Readers of this column will remember that every year in November we discuss Black Friday sales and how prudent investors should manage their spending during the sales period. Black Friday is the day after the US Thanksgiving Holiday. It is the first day of the shopping season and it traditionally ends on Christmas Eve. Retailers usually slash prices of merchandize, and shoppers go into a frenzy trying to buy what they otherwise could not afford. It is a time of shoppers’ delight.
However, if not properly planned it results in spontaneous shopping, spending outside budgets and getting into debt. Money that should be used for other important things are diverted into things that we do not need. Many times, what we buy are upgrades or additions to things we already have. These purchases boost our egos but deplete our wealth. Remember, if you make an unplanned purchase that promises 50% savings, not buying the item at all gives you 100% savings.
Black Friday discounts are real, every wise and prudent shopper should take advantage of them, but only in a proactive and planned way.
We plan by identifying the items we want to buy; even luxury items and occasional indulgences are acceptable as rewards for our hard work. Begin early to save towards these purchases using target savings accounts. The problem with spontaneous spending is not always the items purchased, it is the fact that the spending is unplanned and therefore throws our financial budgets out of sync and delays the achievement of our financial goals. Target savings on the other hand are incorporated into our spending budgets and therefore do not hinder our goals. Open a new savings account or use one in a bank you do not usually patronize. Avoid banking conveniences like debit cards, mobile payments, online banking etc. on the account. This way you are not easily tempted to spend the money on other things. Set up a standing order from your main bank account to credit the target savings periodically so the savings are automatic and not subject to your changing moods or circumstances. Choose a transfer date that is as close to your monthly salary date as possible. This way, you save first and spend what is left. Most people fail at savings because they spend first and try to save what is left, but soon discover that there is never anything left to save after spending. We must always save first.
To excel at savings, we must master delayed gratification. This concept has almost become taboo in today’s world of instant coffee, instant banking, and instant shopping. Borrowing has become very easy with the FINTECHs that process loans within 2 hours without even seeing the borrower’s face. Borrowing is now instant too. But like we have said in this column in times past, never borrow at a cost (and a very high interest at that) for consumption needs, save towards the purchases instead – hence the need to master delayed gratification. Anyone committed to financial prosperity must learn and master it. With this mastery, one is able to overcome the attractions of spontaneous shopping.
Avoid using shopping as a pastime. Visit shopping malls with purpose, do not just wander in, especially during the Black Friday sales. Go in with a shopping list, buy the things on your list and leave the mall. Do not take all your payment cards with you, take only the one with the money required for the purchases. Leave the cellphone registered with your bank for mobile payments at home or even in the car so you are not tempted to make USSD transfers or other electronic payments. By the time you leave the shop to get your phone or additional payment cards, usually the impulse for the spontaneous shopping has ebbed. Pay attention whilst paying for the discounted goods; ensure the discounted prices have been entered into the shop’s cash register and that you are being charged the new low promotional prices and not the old higher ones. Set a spending limit for all Black Friday purchases. Share this limit with a trusted friend who can help monitor your compliance.
In these days of e-commerce, you do not have to leave your house before you shop. Adverts for Black Friday sales are already popping up on our phones and computers. Shopping lists and spending limits will help us remain prudent even in cyberspace. But please remember to practise safe cyber shopping and pay only through trusted sites.
Buying necessities during Black Friday sales is a great way to spend wisely. Happy shopping. Happy investing.