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Shopping for Happiness: The Cost of Being a Shopaholic

I recently happened upon this infographic about compulsive buying on a site that does online training for people who want to earn degrees in psychology. In an attractive graphic presentation, it provides accurate and important information about compulsive buying.

Shopaholics Infographic

 

 

Spendster Site Scouted

Recently a colleague told me about the Spendster.org website and since she found it interesting, I wanted to check it out.  With so many websites on the Internet, it is easy to get lost in the choices and the fancy html designs and I admit that I was a bit skeptical about its utility before I went to look.

The first page greets you with a video clip of a contest the website is running called the Reality Check Challenge.  Contestants post video clips of what they have wasted money on, with the winner getting $1,000.  Visitors to the site vote on their favorites, which encourages contestants to get the word out about the website.  It’s a great way to really SEE what you spend money on.  Looking at spreadsheets of expenditures is useful, but it is much more visually striking to see the objects themselves.

The various tabs at the top of the homepage give links to online discussions, useful documents about the “real” value of what you’re spending money on and software to track your expenses and help you to become more financially savvy.

When I saw there was a “Top 10 List” I experienced a wave of concern, since competition can often lead people to greater amounts of overspending, but thankfully the site is not set up in a way that would favor that kind of unhealthy competition.

I found the site to be a helpful gateway for people who spend more than they should. It provides a means for them to get help and join a community of others who face the same problem – a problem that is finally getting the attention it deserves.

 

Justin Tausig, MHC

www.myinnervision.com

Mint: The Flavor of Financial Clarity

Overshoppers often limp along in a thick financial fog. They may have little grasp of where their money goes, how much they owe, or what to do about any of it. And every financial guru who would help them begins with roughly the same advice: start with clarity.

Mint.com is a free, internet-based program for making and sustaining that leap. It has both a powerful expenditure-tracker and a flexible budgeting tool. Using the two in tandem gives you graphic, color-coded representations of how you’re doing at any point.

Seeing clearly the contours of your financial landscape is no simple matter of opening your eyes wider. It takes careful tracking of your expenditures and a developed list of regular and periodic expenses—an important but arduous bookkeeping chore. Here’s where Mint is so refreshing. As one of our recent group members wrote, “I was very impressed.  It is simple to use, easy to set up, and they send you alerts if you’re behind on a bill or your balance gets too low.” “The scary part,” she adds, “is that it’ll show you your net worth. After that, you can no longer hide behind unopened bills.”

Mint is part of the highly reputable Intuit family of products, including Quicken, and the site is secure. Further, it’s read-only, which means that although you keep your financial data on it, no money can actually be moved via the site. Galia Gichon, of “Down to Earth Finance,” whom I really respect, calls Mint “the personal finance winner overall,” and particularly values their technology and security.

Weighing-In (Part 4)

We’ve now looked in some detail at the Daily and Weekly Weigh-Ins, a keeping of numbers that will tell you how much you’ve spent, what you’ve spent it on, and how much you could have saved had you bought only what’s more necessary rather than less. In order for these numbers to begin revealing the particular figures in your shopping carpet, the patterns that characterize your spending, expect to keep this data for two-or better three-months. And to clarify those patterns, to give you a virtual x-ray of your spending habits, transfer the information from your Daily Weigh-Ins to the Weekly Spending by Categories form:

• At the close of each week, x-ray your spending habits by transferring your Daily Weigh-In data to the Weekly Spending by Categories form. (Don’t agonize about categories; just use your common sense. I’ve largely followed the excellent work of Karen McCall in naming and organizing these categories, and you aren’t likely to have much trouble deciding where to put any expense. If you’re ever in doubt-does an expensive pre-movie dinner count as Entertainment or Food?-make a reasonable decision. What’s most important is that you enter all your expenses and be consistent about categorizing them.)

• Then total the seven days’ amounts for each category in which you’ve spent. Two or three months of Weekly Spending by Categories data will tell you unequivocally what your problem categories are and give you a well-lighted target as you design a more measured and sensible spending plan.

A few final points about the categories. You’ll notice Savings/Investment at the top of Weekly Spending by Categories. That’s to emphasize the centrality of this much-neglected category; remember, pay yourself first. By the same token, though Debt Repayment is listed last, it is by no means least important; paying down your debt is a cornerstone of financial health. And don’t forget Heartsongs. As you move from excessive spending to realistic spending, play yourself some joyful tunes. Balance, here and in all things, is the watchword. Finally, as you keep your numbers, allow me to remind you: use only cash, check, or debit card. A credit card for an overshopper is like lighter fluid for a pyromaniac.

Weighing-In (Part 3)

Over the last two postings, we’ve been examining Weighing In, an important technique for sweeping away the financial fog most overshoppers are mired in. We’ve looked at four columns on the Daily Weigh-In Form—Item Purchased, Actual Cost, Necessity Score, and Necessity Cost.

Today, we’ll look at the second column, Category. The idea here is straightforward: you put each purchase imageinto a thematic bin, a category, so you can start to recognize the patterns of your spending. There are fifteen bins: Savings/Investment, Heartsongs, Home, Food and Drink, Clothing and Accessories, Self-Care, Health Care, Personal and Spiritual Growth, Transportation, Entertainment, Dependent Care, Vacation, Gifts, Dues/Fees/Personal Business, and Debt Repayment. Each of your expenditures can be reasonably fit into one of them.

The assigning of categories needn’t be a difficult decision, or one you struggle with. Just be consistent and reasonable. The only category requiring discussion here is the one I call Heartsongs. These are special investments in your particular joy of living: concert tickets if you’re a music lover, supplies for a fulfilling hobby, taking your grandchild to the movies, a day at the beach perhaps. (Nothing you buy compulsively can be a heartsong, because compulsive purchases also make your heart ache.) Just think about what constitutes a heartsong for you, and when you spend on one, use that category to record it. Providing yourself with heartsongs makes it all worthwhile—including the hard work of stopping overshopping—and makes it a lot less likely you’ll feel so deprived that you binge-spend.

We’ve looked at all the columns on the Daily Weigh-In Form. But where will all this data begin to add up, to tell a story? That’s what we’ll look at now. Each daily weigh-in is a snapshot. Two other documents—the Weekly Weigh-In Form and the Weekly Spending by Categories Form—help you begin to assemble these snapshots into your individual shopping movie. We’ll introduce one now, and the other next posting.

The Weekly Weigh-In simply gathers the results of seven Daily Weigh-Ins:

It’s a simple document—but it’s usually an eye-opener. If you’ve honestly kept your daily numbers, the weekly summary will tell you just how much you might have saved had you bought only what was more necessary rather than less. And it’s usually a lot more than you’d have guessed.

Weighing-In (Part 2)

We may think our wants equal our needs. In other words, that we just have to have a certain pair of shoes or gadget to be happy, successful, etc. While this can seem simple when we’re talking about basic needs like shelter and food, it can get murky when we’re looking at other items.  Here’s an easy way to really get conscious about determining the difference between a need and want.

In the last posting, we began to look at Weighing In, a technique for cutting through the financial fog that envelops so many overshoppers.  Weighing In involves the disciplined recording of purchases—and something more. You also categorize each purchase, choosing from a master list that groups expenses into logical bins: Home, Food, Clothing, Entertainment, Education, and so on. And you assign each purchase a Necessity Score, based on your dispassionate evaluation of how much you need it. (Need, not want).

This data is entered into the Daily Weigh-In Form, which I introduced last posting. Here’s the form again:

Last time, we talked about the first and third columns, in which you record each Item Purchased and its Actual Cost. Next time, we’ll talk about categorization. For now, though, I want to focus on the concept of necessity.

In the fourth column, you assign each purchase a Necessity Score: 0 if the purchase is totally unnecessary, 1/3 if it’s not very necessary, 2/3 if it’s pretty necessary, and 1 if it’s entirely necessary.

There is, of course, a certain subjectivity to assigning necessity scores; the decision will depend to some extent on your psychological awareness, even on your existing debt level and your present and future expenses. But here’s a  rough guide. If you fell and broke your leg during the week, the check  to the orthopedist would be entirely necessary; you’d give that a Necessity Score of 1. If a pair of $500 Jimmy Choo sandals caught your eye, and, despite the fact that you have other sandals in a similar color and heel height and are $8,000 in debt, you bought them anyway, you’d have to stare truth in the face and rate your purchase a 0, totally unnecessary.

The occasional computer gamer who shells out $300 for surround-sound computer speakers when a carefully chosen $75 set would be entirely adequate has a subtler decision. If his old speakers were working, probably the Necessity Score is 0; if the old ones failed, maybe a 1/3 is justified.

As you’re assigning Necessity Scores, keep in mind that you can’t meet psychological needs through overshopping. However bad a day you’ve had, however angry or lonely you may be, buying something won’t really address your authentic needs. If you’re angry, you need to know it, feel it, and handle it constructively; the same is true for loneliness. Whether it’s a Baby Ruth or a little black dress, a cutting-edge video camera or an amber necklace, if you buy it to repair your mood, it probably gets a Necessity Score closer to 0 than 1.

As soon as you log each purchase, assign it a Necessity Score. Do this right away, even though, upon later reflection, you may decide to change the score.

Calculate a Necessity Cost (NC) for each item. This is its Actual Cost multiplied by the Necessity Score you’ve assigned it; NC = AC x NS.

At the end of each day, add up the Necessity Cost of your day’s purchases and enter the total in the double-boxed NC cell at the bottom of the form.

In the next posting, we’ll complete our exploration of the Daily Weigh-In Form with a look at categorizing.

Weighin-In (Part 1)

“Passionately confused,” which nicely sums up our current national conversation about health care,image also characterizes the personal financial grasp of most overshoppers. Few compulsive buyers have a clear idea of how much they spend and what they spend it on. (The incentive for their confusion is straightforward: it supports denial. As for the passion, it’s there to outshout the countering claims of reason, to drown out the sensible voice inside.)

Weighing In is a technique for beaconing your way through this financial fog. It helps you twice: you being to keep close track of your expenses–how much and for what–and you start to see what you could be saving on a weekly basis if you only bought things that were more necessary rather than less.

You can keep your weigh-in data in a little blank pad you carry with you or, better still, on photo copies of the three forms you’ll see in the next few blogs. Here’s what the Daily Weigh-In Form looks like:

For the moment, we look only at the first and third columns of this form, Item Purchased and Actual Cost; and about these, only a little needs to be said:

  • Write the date at the top of each Daily Weigh-In page in advance
  • Record every purchase you make. (Use only cash, check, or debit card. No credit cards).
  • Record the Actual Cost (AC) of every purchase. Write the item and amount–to the penny!–as soon as you make the purchase, whether you pay with cash, check, or debit card. This minimizes the possibility that financial fog will roll back in. (Don’t save up receipts and enter them later; it’s too easy to forget that way.)
  • At the end of each day, add up the actual cost of your purchases and enter the total in the cells at the bottom of the form.

Next time, we’ll explore the three remaining columns, Category, Necessity Score, and Necessity Cost. These will very much clarify your financial picture. The first provides a breakdown of your spending, an x-ray according to usage. The other two address the critical issue of need. They allow you to calibrate how much you need the things you buy, and they then show you how much you could save if you only bought things that were more necessary rather than less.

Face the Facts About Your Credit Card Debt

Credit cards are the ultimate legal drug in a materialist culture, deceptively empowering and beautifully insulated from the feel of spending. They are designed for impulsiveness. And what comes with that impulsiveness is a set of extraordinarily harsh repayment terms. So for overshoppers, the first thing to know about credit cards is: put them away and stop, absolutely stop, using them.

Then deal with paying off your debt. In particular, don’t allow yourself to join the “minimum payment set,” that sizeable group of Americans who make only the required minimum payment each month. It comes as a shock to most minimum payers to learn that a $10,000 credit card debt may well outlive the debtor, requiring—with a 2% monthly minimum payment and an interest rate of 18%—precisely fifty-seven years and six months to repay. Total interest paid on that original $10,000 is $28,930, almost three times the original debt!

What can you do to avoid the decades of debt that go with minimum paying? Make a small change like paying the initial minimum payment each month as a fixed payment (rather than paying the declining minimum as the balance declines). The difference is astonishing. In our $10,000 example, once the first month’s 2% minimum is paid—exactly $200—the next month’s minimum drops to 2% of $9800, or $196. But instead of paying that $196, pay $200 again; and continue to do this each month, no matter how the minimum payment shrinks. Now your payoff period drops by a full half century, down to seven years and seven months. And the interest you pay drops by almost 80% to $8622, a difference of over $20,000! Pretty impressive stuff for so slight a change!

To learn how much indebted time and how much interest you could save by paying the present monthly minimum as a fixed payment, plug in your data at http://www.bankrate.com/brm/calc/MinPayment.asp

And finally, always remember…you can never get enough of what you don’t really need.

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