Four Powerful Systems to Keep Your Splurging at Bay

“You do not rise to the level of your goals. You fall to the level of your systems.” — James Clear

We have default systems for everything — eating, exercising, and even our spending.

Many times, I have fallen into the trap of buying something I won’t end up using or consuming way more than I need. For some people, that’s not a big deal, but I always think about where I could have used that money instead.

I lose an emotional battle every time I give in to spending on a whim.

Thus, being more aware of my habits allows me to cross out what isn’t helpful and replace them with what will bring me closer to my financial goals.

Let me share with you four pillars I have learned to put in place to shield me from emotional spending traps.

System 1: Investment vs. Expense

By default, our emotions rule over reason and logic when making decisions.

When those decisions have financial consequences, it’s important to drag reason in.

Once, a friend and I walked into a Dyson store at the mall. The saleslady used their new Airwrap on my hair, which could effortlessly blow-dry, curl, and straighten it. My hair looked posh after a few minutes and I instantly fell in love with the product. I never styled my hair at all, but I thought I could start the habit.

The shop was closing in thirty minutes. My friends were encouraging me to get it. The saleslady kept saying that there are two units left and they ‘don’t know when they will restock again’. I caved and bought one for $600.

That was two years ago. I only used it less than ten times since that day.

What to do

When you’re starting to tell yourself, “I need this (overpriced thing) to make me (healthier / smarter / more productive),” ask yourself:

Will buying this help me achieve my goals — health, wealth, and others?
Am I willing to add a new habit to use this?
Will I really use this as often as I think I will? Or will it end up being a nuisance?

Anything can be an investment or an expense, depending on how you use it.

When emotion is on fire, it helps to label your purchase.

System 2: First Principles Thinking

When purchasing something you know is worth 5x more in your average department store or flea market, use this mental model.

It simply means to break a thing down to its core elements — often, that includes its labor and material costs.

Here’s an example: A t-shirt uses about $1 worth of cotton and incurs $2.15 in labor costs. If it sells for $20, that gives the seller a margin of more than 80%. Of course, part of the 80% goes to shipping and warehousing costs. If a t-shirt sells for $200, is it still worth buying?

Why is this important?

Thinking this way about more long-term ‘assets’ like jewelry and furniture can help save you a lot.

Sometimes, persuasive marketing gives us the illusion that what we’re buying is one of a kind, only for us to find out that similar items are sold at a lower price elsewhere.

For most items, the brand should not matter as much as the utility.

When buying something, think of its components to gauge whether it’s a worthy expense.

System 3: A Noise-Free Environment

A friend of mine who runs digital ads for eCommerce start-ups told me that people are more prone to buying impulsively late at night. That’s because we have more ‘free’ time on our screens.

With our bodies drained and minds less clogged, we are also more emotional.

At 1 AM one night, I was looking at Audrey Hepburn’s best looks. I saved a bunch of them on Pinterest and immediately got the urge to click through my favorite shopping app to look for well-tailored trousers.

Fortunately, I didn’t see anything I liked. If I did, I would have been enticed into buying four or five pieces I won’t even have a need for wearing throughout this pandemic.

Putting protocols in place keeps us from the splurge traps.

What to do

Delete your shopping apps and turn off your notifications.
Turn your cookies off so that ads won’t follow you around the internet.
Unfollow influencers who ‘trigger’ material desires. I’ve bought over five things I didn’t end up using because of too much time on TikTok.

eCommerce is a world-changing innovation that offers convenience and more choices. It can also turn us into mad shopaholics.

Use technology wisely by setting boundaries.

System 4: A Regular Financial Review

In business, the finance team regularly conducts a ‘month-end closing’.

It is when accountants consolidate income and expenses and package them into reports that the management team can use for making decisions. That usually translates to cutting down on expenses, making investments, and creating new policies.

I do the same thing for my finances. At the end of each month, I gather the data and ask myself:

What do I spend on most?
How close or far am I to my earnings goals?
What habit/s lead to bad spending patterns?
What systems can I put in place to improve them?

Why is this important?

Doing this regularly raises your awareness and helps you course-correct when needed.

Conduct a personal month-end review for financial awareness.

Fall to the level of your well-established systems.

Differentiate investments from expenses: label your purchase based on how you will use it.
Think in first principles: break a thing down to its core components.
Tune out the noise: shield yourself from the temptation to buy something you’ll regret later.
Review your finances often: analyze spending and plan for improvement.

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This post was previously published on Change Becomes You.

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