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How Impulse Spending will Derail your Retirement Plans

Regardless of how frugal a person may be, no one is totally immune to making impulse purchases from time to time. However, the more you give in to this, the more harm it will have on your finances – especially your retirement plans. 

Impulse spending is one of the most common barriers to achieving financial independence, so it’s crucial that you develop a strategy to help you overcome the compulsion to spend in this manner. Below are some tips to help overcome impulse buying.

  1. Calculate an Item’s Value in Time

Most impulse purchases are led by emotions, meaning that engaging the logical part of your brain will be the best way to stop it. An effective way to do this is to stop and think about the amount of time you would have to invest in order to earn what that specific item costs. 

For instance, if you earn $20 an hour after taxes and the item you want costs $300, you’ll have to work for 15 hours in order to afford it. Now, is that impulse purchase really worth 15 hours of your time? 

  1. Don’t Purchase Items that Cannot be Returned

In many cases, the most tempting purchases are those that cannot be returned if you change your mind – such as that final clearance item you’ve seen online or in-store and think the bargain is too good to pass up. There are usually good reasons for items going on clearance – they may not perform as advertised or in the case of clothing items, the fit may not be quite right. 

Most individuals have experienced the awful feeling of regretting a purchase that can’t be returned – at least buying an item that can be returned allows you to undo the damage to your finances once you realize you no longer want it. 

  1. Stop Shopping for Entertainment

If going to your local mall is your idea of entertainment, you’ll need to rethink how to spend your free time so that your financial situation can improve. 

When you put yourself into an area of temptation such as a mall, there’s a strong chance that you’ll make impulse purchases, so stay away wherever possible. Also, refrain from hanging out with friends or family members who shop for fun.

  1. Watch your Savings Grow

Once you stop giving in to impulse shopping, you’ll start seeing just how much money will be saved over time – funds that can be put towards your retirement or other investment accounts. Over time, this could amount to a few thousand dollars – which will have grown quite nicely by the time you reach retirement age.

Although it’s often tempting to spoil yourself with that little impulse purchase, this form of shopping becomes problematic when it starts affecting your finances. If you would like to find out more about how your savings can be put to work and grow as much as possible, get in touch with our financial advisors today. 

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Financial New Year’s Resolutions you can Make

Although you may not have started planning for retirement yet, or you’ve experienced personal circumstances that resulted in you delaying contributing to existing savings and retirement plans, this doesn’t mean that all is lost in this regard. In fact, there are a few financial new year’s resolutions you can make that will help get your savings plans right back on track again.

 

Enlist the Help of a Financial Adviser

If you aren’t working with an accredited and reputable financial adviser yet, now is the time to add this to your list of resolutions. Although retirement planning may seem relatively simple, the truth is that it can be quite complex – especially where tax laws and economic changes are concerned. Hiring a financial adviser will help ensure that you get your retirement planning on the right path from the beginning.

 

Find New Ways to Save Money

Although you may already have a 401(k) or some form of IRA account, you might find that you aren’t contributing as much as you want to them yet. If this is the case, start searching for ways to cut on expenses. For instance, could you get by with a cheaper phone or internet plan? (The answer to this in most cases would be yes). Are you paying for cable TV that you never watch? Even reducing the amount of times you purchase takeout in a month could make quite a big difference to the amount of money that you could be setting aside for retirement. 

 

Start Contributing to Dedicated Retirement Plans

If you don’t have an IRA or 401(k) in place with your employer yet, be sure to get this started as soon as possible in the new year. These are by far the two best options when it comes to saving for retirement, so the sooner you can set them up, the better. Keep in mind as well that these contributions are pre-tax, meaning that you will probably not even notice these amounts being deducted from your paycheck at this time – but you’ll definitely notice the difference when it’s time to retire. 

 

Repay Outstanding Debts

Your goal should be that you will be completely debt-free when you retire. Too many individuals make the mistake of thinking that there is still a lot of time to get their debts repaid, so they don’t treat them with any form of urgency. Unfortunately, this can result in them still having large mortgages to pay – while no longer earning a decent income. As a result, it’s strongly recommended that you start strategizing now to get all of your debt repaid as quickly as realistically possible. 

Although everyone looks forward to the day that they will no longer need to report at the office, you will only be able to truly enjoy your golden years if you have planned ahead with regards to your finances. If you would like to find out more about hiring a financial adviser or setting financial goals, contact us today. 

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