We have all been there. We walk by a store, notice something that catches our fancy and we purchase it in the name of making ourselves feel better. Also known as impulse shopping, a report reveals that this practice is costing us dearly.
In an economy where debt has become the new norm, income has remained stagnant and taxation runs rampant, consumers are in a tight spot where they do not earn enough each month to splurge on the wants rather than the needs.
The Bank of Montreal (BMO) published its findings in a report titled the “BMO Psychology of Spending.” It’s the first in a series that will analyze the personal finance and investment habits of Canadians and what transpires afterwards.
On Tuesday, the financial institution released the inaugural report where it focused on spending habits. The report conducted by Pollara found that 59 percent of Canadians make impulse purchases, 52 percent regret the decision after the acquisition has been made whilst 43 percent even spend more than what they earn in a month.
In total, Canadians spend on average $3,720 each year on impulse items.
It also revealed that 60 percent shop to cheer themselves up and 55 percent may purchase an item not because they need it, but rather because it’s on sale. The commonly purchased impulse items are clothing (57 percent), dining out (52 percent), shoes (39 percent), books and/or magazines (38 percent), music and/or movies (31 percent) and consumer technology (19 percent).
Canadians do understand, though, that they could save more than two-thirds of that impulse amount if they took the initiative of limiting the $310 monthly impulse shopping.
If these individuals do not take control of their spending habits then they could face dire consequences. The report found that nearly one-third had to borrow money or take out a loan to pay for non-essential items, while 23 percent could not purchase something they actually needed because they spent their money on something they wanted.
Furthermore, this pattern is most seen in those under the age of 30. One-third of those in this age demographic have been unable to buy needed items due to acquiring non-essential goods.
What may surprise some; men spend double what women spend on impulse shopping ($414 and $207 respectively).
“Financial anxiety is commonly triggered by larger one-time expenses, but spending on a daily basis can be the most disruptive when it comes to keeping your financial house in order over the long term," said Lily Capriotti, Vice President at BMO Bank of Montreal, in a press release. "In most cases, impulse spending is an emotional transaction. Setting parameters and tracking your daily spending can help curb behaviours that can negatively affect the larger picture."