance.

To start, that means saying no if you're unable to extend the loan. If you're not in a position to lend money to your loved one — whether it's your financial situation or your emotional situation — then you need to tell them that you can't help them that way. Don't say you can't afford to loan them money, since that can be construed as an invitation for your would-be borrower to question every purchase you make. You can make it clear that you do care about their situation by asking if there are any non-financial ways you can help.

If you do decide to loan them money, treat it like a formal loan. Tell your borrower that you require a written contract with the repayment terms spelled out, including what will happen in case of a missed payment. There are free templates for promissory notes available online that can help you draw up the contract. Having this in place will make it clear to your borrower that you're treating the loan as a serious transaction. These boundaries will also ensure that you preserve the relationship.

If your loved one feels affronted by these terms, remember that you don't need to manage their reaction to your financial requirements. They are the potential borrower, which means you, as the lender, get to set the terms of the loan.

Don't let money get in the way of your relationships

In a perfect world, money would never come between you and your loved ones. But in the real world, money disagreements can cause a great deal of resentment and distress. However, setting firm boundaries and talking openly about your priorities can help you keep money arguments from turning extremely ugly.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Pre-Commitment Mechanisms Can Help You Resist Impulse Buys

Emily Guy Birken — Mon, 28 Oct 2019 08:00:07 +0000

If you've read the Greek epic The Odyssey, you may remember Odysseus's ingenious plan to hear the dangerous voices of the sirens, who would lure sailors to their deaths. Every member of his crew plugs their ears with beeswax so they can't hear the tempting song, and Odysseus latches himself tightly to the mast of his ship, so that he cannot escape and steer the ship off course. With a little forethought, Odysseus manages to be the only human who hears the sirens' song and lives to tell the tale.

Odysseus's scheme is an excellent example of what behavioral economists and social scientists call "pre-commitment mechanisms." These mechanisms can be powerful tools in helping people overcome impulsive behavior, and specifically, overspending.

Here's what you need to know about pre-commitment mechanisms and how you can incorporate them into your financial decisions. (See also: 5 Mental Biases That Are Keeping You Poor)

Why do pre-commitments work?

According to Dr. Daniel Crosby, author of The Behavioral Investor, "pre-commitment works because it takes natural (and sometimes negative) human tendencies like laziness and status quo bias and actually makes them work for us."

Since we're likely to let a previous decision stand if it keeps us from having to make a new decision, we can profit from our own laziness. For instance, someone trying to maintain a healthy lifestyle may not keep donuts or ice cream in their home as a pre-commitment to eating better. Since getting junk food requires leaving the house, the pre-commitment of not buying treats can often be enough to keep sweets out of their diet.

Pre-commitments can help align your long-term goals with your short-term decisions. Dr. Crosby writes that "a pre-commitment should be used anytime we feel our short-term preferences may change, but our hope is for our long-term commitments to mirror our current frame of mind."

This means that anyone who'd like to spend less, make rational investment choices, or pay down debt could benefit from creating pre-commitment mechanisms.

What does a pre-commitment mechanism look like?

There are multiple ways to create a pre-commitment mechanism to keep you on track to accomplishing your goals.

Social consequences

Many successful budgeters blog about their journey out of debt or toward financial independence. These budgeters are pre-committing to social consequences if they should fall off the debt-repayment wagon. The negative social consequences of reneging on the publicly stated goals are much stronger than the immediate temptation to spend, which helps those who share their goals publicly to stay on track.

In the modern world, there are a number of ways to use social consequences as a pre-commitment to improving your spending habits. For instance, you can set up an automated alert from your bank or credit card issuer that texts your spouse anytime you make a transaction larger than a certain amount. The social consequences of having to explain your purchase to your spouse can be enough to make you pause before buying anything.

In addition, you can also seek out accountability partners via social networks or take a page from debt bloggers and record your journey in a blog.

Automation

Having your savings taken automatically from your checking account allows you to pre-commit to a savings strategy that's harder to undo. This automated decision allows you to benefit from your own disinclination to change the default setting. (See also: 5 Ways to Automate Your Finances)

According to Dr. Crosby, one of the most famous examples of a pre-commitment mechanism is the Save More Tomorrow program, popularized by Richard Thaler and Shlomo Benartzi:

"It involves pre-commiting to the auto-withdrawal and auto-escalation of retirement savings over time. Effectively, it allows a retirement saver to make a good decision once that benefits them for the entirety of their savings lifetime. People are busy, their willpower is weak, and their decisions can be inconsistent. By 'setting and forgetting' decisions like saving and escalating retirement contributions, human frailty gets turned on its head."

Remove temptations

Another pre-commitment option is to change your environment so that you encounter fewer temptations. This is what the dieter who has no sweet treats at home is doing. Reformed spenders can do the same by taking their credit card out of their wallet. (There's a very good reason for the old-fashioned advice about freezing your credit card in a block of ice.)

Similarly, removing your payment information from your favorite online retail sites, unsubscribing from retail email newsletters, and immediately recycling paper catalogs you receive can all help you avoid the siren song of spending.

When pre-commitments don't work

While setting up pre-commitment mechanisms can do a great deal to help you improve your financial life, they're not magic. A pre-commitment that can be undone will be undone if it's easy for you to change your commitment when you're feeling tempted.

Dr. Crosby has seen that creating rules-based pre-commitment strategies often does little to stop investors from reacting emotionally. "Jim O'Shaughnessy, the godfather of quantitative investing, recently revealed that 60 percent of rules-based traders broke their rules during the Great Recession, effectively nullifying their pre-commitment (which is all an automated, quantitative strategy really is)."

These traders had pre-committed to a kind of "if this, then that" rules system for investing. But when they got scared about their investments, they ignored the rules they had committed to. Because they could break their own rules, these traders did so, despite their pre-commitment to more rational investment choices.

This is why Dr. Crosby recommends making your pre-commitments difficult to alter. "Once you've made a commitment, you want it to be as hard as possible to change it. Make that choice and lose the key!"

Know your temptations

Pre-commitments can help you protect yourself from making easy, habitual, lazy, emotional, or poorly-thought-out decisions. But your pre-commitments will be more effective if you know which temptations are most likely to affect you, and if you make your pre-commitments difficult to change.

Be like Odysseus, and outsmart your worst impulses before you have a chance to indulge them.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Resist These 4 Rationalizations to Spend Money

Emily Guy Birken — Mon, 30 Sep 2019 08:00:08 +0000

When I turned 40 earlier this year, I decided to celebrate in style with a theme party at a local pub. When I went to a party store to buy decorations for the event, I went a little overboard with balloons, streamers, hats, and kitsch. I'm only going to turn 40 once, after all, and I wanted to enjoy myself and throw a fun party.

As I was cleaning up many of the unused decorations after the party, I realized I had fallen victim to one of the classic money blunders: using a special occasion as my rationale for overspending.

Humans are good at coming up with rationalizations for spending money. But the lies we tell ourselves to excuse our spending are remarkably consistent, and we can recognize these rationalizations while they're happening. The next time you find yourself using one of the following excuses, stop and ask yourself if you're rationalizing your spending. (See also: 5 Mental Biases That Are Keeping You Poor)

"It's a special occasion!"

The special occasion excuse is the very reason the staff at the party supply store were so happy to see me. It feels wonderful to spend money to celebrate, whether you're marking a milestone birthday, giving holiday gifts to your loved ones, or commemorating a major life change like marriage or graduation.

However, as good as it feels in the moment to spend money for these reasons, special occasion bills are just as painful to pay as any others. The boost you may feel for being the hostess with the mostest or the uncle who gives the best Christmas presents will have faded by the time your credit card payment is due. And that is hardly the way to ensure that you have happy memories of your special occasion.

If you find yourself excusing your overspending because it's for something special, stop and think about what it is you truly want to get out of the occasion. Take a moment to recognize what feeling you want to evoke. Once you've figured that out, you can then determine how to do so without overspending. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

"This will save me money."

My stepfather once went to Sears to buy a single 5/16 inch wrench that he needed for a project. Buying the single wrench would've set him back about $15. But when he got to the store, he found a 44-piece wrench set with every possible size he could ever need. The set cost $200, but he proudly told the family that the 5/16 inch wrench in the set only cost him $4.50. By spending $185 more than he planned, he saved $10.50 on the particular wrench he needed.

We often rationalize a purchase with this kind of thinking. We tell ourselves that spending money we didn't intend to spend will somehow save us money in the future. And retailers are fully aware of our tendency to rationalize purchases as a way of saving money. (My stepfather's wrench set helpfully broadcast the fact that each wrench only cost $4.50 across the top.)

Asking yourself the following questions can be a good method of breaking through your rationalizations:

Do I need this item?
Would I buy it if it weren't on sale or if it couldn't save me money?
Can I afford it?

Had my stepfather asked himself these questions, he certainly would not have come home with a set of 44 wrenches that he didn't need. (See also: How to Use Financial Anchors to Make Better Money Decisions)

"I need this!"

Knowing the difference between needs and wants is the basis of personal finance literacy. Recognizing that you must prioritize your needs over your wants is the cornerstone of basic budgeting, and most people are well aware of the importance of doing this.

The problem with the needs-versus-wants education is that it provides us with another ready-made rationalization for spending. Anytime we can convince ourselves that we need an item, there is very little to stop us from overspending.

For instance, let's say your car is on its last legs. You need to get a new car because you have to have reliable transportation to get to work. But you convince yourself that you need a brand-new car rather than a reliable used one. You've tacked a want onto your legitimate need in order to justify your overspending to yourself.

To avoid this rationalization, ask yourself if your need could be fulfilled with a less expensive option.

"It's only $X."

Spending a little bit of unexpected money can feel like no big deal, since you're only parting with a five-spot or a tenner. If this only happens every once in a while, you might chalk it up to the cost of living.

However, there are problems with the "It's only $X" rationalization. The first is that small amounts add up quickly. You can rationalize your way into some pretty hefty spending a couple of dollars at a time.

In addition, what you consider a small amount of money changes with your budget. As you earn more money, you may go from thinking "It's only $5" to "It's only $50." While you may have the income to absorb such a change in your "It's only" thinking, you're still spending more than you planned and it will add up even quicker at a higher income level.

If you find yourself rationalizing a purchase with "It's only $X," ask yourself what else you could do with the money. Thinking through what the loss of that money actually means to you can help you overcome the rationalization. (See also: 4 Mindful Spending Habits That Will Save You Money)

From rationalizing to rational

Making excuses for our less-than-ideal choices may be human, but it's not the best way to manage your money. Taking the time to really ask yourself why you're making the choices you are can help to end your rationalizations and start looking at your finances more rationally.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Keep Office Solicitations From Busting Your Budget

Emily Guy Birken — Thu, 29 Aug 2019 08:00:06 +0000

Are office solicitations becoming a regular drain on your paycheck?

Last week, it was the IT woman asking if you'd buy overpriced gift wrap to support her daughter's music program. Earlier this week, the head administrative assistant asked everyone to chip in $20 for an upcoming retirement party. And you know that Ted from accounting is going to hit you up for a donation toward that charitable 10K he's been training for.

While you're happy to support all of these coworkers and their causes individually, together it's getting to be a major financial burden.

So how do you keep these regular solicitations from wrecking your carefully planned budget? Here's what you need to know about navigating this financial and etiquette minefield. (See also: 8 Awkward Money Moments Everyone Has at Work)

Perfect your "No, thanks!"

Office solicitations are awkward because it can feel like there will be some sort of work or social repercussions for saying no to a request for money. But you have every right to refuse to give, no matter who is asking. You don't need to give a reason or an excuse. You simply need to say no.

Perfecting your polite "No" will go a long way to making sure these requests leave no hard feelings on either side. Here are some ways to refuse graciously:

"No, thank you." It's an old standby for a reason. If your coworker presses, you can say that you appreciate their passion for the cause, but you're not interested.
"I've already allocated all of my charitable spending for the year." This is polite, to the point, and not something anyone can argue with.

"I don't donate to organizations unless I have done my own research on them." This makes it clear to the office solicitor that you ultimately get to decide where your money goes.

Know your workplace policy

Many companies are well aware of how uncomfortable workplace solicitations can be, since you're a captive audience for the solicitor-du-jour, and you have to maintain a pleasant working environment with them, to boot. That's why it's common for workplaces to have solicitation policies. These policies will often prohibit one-on-one solicitations between employees, but allow more general solicitations.

For instance, your workplace may not allow the father of a girl scout to go desk-to-desk asking each of his coworkers how many boxes of Thin Mints he can put them down for, but will allow him to put a sign-up sheet in the break room for those interested.

If you're feeling pressured to give, start by finding out the specific policy in place. If multiple coworkers are not adhering to the policy, then you can say something to HR or your manager about making sure everyone knows the policy.

But what if there is no policy in place?

"Tell someone!" recommends HR professional Jenni Stone. "Solicitation only becomes a problem when it becomes disruptive. This repeated solicitation and pressure is unacceptable. Let management know what's going on so it can be addressed through creating and enforcing a policy." (See also: 10 Ways to Improve Your Company's Culture, Even If You Aren't the Boss)

Develop a personal policy

Even if there's no policy in place at work, you can still create a policy for yourself regarding donations. Having such a policy for yourself can help you say no comfortably without feeling cornered, since you've already made the decision before the sign-up sheet has gone around.

Here are a couple of ways to shape your policy:

Never give at work

If you have a flat refusal in place because you don't give money at work, then Rhonda in marketing won't be wondering why you gave to Keisha's fundraiser but not hers. If this is your policy, you could say you've budgeted for charitable donations and take care of it entirely outside of work. (See also: 10 Money Moments That Are Awkward for Everyone)

Only give in specific categories

Decide ahead of time that you will only donate to certain categories of charities. For instance, you might decide you'll only support children, education, and the arts. That makes it easier to say no if a coworker is raising money for their church or for medical research. Those are worthy causes, but they're not in the categories you've chosen to support.

Make a charitable budget

Determine the amount of money you're willing to spend on office solicitations. That could be an overall budget — like $150 for the year — or an amount like $5 per solicitation. If you choose an overall budget, you can tell anyone asking after you've used up the $150 you'd allotted that you've reached the end of your budget and to try you again next year. If you choose the $5 per request, that will allow you to support everyone without destroying your overall budget.

Pressure from management

There's an added layer of stress when the solicitation comes from above. For instance, I used to work with kids for a nonprofit charitable organization. I earned less than $10 an hour in my role as an art teacher with the organization. However, the charitable non-profit wanted to show potential donors how much the employees believed in the mission. We were all "encouraged" to give money during the annual fundraising campaign so they could say that they had 100 percent employee participation.

A similar pressure can occur when your workplace encourages you to give money toward a retirement party, wedding or baby gifts for coworkers, or to help a sick employee. You can often feel like you have no choice but to give money toward these causes, even if you're feeling financially strapped.

There are a couple of ways to handle these kinds of uncomfortable solicitations. The first is to only give what you can. When I was struggling to make ends meet working for the non-profit organization, I gave $2 toward the annual campaign one year. The higher ups made it clear they didn't care how much you gave, since getting 100 percent participation was their main goal.

In addition, remember that you can always ask if there are other ways to be supportive. Some employers will allow you to donate sick time or vacation time to coworkers. Donating a day or two of the leave you've built up could be a great way to give to an ailing coworker or a new parent without spending money.

Similarly, you could offer to set up the retirement party, bake the cake, or even run the errands necessary for the party in your off time. That shows you care without hurting your bottom line.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Reflecting on Possessions Can Help You Resist Impulse Buys

Emily Guy Birken — Tue, 27 Nov 2018 09:00:11 +0000

The office supply section of the local pharmacy has a nasty habit of extracting money from my wallet. You'd think I could easily fix this problem by avoiding that aisle, but nearly every time I'm at the pharmacy, I'm convinced that I need to buy some mechanical pencils, and perhaps some sticky notes, too.

Some of what's going on here is my personal affinity for office products, but my growing collection of highlighters also reflects a universal problem: the inability to resist impulse buys. But according to a 2018 study from Rice University, an easy and free way to keep yourself from making impulse buys is simply reflecting on the items you already own.

Here's how this trick can help you keep more money in your wallet, and fewer notebooks and binder clips from following you home. (See also: 10 Classic Impulse Buys We Need to Stop Falling For)

Think about what you already have

The Rice University study asked one group of participants to describe an item they purchased, currently own, and have recently used. For instance, a 29-year-old female participant wrote:

"I just purchased a Kindle Fire. It is black. I can read books and access the internet. It opens a world of novelty to me. I read a book in bed and checked the weather this morning before even getting up. I spent about 45 minutes. I also downloaded several apps. I was lying down and the ease of Kindle use allowed me to comfortably read without noise to wake up my partner."

The "recently used" aspect of this thought exercise seems to be the important factor in helping to reduce your interest in spending money on something new. A second group of participants was asked to make a plan to use items they already owned but had not used in some time, while a third group — the control group — was asked to do nothing.

Surprisingly, the participants in the first group, who had reflected on something they owned and had recently used, found their willingness to pay for something new reduced by 14 percent compared to the control group. The planning group, despite having thought about the fact that they have items they are not using, saw their willingness to pay for a new item increase by about 6 percent compared to the control group. (See also: 8 Ways Social Media Tricks You Into Spending More)

Practice gratitude as an antidote to impulse buys

So why did the planning group see their willingness to spend money increase? Logically, it would seem that thinking about all the unused stuff you already have would be enough to pump the brakes on an impulse buy. After all, why spend money on something new when you have things already collecting dust at home?

However, buying something on impulse is, by definition, an emotional decision. So trying to counter that urge with a logical response is unlikely to work. It would be like trying to fight a fire with a single ice cube. Instead of trying to talk yourself out of an emotional decision using logic, you need to counter it with another emotion.

In particular, gratitude has been proven to reduce impulsive urges. According to a 2014 study published in Psychological Science, participants who were prompted to feel grateful showed a reduced level of impatience in waiting for a financial reward.

What's likely going on here is the fact that impulse purchases are often an attempt to fill some sort of emotional void. My purchase of a new pen is not really about the pen itself, but the momentary thrill I feel at having something new. That thrill keeps me from feeling low or bored or frustrated, however briefly the emotional boost may last.

But gratitude is a nourishing emotion. It is difficult to feel an emotional void when you're reflecting on how full your life is and how glad you are to have what is already yours.

Within this context, it makes sense that the Rice University study participants thinking about a recently-used item they already owned were less inclined to spend money. Intended or not, they were given an opportunity to feel grateful for an item they already had, which lessened their interest in spending money on something new.

How to make this practice work for you

The next time you're facing down a display of day planners or dry erase boards (or whatever impulse purchases tend to tickle your fancy), take a moment to think about an item you already own. Specifically, try to remember:

How much you spent on it.
When and where you bought it.
What it looks like.
When you used it last.
How you used it.
What you enjoyed about using it.

It's very likely that your potential impulse buy will have lost its sheen by the time you finish thinking through all of these. Not only will this thought exercise give you a moment's pause between wanting and buying — which is very helpful in giving your better nature a chance to remind you that you don't need yet another notebook — but it will also evoke a sense of gratitude for what you already have. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Projection Bias Could Be Destroying Your Finances

Emily Guy Birken — Thu, 18 Oct 2018 08:00:11 +0000

Have you ever gone grocery shopping on an empty stomach? If you’re like most people, you come home with all kinds of random junk food and disparate ingredients you have no specific plans to use, all because they looked good at the time.

So when you decide to throw some “lightly expired” shrimp, Lonely Gal Margarita Mix for One, and an entire shelf’s worth of tortilla chips into your cart when you only needed a gallon of milk, you are falling victim to a cognitive bias known as the projection bias.

This bias causes you to believe that however you are feeling in the moment is how you will still feel in the future. So when you are feeling rumbly in your tummy while cruising the grocery store, you believe you’ll still want to eat shrimp-covered nachos once you get home — even though your enthusiasm for shrimp that’s gone to the bad place will definitely wane once you’ve had a snack.

Of course, the projection bias does more than just fill your grocery carts with food you’ll never eat. It can also cause you to make even bigger financial mistakes. Here’s how your inability to project your future preferences can ruin your finances. (See also: 5 Mental Biases That Are Keeping You Poor)

Irrational shopping

Car dealerships have long found that they sell more convertibles in the spring and summer than in the winter. Some of that is perfectly natural. A car buyer is likely to want to purchase a car whose amenities they can take advantage of right away. But convertible sales also spike during sunny days or warm spells during the winter. In those cases, the irrational convertible owner is projecting that she will want to ride with the top down and the wind in her hair every day, just because that’s what she wants on the unseasonably warm and beautiful day when she buys her new car.

Similarly, when you are in the midst of a new enthusiasm for exercise, it might seem like a great idea to buy a treadmill or elliptical machine. You want to exercise every day right now, so of course you’ll want to continue exercising in the future. There is no possible way that your new BowFlex will collect dust and/or become an impromptu clothes-drying rack within a few weeks of purchase.

One of the best ways of thwarting this expensive projection bias mistake is forcing yourself to take a cooling-off period before making any major purchases. Test driving the convertible BMW may be a blast on that random 70-degree day in late February, but will actually purchasing the car still feel as reasonable a week later when the snow is falling? Forcing yourself to wait a week (or a month) before making any large purchases can help you keep projection bias at bay. (See also: 9 Simple Ways to Stop Impulse Buying)

Not saving enough

The closest I have ever come to slapping someone was when a teaching colleague once told me that she didn’t bother saving money for retirement because she wanted to enjoy her money while she was young. This colleague seemed to believe that she would always enjoy good health and stable employment, and that she could just continue to work forever.

This kind of thinking is a common symptom of projection bias. We all tend to assume that the way our lives are now are how they will continue to be in the future. So we don’t bother to save money for a rainy day or for retirement, because we project today’s stability into the future.

This is one of the reasons why pessimists tend to be better savers than optimists. Pessimists expect things to go wrong, and they plan accordingly. So it’s a good idea to embrace your financial pessimism and think through all the potential ways Murphy’s law could throw a wrench in your life. You’ll be less likely to assume that your current life will remain unchanged forever — and you’ll be more likely to save money to protect yourself. (See also: 4 Ways Pessimism Can Actually Improve Your Finances)

Locking up money in illiquid investments

Whether you're investing in real estate or buying an annuity, the projection bias can potentially prompt you to make an expensive mistake. That’s because you might decide to put your nest egg into a real estate venture or annuity product when you're doing well financially. If your job feels secure and you can’t imagine needing to tap into your nest egg, it can feel foolish not to invest in something that will grow over time or provide you with guaranteed retirement income.

But job loss can strike anyone at any time, and if all of your investment money is tied up in a rental property that you cannot sell or an annuity that you cannot get out of, then you'll be stuck making some pretty difficult financial decisions until you are able to find another job.

While putting your money in illiquid investments can be a savvy financial move for the right investor, it’s important to think through what would happen if you were to lose your job or experience a financial downturn. When you consider making such investments, be sure you also have a Plan B for if life does not continue in the same way. (See also: How to Get Your Finances Back on Track After Losing Everything)

Buying a timeshare or retirement condo

One of the big problems with the projection bias is the fact that marketers and salespeople (not to mention con artists) are all perfectly aware of how this mental quirk works. So they make absolutely sure you have a great time with whatever they are selling to help you project future good times if you buy their product.

Two industries that often rely on this bias are timeshares and retirement condos. In many cases, both of these types of purchases require an upfront payment for future residence. While it’s possible that you will still want to visit Florida the first week of August every year in perpetuity, or that you will want to move into the 55+ condo community after you retire, you may also change your mind and feel stuck with an expensive choice that you may have trouble getting out of.

These types of purchases should also only be made after a great deal of thought, rather than right after a fun-filled weekend visit. (See also: Are Timeshares Ever Worth the Investment?)

The future will be different

The trick to keeping projection bias from destroying your finances is remembering that the future will not be exactly like the present. So it pays to be flexible in your plans for the future, and a little pessimistic about what you can expect.

Even if there are nothing but blue skies ahead and your tastes never change, you’ll still be glad you kept your finances flexible (and robust).

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Non-Finance Skills That Will Make You a Money Master

Kentin Waits — Wed, 13 Jun 2018 09:00:22 +0000

When it comes to winning in the world of money, I'm a firm believer in the power of the liberal arts. Sometimes, a broad base of knowledge can serve you better than a narrow set of skills in mathematics, business, or investing. So buck up, theater majors and graduates of the School of Hard Knocks; here are eight non-finance skills that will make you a money master.

1. Self-awareness

Socrates was onto something when he said, "To know thyself is the beginning of wisdom." Self awareness is the key to understanding the level of investment risk you're comfortable with, the situations that trigger impulsive consumer behavior, and the strengths you can build upon to become more successful with money. Stretch your self-awareness muscle a little every day by being mindful of your emotional responses to advertising and noticing which parts of your budget are the easiest and most difficult to stick to.

2. Self-control

How do you become a money master while living in the middle of a three-ring consumer circus? You develop superhuman levels of self-control. Money masters resist impulse buys (at least most of the time), drive reliable used cars instead of new ones, shred stacks of preapproved credit card offers, and stick to their budgets despite everything that urges them to do otherwise. (See also: 6 Ways to Resist a Splurge)

3. Self-confidence

In the U.S., keeping up with the Joneses is practically a national pastime. Those in charge of their financial futures evolve beyond the constant comparisons that drain time, energy, and money. How do they do it? They cultivate authentic self-confidence and are able to live by a simple, yet fundamental truth: Who they are is far more than what they buy. (See also: 3 Ways Confidence Makes You Better With Money)

4. Big-picture thinking

Money masters always play with the end-goal in mind. That means sacrificing when necessary to pay down student loans, avoid credit card debt, save for retirement, and build a healthy emergency fund. It means understanding that long-term financial security is the result of dozens of tiny, strategic decisions they make every single day.

5. Patience

For those of us who don't have relatives in the oil business or who haven't won the lottery, achieving financial security takes patience. Delaying gratification, taking the long-view on investments, building wealth dollar by dollar — these are the traits of true money masters. Without patience, you'll always be seduced by get-rich-quick schemes, always expose your principal to unnecessary risk, and only become the master of financial disaster. (See also: 8 Ways Being Patient Saves You Money)

6. Critical thinking

I hate to alarm you, but there are hordes of people after your money. Every day, scammers and shady investment brokers are developing new and better ways to relieve you of your hard-earned cash. In this environment, critical thinking is a survival skill. Money masters consider each expenditure carefully, arm themselves with unbiased information, and can spot a too-good-to-be-true investment from a mile away. (See also: 7 Steps to Improving Your Critical Thinking)

7. Creativity

Creativity helps people make money and save it. Some of the most creative folks I've ever met were raised during the Great Depression, and the lessons they learned permanently shaped their relationships with money. These money masters know how to stretch a dollar to within an inch of its life (without feeling deprived for a second), grow their own food, repurpose items, and build thriving cottage businesses. (See also: 9 Money Lessons to Take From the Great Depression)

8. Communication

Communication is the life skill that feeds all the others. Money masters are able to talk openly with their partners about finances, negotiate with diplomacy, share their knowledge, and ask the sorts of the questions that empower smart investing. (See also: 5 Money Conversations Every Couple Should Have)

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This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

These 6 Shopping Challenges Will Keep You Stylish Without Breaking Your Budget

Denise Hill — Mon, 14 May 2018 09:01:08 +0000

As a passionate yet frugal fashion connoisseur, I'm always looking for ways to keep the peace between my inner Chic Chandra and Frugal Fran. It isn't easy. One of my favorite ways to pacify both sides and exercise a bit of creativity is by engaging in shopping challenges. Some challenges I've found through social media, fashion blogs, and some my fellow spendthrift friends and I create ourselves.

No matter what you're trying to do — be "bougie on a budget," upgrade your wardrobe, try out different styles, or give yourself a complete makeover — shopping challenges help you simultaneously accomplish your fashion and finance goals. Below are a few of my favorites, but I challenge you to be creative and mix and modify these, or create your own.

1. No Shopping Challenge

The No Shopping Challenge is exactly like it sounds. You don't shop for a specific amount of time. It's one of my favorites. During the challenge, you don't buy clothes, shoes, or accessories of any kind. This challenge forces you to use what you have and re-envision your wardrobe. It stretches you past your comfort zone and it helps break your normal fashion thought pattern. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)

I always institute this challenge during a spending fast, but it usually extends far beyond the end of the fast. My shopping fasts usually last anywhere from four to eight months. However, some people stretch the challenge a full year.

During my most recent fast, I noticed the most fascinating thing. Not once, during the entire six months, did I ever say to myself, "I have nothing to wear." The shopping fast actually keeps my Frugal Fran happy and Chic Chandra satisfied.

2. Adding Accessories Challenge

In the Adding Accessory Challenge, you set a very small budget and buy nothing but accessories for a set period of time. This challenge came about during a time, several years ago, when money was tight because I was aggressively saving for a big-ticket item. I had $25 per month allocated for shopping, entertainment, and miscellaneous items. I wanted to revamp my outfits a bit without going over budget. And I found a way to do just that by accessorizing. Even though I had very little money to spend, during the initial challenge, I was able to amass quite a collection of eclectic accessories. The trick is to pair an interesting and eccentric piece of jewelry or a great hat with a basic outfit, allowing the accessories to take center stage.

Accessories can be super cheap — if you have a keen eye and a bit of imagination. You can pick up scarves, hats, socks, jewelry, and even purses for very little money. I've paid as little as $.50 for some really great pieces. What you spend instead of money is time. Shop yard sales, thrift stores, sample sales, and keep an eye out for seasonal sales from your favorite brands, and you're sure to find some killer deals. (See also: 101 Ways to Save Money on Clothes)

3. One In, One Out Challenge

The One In, One Out Challenge is all about spending money strategically and combating excess and wastefulness. The object of this challenge is that for every item you purchase, you must get rid of a similar item, sell it, or donate it to charity. For example, if you buy a pair of black pumps, you must get rid of a pair of dress shoes. (See also: How I Make $800 on Month on eBay Selling Used Clothes)

This challenge can be extremely difficult, because when you pick something up, you have to choose to let go of something else. It combats hoarding tendencies, making you regularly take stock of what you already have, and only purchasing things you need. It also helps you break your attachment to material things and become a more mindful shopper.

4. A Week Without Challenge

The Week Without Challenge is truly a challenge. The purpose of this challenge is to assess the clothing items you love and chose one or two of those items to go without for the week. For example, if you're always wearing black shoes, you would go an entire seven days without wearing black shoes. This really shakes up your wardrobe and makes you think outside the box.

This challenge is especially helpful for people who have a very specific style and wear the same few items incessantly. If a T-shirt and jeans is your go-to outfit, you would go a week without wearing either one of those items. It's also a great challenge to do with a friend. Instead of you choosing the items to go without, you allow your friend to choose for you. It keeps you honest and it will provide you with a more objective perspective on your style. (See also: How to Master These 10 Shopping Skills Before You Hit 30)

5. The 10x10 Challenge

The 10x10 Challenge is when you select 10 clothing items and style those items into different outfits for the same number of days. The catch is you wear only those 10 items for the entire 10 days. Chic Chandra just had a mild panic attack.

This challenge really gets your creative juices flowing, and essentially helps you create a micro capsule closet. It will also highlight the fact that you can do a lot with very little. A boyfriend button down triples as a shirt, a dress, and a jacket. Tie it around your waste and you've got another look. It teaches you how to look at your clothes in a new way in lieu of always looking for new clothes. Some people do the challenge for 30 or even 60 days. Of course, the longer the time frame, the less challenging it becomes.

6. $30 Outfit Challenge

The $30 outfit challenge is all about learning how to shop on a budget. It makes you visit shops you may not otherwise visit. You are given a budget $30, and you must purchase an entire outfit — including shoes — without going over. I know you're reading this saying, "There's no way." It's not only possible, it's actually pretty easy once you learn where to look and how to shop.

If you're like most people, you have a handful of stores you frequent regularly. They are your tried and true. You know exactly how the clothes fit. You know the style, and you know the price range. This challenge pushes you to look beyond your traditional go-tos and visit stores and websites that may be outside your comfort zone. The best part about this challenge is that once you try it and succeed, you'll be hooked. And your inner Frugal Fran will rise to her feet and begin the slow clap that crescendos into thunderous applause.

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Reasons You're Still Struggling to Pay Bills

Kentin Waits — Thu, 03 May 2018 09:00:11 +0000

You've worked hard. You've hit your career goals. Your salary has never been higher. Still, at the end of the every month, you break into a cold sweat worrying if there's enough money to go around. Why, at this point in your life, does bill paying still feel like a painful game of financial Twister? It's time to get to the root of the problem. Here are six reasons you're still struggling to pay bills.

1. You don't have a budget

Budgets are how people anticipate their expenses and allocate their spending. Without this essential framework, your financial life will look a lot like the Wild West — filled with drama and boom and bust cycles (and probably too many saloon scenes). If you're making late payments or missing payments altogether, it's time to build your first budget, cowboy.

2. You have too much credit card debt

With astronomical interest charges, late fees, and other penalties, credit card debt leaves millions of families strapped for cash year after year. If you're struggling to pay your bills each month, take a hard look at your credit habits. How much of your income is devoted to servicing debt? Are you barely covering the minimum payments or racking up new charges? If so, grab a shovel. It's time to dig yourself out of high-interest credit card debt. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

3. You're house poor

If your mortgage consumes more than 25 percent of your income, you may be house poor. For many, that single payment is simply too steep and leaves little money leftover for bills and other budget essentials. Think you may be house poor? Explore refinance options, rent out a spare bedroom, or consider selling and moving into a more affordable home. (See also: How to Make Ends Meet When You're House Poor)

4. You can't stop impulse buying

We all fall prey to impulse buys every now and then. But if off-budget spending has become a way of life, you're probably broke by bill-paying day. Examine why impulse buying is so attractive. Is it a way of relieving stress? Is it a reward for working long hours at a job you don't like? How could you rearrange your life and take control of your spending? (See also: 9 Simple Ways to Stop Impulse Buying)

5. You're too focused on keeping up with the Joneses

Trying to keep up with the Joneses can exhaust you mentally, emotionally, and financially. If you're constantly struggling to pay your bills, ask yourself: "To what degree is my spending influenced by the spending habits of others? Am I trying to project an image I can't afford?" Since paying your monthly bills doesn't give you much "image bang" for your buck, you may simply be prioritizing status over solvency. (See also: 4 Money Lessons You Can Learn From the Joneses)

6. Someone's draining your income

If you're always behind the eight ball with your bills, maybe the problem isn't something, but someone. Is your BFF always "a little strapped for cash?" Are you supporting a chronically unmotivated spouse, sibling, or adult child? Practice a little tough love (and self-care); use your cash to cover your own bills, protect your own credit, and keep your lights on. (See also: 4 Things You Should Make Your Adult Child Pay For)

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This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Signs You're No Longer a Personal Finance Rookie

Paul Michael — Wed, 02 May 2018 08:00:10 +0000

How are you doing with your money? Is your checking account flourishing? Do you have a well-stocked savings account, a growing 401(k), and an emergency fund ready to save you from life's unexpected money mishaps? That's great news. These are all signs you're out of the minor leagues and are now a major player in the world of personal finance. Here are a few more.

1. You're not panic-checking your financial accounts

When you are in full control of your finances, you know where your money is going, when it's coming in, and you have a pretty good idea of all your balances at all times. You keep track of your spending and you see the numbers you expect to see when you log into your bank or credit card account.

This is a far cry from the days when checking your accounts was like a horrible game show moment ('Let's see if there's any money behind door Number 1!'). You may not even notice this good habit anymore, but you can feel good knowing those panicky peeks at your balances are over.

2. You never get a huge tax refund (but you don't owe anything, either)

A massive tax refund is not a smart way to manage your money. By overpaying your taxes, you are giving the government an interest-free loan all year while you miss out on investment opportunities and the benefits of compound interest. Finance rookies overpay their taxes because a refund feels like a windfall. The fact of the matter is that money should have been in your paycheck all along.

No one wants to owe money at tax time, but if you calculate your withholdings correctly, you should come out as close to $0 as possible. That means you're taking advantage of every cent you earn throughout the year.

3. You have almost no monthly debt

Most of us are going to carry at least some debt for a chunk of our lives; after all, it's difficult to pay for a home with cold, hard cash. But excessive monthly debts mean that your finances are not as shipshape as they could be.

It's better to buy a car in cash, upfront, than it is to pay a lease or car payment. Credit card debt that lingers for years is a huge drain on your finances. Other loans or monthly debts almost always carry interest, and that means you're continuously throwing money away. If you're living with little to no monthly debt, you have financial freedom; and that means you're no rookie. (See also: The Fastest Method to Eliminate Credit Card Debt)

4. Your credit score is doing really well

When was the last time you checked out your credit score? It's a good idea to do it once a month, because erroneous things can creep up. Now, take a look and see where you are on the credit rating scale.

If you're above 700, it means you're doing great. Above 750, you're doing even better. And if you are in that magic 800+ category, you are considered by all credit agencies to be one of the best customers around. This means you have low debt, you pay everything on time, and you have accounts that date back many years. This is all evidence that you are definitely not a finance rookie. Congrats! (See also: 5 Ways Life Is Amazing With an 800 Credit Score)

5. You're automatically putting money away

Saving money when you can is great, and you should always try and pay yourself first. However, if you have automated this system, you have taken a much bigger step toward financial freedom.

By automating payments to savings accounts, retirement accounts, and an emergency fund, you have prioritized your future. Now, saving isn't just something you do if there is money left over at the end of the month. Instead, saving comes first, and you budget with what's left. It's tougher to do it this way, and it often requires discipline. But it's the best way to go about it. (See also: 5 Ways to Automate Your Finances)

6. You're not living paycheck to paycheck

This is a tough one. The sad state of affairs is that as many as 78 percent of Americans are currently living paycheck to paycheck, according to a poll by CareerBuilder. Wages have stagnated, and the cost of living has risen dramatically compared to income. However, a chunk of that 78 percent are living this way due to a lack of budgeting, discipline, and overwhelming debt. Even people earning over $100,000 a year are living like this, and that's just unacceptable.

If you don't live above your means, don't try and keep up with the Joneses, and don't make rash decisions with your money, you should be able to escape this paycheck to paycheck existence. It's not only bad for your finances, but extremely bad for your health and mental wellbeing. (See also: How to Escape the Paycheck-to-Paycheck Cycle)

7. You have an emergency fund

An emergency fund is just that; a stash of money that can be used for a crisis, such as losing your job, unexpected home repairs, medical care, and even emergency travel. Ideally, this fund should cover at least six months' worth of daily living expenses for you and your family — even more if you have a high-paying job or unique living expenses such as a medical condition.

Socking away a few months' worth of expenses can be daunting, but if you at least have a few thousand dollars put away, you're off to a great start and doing better than the majority of the population. You'll thank yourself when a financial speed bump comes along. (See also: 5-Minute Finance: Start an Emergency Fund)

8. You pay all your bills on time

Have you ever seen people play fast and loose with their bills? They will choose to pay some one month, and others the next. But sooner or later, everyone has to pay the piper. Utilities will get shut off, debt collectors will call, and credit scores will tumble. And, it often costs even more money to put things right. If you pay all your bills on time, every month, you're doing a fantastic job with your finances.

9. You don't make impulse purchases

It takes willpower to shed the 'personal finance rookie' title, and if you are no longer throwing money at purchases without thinking, you have moved beyond that role.

Impulse buying should not be confused with taking advantage of a sale on a needed item or even an occasional treat. If you carefully consider the purchase and decide it is one you need or deserve, that's great. The problem arises when you see a 75 percent off sticker and automatically grab the item regardless of whether or not you would ever actually use or need it. In that case, you didn't 'save' 75 percent … you wasted money on the remaining 25 percent. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

10. You have a monthly budget and stick to it

Perhaps the most important item on the list is a monthly budget. In fact, if you adhere to a monthly budget, most of the other habits on this list will follow naturally.

A monthly budget is the linchpin of financial stability. It tells you exactly what money is coming in, what is going out, where it's being spent, and what you can expect to see when you look in your different accounts. By sticking to a monthly budget, you have fewer financial surprises. Even if you're not yet at the point where you can save, you are at least managing the money you have, and that will lead to financial freedom down the road. (See also: Stop Using These 5 Excuses Not to Budget)

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Ways Social Media Tricks You Into Spending More

Camilla Cheung — Thu, 19 Apr 2018 09:00:06 +0000

When it comes to saving money, social media may not be your friend — especially if you're a millennial. Research shows that a whopping 57 percent of millennials spent money they hadn't planned to spend because of what they saw on social media. Here are some of the sneaky ways social media gets you to spend more, and what you can do to avoid it.

1. Impulse buys

Social media makes it easy for you to hand over your hard-earned (digital) cash with frictionless in-app purchases, like unlocking game levels, adding monthly subscriptions, and shopping for items recommended by people you follow. Within seconds, you can tap or swipe your way into an expensive, unplanned purchase.

Avoid this impulse by making it your policy to save the photo of the item or subscription and revisit it at a later date. Chances are, by the time you look at the saved photo later, you won't want the item as badly, or at all. Another strategy that works for me is looking up the reviews of the item before buying. A lot of the time, items that are super trendy on social media get terrible reviews in real life. Find a mental trick that works for you, like telling yourself you'll wait until the item is on sale, to delay purchasing until you've thought it through. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

2. Suggested posts

Social media algorithms may not be helping you in your quest to save money. If you've shown interest in anything from fashion, to coffee, to beauty products, the algorithm on platforms like Instagram remembers what it thinks you like and shows you similar content and products. When you open up the app, the algorithm may then show you a barrage of things you should buy — and they're usually tailored to your preferences, making it doubly hard to resist.

To avoid this influx of temptation, be sure to avoid the Explore page on Instagram or skip over suggested posts if you can. You might not be able to avoid all temptation, but you'll definitely cut down on the sheer number of tempting photos you see. Also, avoid "liking" photos full of products, so the algorithm doesn't push similar content into your feed. (See also: 5 Mental Biases That Are Keeping You Poor)

3. Those sneaky influencers

If you follow any influencers, your best bet is to unfollow them if you want to keep your hard-earned cash. Seeing someone else's perfectly-curated and styled life is a surefire way to feel unsatisfied with what you currently have, especially if the influencer has (as most do) cultivated an approachable persona.

Remember, influencers are not just like us. That entire line of Tom Ford lipsticks, the stylish new watches, and the new clothing line at Nordstrom were probably all provided for free, as was the trip on a private yacht to a beautiful island getaway to show off all their new wares in front of epic scenery. If you start trying to keep up with your favorite influencer's lifestyle, you'll quickly end up in the poorhouse.

4. FOMO

It's telling that fear of missing out, aka FOMO, has become common parlance on social media. Most of us, to some extent, want to keep up with everyone else. And we fear being left behind, or being seen as not up-to-date.

Remember that trends come and go fast, especially on social media. Once you buy that latest gear, watch, or stylish outfit, in a few months, the next trend cycle will be pushing another product. Instead of buying something to fit in with the crowd, think about whether it truly fits in with your needs and lifestyle. (See also: Are You Letting FOMO Ruin Your Finances?)

5. An expanded social circle

Before the advent of social media, it was hard enough to resist comparing ourselves to our friends, but it's even more difficult now with our drastically expanded circles on social media. The increased frequency of social contact online has also made it harder to resist spending. Whereas before social media, you might've seen that uber-rich high school classmate once a year, now you see what she's doing everyday on Instagram. In fact, 88 percent of millennials believe that social media makes them compare themselves more with others.

Consider unfollowing people you barely know on social media, especially if they're a bad influence on your shopping habits. Instead, interact with closer friends more frequently — social media algorithms usually show you posts from accounts you interact with more frequently — rather than acquaintances you barely know, and will probably never see again in real life. (See also: 4 Money Lessons You Can Learn From the Joneses)

6. Endless MLMs from old friends

Not long ago, it seemed like every time I opened Facebook, another friend was hawking leggings, skin care, or essential oils from a multilevel marketing (MLM) company. Wanting to support friends who are trying to make ends meet is an admirable goal, but doing so can quickly add up, especially with the high prices of most of these MLM products. Before long, buying a few products I didn't need had completely wiped out my "fun" money for the month.

Facebook allows you to stay friends with a person, but to stop allowing their posts to show up on your feed. All you need to do is unfollow. Eventually, I had to block the feeds of more than one person to prevent my feed from turning into one huge ad. Those friends can still send messages to me, but I don't see what they post unless I consciously go and check out their page. And now, when people approach me about MLM products, I tell them that I already have a supplier. (See also: 5 Friend Types That Can Hurt Your Finances)

7. Hyper-targeted ads

Sometimes it seems as if the internet is reading your mind. Advertisers on social media are able to target you based on the data you generate by using the platform. Everything including the movie you streamed recently, the ramen shop you checked in at, and your political leanings are accessible in this new marketplace, making it harder to ignore ads that seem custom-made for you.

In the interest of preserving your hard-earned cash, take steps to prevent ads from being quite as eerily targeted toward your likes. Clicking on the small triangular "AdChoices" logo on any online ads served to you will take you to a page run by an organization called the Digital Advertising Alliance. Once you get to the AdChoices page, you can opt out of having ad networks target you with personalized information. It won't block ads entirely, but it will help you avoid the onslaught of personalized ads.

8. Go off the grid

It may seem old-fashioned, but it's nice to take a break from social media sometimes if you feel you're too caught up in the constant marketing ploys. Research shows that spending a lot of time on social media can have negative effects on your mental health. Try consciously unplugging over the weekend and spending that time with friends in-person, or limiting yourself to an hour a day of social media time throughout the week.

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This article is from Camilla Cheung of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Behaviors That Risk Your Financial Security

Dan Rafter — Thu, 08 Feb 2018 09:30:05 +0000

Do you consistently spend more than you make? Do you go on shopping sprees to celebrate a raise or to soothe your disappointment at not getting a promotion? Maybe you're constantly charging gadgets or shoes you don't need to your credit card, telling yourself that you'll start whacking away at debt tomorrow.

These are all dangerous behaviors that can damage your financial health. And what's worse, many times we don't even realize how much damage these bad habits are inflicting on our bank accounts.

We all have bad habits. But the key lies in preventing them from turning into missed credit card payments, huge mounds of debt, and low credit scores. Here are four behaviors that could be damaging your financial health.

You're impulsive

Do you give into temptation whenever you see a dessert, even though you've sworn off sweets? Do you immediately purchase that trinket that catches your eye in the check-out lane? You might be a bit impulsive. Impulsive people struggle with discipline, and that can be a real challenge when it comes to building healthy finances.

Here's another example: Instead of waiting a few months to save up enough money to pay for a new laptop, you run out to the store to buy it with your credit card. Now you've added hundreds of dollars to your credit card debt. And this new debt comes with high interest. If you can't pay off your credit card balances in full each month, you'll end up paying much more for that laptop than you would have if you'd simply saved the money first.

How can you beat impulsive spending behavior? Create a monthly household budget. Look carefully at how much money you have left over to spend on extras. If the purchase you're dying to make doesn't fit into the money you have to spend, hold off on purchasing it. And if you do dip into that slush pile, know that you won't be able to spend as much the rest of the month. (See also: 5 Mental Biases That Are Keeping You Poor)

You celebrate, or commiserate, by spending

Did you earn a promotion at work? Did you get passed over for one? It might not matter. You might mark either occasion by spending a big chunk of money.

Some of us spend as a way to soothe our feelings when we're upset, to celebrate when we're glad, or both. This can become a big financial problem when these spending bouts bust your budget.

Learn to recognize what feelings trigger your spending urges. Find some other way to celebrate or soothe your emotions. This could mean calling a friend, exercising, or journaling. If you just want to escape, try watching a fun TV series or reading a good book. Don't let shopping be the only way you deal with emotional swings. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

You let your spending swell as your economic situation improves

What should you do if you get a raise at work? The best financial answer is to take that extra money and use it to boost your savings or pay down high-interest credit card debt. Unfortunately, many of us instead start spending more.

We get a raise and we automatically raise our lifestyle to fit our new paycheck. Maybe we buy a more expensive car. We might start eating out more often. We might upgrade to a fancier TV or a top-of-the-line laptop. But don't start spending loads more just because you've gotten a raise. You'll never build your savings or improve your financial stability if you fall into this pattern.

When you do get a raise, it's OK to loosen your belt a little with a few small luxuries that you budget for. But most of your new income should go to increasing the money you devote to savings or paying off credit card debt. (See also: 9 Signs You're Suffering From Lifestyle Inflation)

You put things off

Are you a procrastinator? This can be a challenging habit when you're trying to improve your finances. For example, you might decide to start paying extra toward your credit card debt but not until the next month starts. In the meantime, because you plan to make improvements the following month, you figure it doesn't matter what you do this month.

The problem is, the extra money you give yourself permission to spend this month only makes your financial health that much worse. And for some people, next month never comes. They don't actually ever start making those extra payments.

If you have a financial goal, don't put it off. Write it down in a location where you can see it every day. And don't give yourself permission to hold off on tackling it. If you keep procrastinating, you'll simply build up more debt that you'll have to tackle anyway. Why not get to it today? (See also: 7 Biggest Ways Procrastination Hurts Your Finances)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Traits of People Who Live Debt-Free

Kentin Waits — Mon, 05 Feb 2018 09:00:06 +0000

Why are some families debt-free and others chronically debt-ridden, even when they have nearly the same amount of income and expenses? Are there universal qualities that keep some of us on the financial straight and narrow, while others crash and burn?

After years of introspection and observation, I think there are certain traits all debt-free folks have in common. Here are the key characteristics of a successful debt-free lifestyle.

1. Goal-driven

Living debt-free doesn't happen by accident; it takes a combination of crystal-clear goals and sheer force of will. And once one goal is reached, it's time to tackle the next. You'd be surprised by what you can accomplish personally, professionally, and financially when you're free of crippling consumer debt. (See also: 5-Day Debt Reduction Plan: Pay It Off)

2. Nonmaterialistic

It's nearly impossible to be debt-free if accumulating more stuff is your measure of success. There will always be something newer, faster, flatter, or bigger to buy. And worse, you'll happily pay for it with plastic. Those who live without debt steer clear of the more stuff/more money/more debt trap and keep their consumerism in check. (See also: Why We're So Materialistic)

3. Controlled

Americans live in a consumer wonderland that's designed to test our willpower at every turn. But in order to embrace debt-free living, control has to override impulse a majority of the time. Those of us who live debt-free understand how marketing manipulates human behavior, and we're able to acknowledge — but not act on — wealth-draining whims. (See also: 10 Classic Impulse Buys We Need to Stop Falling For)

4. Self-aware

Sophisticated advertising, easy credit, and countless consumer baubles — it's a dangerous mix. Those who've conquered debt have developed a strong filter and a clear understanding that buying isn't the same as being.

Before any purchase, we're able to ask ourselves (and truthfully answer) three crucial questions: "Do I really want it or need it?" "Will this simplify my life or make it more complicated?" and, "Am I buying this from a position of strength or weakness?"

5. Self-assured

There are numerous ways to broadcast affluence in our society, but very few ways to communicate the sort of freedom that comes from living debt-free. Instead of keeping up with the Joneses, we have to be comfortable in our skin. The race (if you want to call it that) is only with ourselves and only we know when we've won. (See also: 6 Ways Envy Is Keeping You Poor)

6. Strategically sacrificial

Not all sacrifices have to hurt. For those who live debt-free, strategic sacrifices feed a greater good. We gladly skip a few meals out, buy used cars instead of new, and try to make our old brick cellphones last as long as possible. Why? So we can enjoy the luxury of living debt-free.

7. Patient

Buying something is immediately gratifying. You get to open it, play with it, buy accessories for it, and show it off. By comparison, the real rewards of budgeting, saving, and paying off debt come much later. The debt-free take a long view of success and have achieved a nearly Zen-like level of patience. (See also: 8 Ways Being Patient Saves You Money)

8. Consistent

Becoming — and staying — debt-free is a slow march that's marked by unwavering dedication and consistency. Success is all about finding a formula that works and executing it month after month and year after year. The journey may not always be glamorous, but the destination is wonderful. (See also: 11 Good Money Habits That Will Keep You Out of Debt)

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This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Flashback Friday: 44 Ways to Effectively Resist Impulse Buys

Chrissa Hardy — Fri, 27 Oct 2017 08:30:12 +0000

The impulse buy is sly. It is cunning. It can suck you into its wasteful clutches before you realize you don’t actually need that gadget or geegaw or trifle in the first place. Impulse buys are also major budget busters, as they are often unplanned expenses that can add up quickly. If you're looking to resist the lure of the impulse buy, succumb to the charms of these 44 impulse buy busters.

10 Classic Impulse Buys We Need to Stop Falling For — To defeat your enemy, you must first learn everything you can about them. So in terms of impulse buys, you need to know which products to avoid. These are the items we all fall for, so steer clear.

6 Ways Having Your Groceries Delivered Can Save You Money — A big chunk of impulse buys include food. Whether it's candy at the checkout line, ice cream when you decide you've had a bad day and deserve it, or three extra frozen pizzas because you've had a bad week, if you get your groceries delivered to your doorstep, you can likely avoid all of these purchases. And save money while you're at it!

Now or Later: How to Decide the Right Time to Buy Almost Anything — Cutting out the classic impulse buys entirely from your budget isn't a good idea though, because it'll come to feel like deprivation, which can lead to even more reckless spending. So if you use this guide to determine when you should stock up on some of your favorite comfort buys, you will be victorious.

9 Simple Ways to Stop Impulse Buying — Cutting back on impulse buys is a great idea, in theory. But so is eating right, getting eight hours of sleep, and exercising four or five times a week, and not many of us practice these healthy habits consistently. These tips will simplify the concept, though, so that in a moment of weakness, you'll make the right choice.

7 Effortless Ways to Prevent Budget-Busting Impulse Buys — Sure, "simple" ways to prevent impulse buys sounds helpful, but you know what sounds even better? "Effortless." These tips will make impulse buys seem as easy as breathing, well, almost.

11 Money Habits That Make You Look Financially Immature — Impulse buying is a bad habit. It's also a financially immature habit, because it screams, "I want it now, so I will have it now!" Once you accept that, and decide you want to avoid all immature financial habits, you'll be less likely to make these poor shopping choices.

This article is from Chrissa Hardy of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Effortless Ways to Prevent Budget-Busting Impulse Buys

Emily Guy Birken — Wed, 25 Oct 2017 09:00:06 +0000

I can remember a time when controlling impulse spending was relatively easy — if you avoided going into stores, you missed the vast majority of spending opportunities. Yes, there were the As Seen On TV products you could buy over the phone, as well as the occasional door-to-door salesperson or girl scout giving you a chance to fall victim to a spending impulse — but in general, pre-internet consumers had much greater control over their shopping environments.

Now that the majority of Americans have smartphones or tablets, you don't even have to get out of bed to have to spend money. That means you still have to avoid the types of impulse purchases that have been plaguing would-be savers for years — like the candy bars in the checkout at the grocery store — and beware of the more modern spending temptations — like shopping apps, targeted advertisements on social media, and freemium games.

However, even though impulse spending is effortless in the modern age, avoiding impulse spending can be just as effortless. Here are seven ways you can control your impulse buys without ever breaking a sweat. (See also: 10 Classic Impulse Buys We Need to Stop Falling For)

1. Remove your credit card information from online retailers

Every online merchant offers the same helpful "service," which is remembering your payment information so you don't have to enter it every time you make a purchase. But that service is actually only helpful to the retailer, since it makes it possible to buy something with a single click without giving the purchase a second thought.

It's a major bummer to have to get up and hunt down your wallet or purse to enter in your credit card information. But that "major bummer" of having to get up is the time that the angel on your shoulder needs to remind you that you probably shouldn't be spending any more money. And having time for such a mental reminder is a necessary part of keeping your spending in check. After all, retailers wouldn't remember your information for you if it weren't in their best interest. (See also: 8 Self-Destructive Habits That Keep You in Debt)

2. Block internet access to your favorite retail sites

I removed my credit card information from all of the usual retail shopping sites, but since I have my credit card number memorized, it did not slow down my impulse purchases a great deal. An easier way to keep me from surfing my favorite online retail sites is to install a web-filtering software to automatically block them for me.

For instance, programs like Optenet Web Filter PC completely block users from accessing entire genres of internet sites. You can pick what types of sites you want to block (such as shopping, games, social media, etc.), which you then password protect. Either let a friend choose your password to keep you from disabling the block, or choose a random string of letters and numbers for your password, and store the impossible-to-remember password someplace difficult to access. If you have to get a ladder to get the password down from the very top shelf of your guest room closet, you're less likely to disable the block when you're in the mood to shop.

3. Remove shopping apps from your phone

You may love scrolling through the apps for your favorite retailers, but they are just another path to impulse spending. There is no reason for you to invite these temptations into your life!

4. Unsubscribe from shopping emails

Along the same vein, it's a lot harder to succumb to the temptation to shop if you aren't reminded of the opportunity. Unsubscribe from any retailer emails you receive — or if going through the unsubscription process is too much of a hassle, then simply filter those emails to go straight into the trash. That way, you won't see them before they get trashed. (See also: 5 Easy Ways to Declutter Your Digital Life)

5. Use gift cards for mobile purchases

Deciding to download your new favorite song from iTunes seems like a no-brainer, since it only costs 99 cents. But it's surprisingly easy to spend a small fortune on songs, apps, and in-game upgrades on your mobile devices, since each little purchase doesn't seem to be worth worrying about. Unfortunately, you might find yourself staring down the loss of big bucks if you let yourself click-to-buy any kind of mobile purchase that tickles your fancy.

To protect yourself from wasting more money than you can afford on mobile device purchases, pick up a gift card to iTunes or Google Play each month. That works as a natural limit on how much you can spend on mobile purchases. Once you've reached your limit, you'll just have to wait until the following month before you can start buying again.

6. Make it easy to get entertainment for free

I'm an avid reader, and I'll often receive emails or ads that suggest books that I might be interested in reading. On the plus side, the algorithms that Amazon and Audible use to recommend books are top-notch, and I love the books I end up reading or listening to. However, it's very easy to spend more than I can afford on these books.

That's why I have my local library's website bookmarked on my computer, and its app installed on my phone. When I learn of a book that I want to read, I immediately log onto the library and put a hold on the book. I feel the same sense of instant gratification I would experience by buying the book, without having to spend a penny.

While it may take a little longer for me to receive the book than it would if I bought it, I'm putting holds on books at least once a week, so I consistently have a new book or audiobook waiting for me at the library through this system. This method could work just as easily for movies and music, or any other entertainment you can find at your local library. (See also: 5 Easiest Ways to Score Free eBooks)

7. Have a snack

There is definitely something to the age-old advice about never going grocery shopping on an empty stomach: according to a 2007 study by Matthew T. Gailliot and Roy F. Baumeister, your ability to exert self-discipline depends partially on your blood-glucose levels.

This is pretty obvious when you are hungry in the supermarket, since you're feeling tempted by the very thing you lack. However, the relationship between self-discipline and blood-glucose levels is also behind your struggle to avoid other types of temptations. That's because, according to the researchers, "self-control requires a certain amount of glucose to operate unimpaired."

This means that an easy way to control your impulse spending is to have a piece of fruit or other complex carbohydrate when you're feeling tempted to buy something you don't need.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: