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Why you need to put a brake on your impulse spending

WORK LIFE
By JOHN KARIUKI | October 8th 2014

A pervasive and costly myth is that many townspeople count themselves lucky for being at the centre of things. Whether they are employed or in business, such town dwellers are often the first to zap up every new trend.

They are the first to arrive at an auction down the street where things are selling at ‘throwaway prices’ and are privy to ‘envoys who are leaving’ and international agencies disposing off property. As a result, such urbanites have an uncanny sense of value and own the best cars, furniture and household items, all bought at what they believe are once-in-a-life time bargains.

Further, such people have encyclopedic knowledge of the best and cheapest entertainment joints, hospitals and hotels in town. They also know the cheapest shortcuts, say, like the shortest route from Eastlands to Westlands and the matatus that never raise their fares come rain or shine. One cannot help marvelling at their immense insiders’ knowledge. Unfortunately, such people end up buying junk at the expense of any real financial plan in their lives.

Pascal Rimbui, a Nairobi businessman, says he used to boast about his apparent genius in nosing out good and cheap things until he took a hard look at his financial destiny. “I realised I was a slave to impulse buying and in grave danger of messing up my long term financial plans,” he says.

Guilty of raiding his business capital several times to dash out and bid at impromptu street auctions, Rimbui now sees disaster in this habit. “I began falling behind on my loan repayments but amassed mahogany furniture and rare cutlery and crockery from these auctions,” he says.

When he identified the financial problem, Rimbui decided to dispose of his useless clutter. “I approached several carpenters to buy my furniture and resell it, but they all said it wouldn’t fetch much; the designs were even outdated,” he says.

In the end, he made a bonfire of it to create room in his house and do away with the memory of his financial woes. Rimbui advises people to fight back any urge for impulse buying. “Even if a new car is selling at Sh10,000, it is damn expensive in the long run if you had not saved this money and planned specifically for an automobile purchase,” says Rimbui.

Stanley Njoroge, a personal banker with a micro-finance institution, says when people do not have specific financial goals, they fall into the trap of spending money on anything that comes their way.

In his work, Njoroge has seen impulse spending putting a strain on people’s finances and their relationships, especially when they fall back on loan repayments. “I routinely hear woeful tales of people who take credit to purchase tractors and plots of land only to end up buying cars and numerous suits that were offered at irresistible prices,” says Njoroge, adding that one must never withdraw any loan money until they have a waterproof financial plan.

According to Njoroge, a golden rule in controlling impulse buying, especially among urban and employed people, is to pay cash whenever possible for all items bought. He advises impulse spenders to leave their credit cards at home and carry only a little money. “When people use credit cards and other electronic cash transfer facilities, the reality of the amount of money spent is often suppressed,” he says.

Personal finance experts suggest that people should write down the things they want to buy on a card and wait for at least two weeks before buying the item. During this ‘cooling-off period’, one should do a soul search to determine if he or she really needs the item. In the meantime, one can add other items onto his or her card and review all of them together in their order of priority.

It is best to have only three items on your wish list at any one time. To add a fourth item, you will need to remove one of the other older items. This way, you frequently cross items off to make room for the newest and ‘must have’ items. Knocking off an item also reduces its psychological appeal.

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