Financial surprises are a hallmark of the holiday shopping season. SamuelFields Consulting Group (SFCG) believes that there are actions that consumers can take now — make a budget, match purchases with priorities and be creative when spending — to start 2024 in a position of financial power instead of in a financial pinch.
Last Wednesday, as part of their weekly show Likkle Byte Ideas, the SFCG team explored the topic “The Pitfalls of SPAVING: When Saving Means Spending.” The guest speaker was Luana Laurent of Finance Focus in Dominica. This seasoned finance expert, educator and coach, discussed behaviors that can lead to crippling debt as some consumers blow their budgets during the holiday season.
“Many of us are conditioned to hunt for deals and we just can’t resist a sale. But just because something is on sale doesn’t mean it’s a good deal…if you don’t need it. If you add another $20 worth of items to your shopping cart just to avoid a $10 shipping charge, then you are spaving, not saving,” Laurent said.
The panelists delved into a range of retailers’ tactics that are used to induce holiday shopping. “Retailers know that consumers are emotional and tend to act when there’s a sense of urgency to grab a deal,” said Derede Whitlock, Chief Marketing Officer of SFCG. She identified a range of sales tactics and price traps that retailers, both on and offline, use to tap into shoppers’ psyche. From free shipping or free gifts that require consumers to spend more. BOGO deals — short for “buy one, get one” — where retailers give a percentage off when you buy similar items.
SFCG’s CEO, Megan Samuel-Fields also cautions against falling for spaving offers. “It’s only a deal if you were going to buy it anyway. We feel a sort of high when we score a deal, but a few extra dollars spent here and there can add up and put a dent in your overall budget. Spaving can also increase credit card debt, which can mean paying interest that far exceeds how much was saved in the sales deal,” she added.
Tips to Avoid Spaving
The panelists offered the following advice to avoid spaving:
Dodge Sales Alerts
Retailers bombard shoppers through email, texts, app alerts and social media. The easiest way to avoid temptation is by unsubscribing from emails, opting out of text alerts, turning off push notifications in retail apps and unfollowing brands on social media.
Pay With Cash
Studies show that when consumers pay with cash, they spend less overall and are less likely to buy things they don’t need. Consumers tend to compare prices to the cash in their wallet, rather than their monthly budget, how much they have in a checking account, or their credit card’s credit limit.
Create Purchase Hurdles
One-click buying makes it easy to buy something without thought. By deleting payment details stored in your online retail accounts and social media, you create a purchase hurdle that forces you to think through the actual purchase.
“By the time you enter your credit card information, you may realize that the potential deal is unnecessary. If you’re shopping online, add it to your cart, and give yourself at least 24 hours to think about the purchase. This window of time allows you to calm your emotions from the urgency of the sale and determine whether the item fulfills a want or a need, “Samuel-Fields stated.
Consider the Opportunity Costs
You may be saving a few dollars, but are you pursuing a deal that is directing money away from more important financial activities? Have you considered potential ways that you could use this money — buy something else, save, pay down debt or invest?Laurent suggests that consumers ask themselves “Is this purchase an indulgence or an investment? Would you spend money on this item without the offer and can it be purchased cheaper elsewhere? The finance guru recommends using an app PayPal Honey to do price comparisons.
The panelists cite a few instances however, where spaving may actually have a positive effect. “Sometimes spaving can be a good idea if you’re able to lock in savings by purchasing an annual subscription for a service, rather than paying month-by-month. Or to invest in high-quality products that last decades rather than replacing cheaper, lower-quality products every few years,” Laurent added.
Spending Ahead of the ABST Hike
One viewer raised the issue of the pending increase in ABST and the types of items consumers should consider purchasing ahead of the tax hike, to save money. The tax increase goes into effect in January 2024 and Samuel-Fields recommends that consumers consider high ticket items that they really need and would have considered even without a time constraint. However, she cautions against using credit cards or higher purchase agreements to make purchases ahead of the impending tax increase. “Consumers should keep their budget in mind when financing any large expense over a long period of time, because you may be subject to fees for missed payments or high interest on the remaining debt. This could potentially wipe out any savings,” she said.
To listen to the full episode of Likkle Byte Ideas click: https://www.youtube.com/live/QgaEMsHPGPs?si=3LplsSnCpOwjfYrG
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