14 July 2016
Attention: Thulisa Mancotywa
Move! Magazine’s proposed article on Impulsive Spending.
Thank you for your request and the opportunity to provide you with input on this article; I firmly believe that your target market will benefit from it.
However, should you use any of the content of this letter – kindly send me the final draft before it is published for sign-off of using the content and crediting it to my name.
Kindly take note: before answering the questions you posed, I want to make it very clear that any individual reading these answers should seek the professional advice and coaching of a professional financial adviser/ coach/ accountant. The content of this letter is for information purposes only and should in no way be taken as individual direct advice of any sort.
All of the information contained in this letter is based on personal experience, knowledge, anecdotal evidence and physiological research in the specific field. Although I have strived to be as accurate and complete as possible in this letter, notwithstanding the fact that I do not warrant or represent at any time that the contents herewith are up to date and accurate, due to the rapidly changing nature of the Internet.
While all attempts have been made to verify all the information provided in this letter, I assume no responsibility for any errors, omissions or contrary interpretations of the subject matter within. Any perceived slights of specific persons, people or organizations are unintentional.
In practical advice books, like anything else in life, there are no guarantees of income made. Readers are cautioned to reply on their own judgement about their individual circumstances to act accordingly.
Although I am a Qualified Financial Advisor by profession; this letter is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to contact me in my professional capacity or refer to the services of a competent professional in legal, business, accounting and finance fields.
I assume no responsibility for the use or misuse of the information, or any injury, damage and/or financial loss sustained to a person or property as a result of using the content of this letter. The information contained in this letter is for informational purposes only.
ALL RIGHTS RESERVED: No part of this letter may be reproduced or transmitted in any form whatsoever, electronic or mechanical, including photocopying, recording or by any informational storage or retrieval system without express written, dated and signed permission from me.
What is the difference between normal spending and impulsive spending?
First, the reader must understand the distinction between what is seen as normal and what is seen as impulsive spending. And although the ‘norm’ is not always the ‘norm’ for all individuals – there are some that will describe what you and I describe as impulsive spending as their own ‘norm’.
Now I know there are those that will argue with me on the following, but this is how I assist some of my clients to understand what their own normal spending would be described as.
The easiest way to distinguish what is the normal spending for any individual is to establish what are the basic needs which the individual has every month, month after month. Purely by this measure can you then state it to be the normal spending habit of an individual.
For instance, although both Miss X and Miss B have the same basic needs – such as housing, nourishment, transport, clothing, and so forth; Miss X might have an additional financial dependent where Miss B does not. Thus they would have two different normal spending patterns a month. Please also understand that a financial dependent is not always or only a child or children but in some instances, it could be a niece or nephew, a grandmother, grandfather, father or mother who is dependent on your reader to meet certain financial needs.
Once the reader has established her own normal spending month after month, of her own basics and those of her dependents; any other spending would fall in a category of additional need. Because the lines between the two can get very blurry at times – confusion between the basic need and additional need is a common occurrence in a lot of households.
Impulsive spending is not just on frivolous items that do not fall within the description of the basic or additional needs but could also be on this basic or normal need fulfilment.
For example, although the normal spending includes nourishment, the purchasing of ‘take-aways’ on the way home, because you are too tired to cook, would classify as impulsive spending.
A home-cooked meal would cost for argument sake, let say R50 feeding 2 adults and three children
‘Take aways’ would cost for argument’s sake R180 feeding the same 2 adults and three children
Now although the basic need for nourishment has been met – the impact on the normal spending or better known as your monthly budget would result in 3 and a half meal times budget spends in one instance of not being in the mood to cook.
Impulsive spending, as I would classify it – is any and all spending that has not been pre-planned and budgeted for on a month-to-month basis.
What are some of the common reason that makes people want to spend money impulsively?
Impulsive sending would generally be earmarked by either a physical or emotional need of fulfilment that the individual wants instant gratification on.
Although the need or even want for the fulfilment of any physical need is not the issue – it is the instant gratification that creates issues. Any purchase that has not been pre-planned and budgeted for can create in itself massive implications for any individual or household.
Furthermore, most emotional spending is impulsive, of which a great deal is regarded after the fact; maybe not for the fact of now owning the product that was purchased, but rather a regret of the money that has been spending.
Best known as “Retail Therapy” – it provides the individual with a stimulus to satisfy an emotional need or want. Although this need or want might be justifiable, the instant gratification of that need or want is where impulsive spending occurs.
Another common reason individuals spend impulsively is purely to keep up with the individuals next to them. This is another example of an emotional need or wants been met purely because … “my friend has one…”.
Is impulsive spending common amongst specific groups of people?
Impulsive spending, in my own experience, is not just found in a specific age, income or even ethnic group. Impulsive spending can occur in any of these groups.
Should you wish to link impulsive spending to a group label – I would say it is a group of individuals that are not disciplined in pre-planning and budgeting any and all need or want fulfilment. It could very well be an individual that has a stable month to month income or even an individual with a very irregular income.
Strangely enough, I have found it is the individuals that can least afford it that is more subjected to impulsive spending.
Is this an addiction that can affect relationships, lifestyle and even health?
This question should be answered twofold…
Is it an addiction: Yes and no… In some cases, the emotional needs or wants for instant gratification can become an addiction. However, in most cases it is purely a lack of … I won’t say knowledge or even understanding, but rather a lack of practical implementation of financial planning and accounting measures that creates issues for the individual.
Does it affect relationships, lifestyles and even health…? Yes to all the above.
Relationships can be seriously affected to the extent of ending the relationship. On official records, there is many divorces – which are due to one partner’s lack of financial discipline and the other partner’s lack of willingness to maintain the relationship due to financial issues.
Further to this, the individual’s lifestyle will be affected by impulsive spending to the extent that they could end up in such a deep debt hole, that the only solution at the end of the day is to declare themselves insolvent
Health issues are also very common. This can be either due to the emotional turmoil (stress) related to the regret after the fact or the constant “month that is left after the money has ended”; or due to a physical lack of basic needs fulfilment as a result of impulsive (over) spending.
What is your advice to Move! Magazine readers about the importance of financial planning?
Before I give the readers any “advice”, there is something that the individual must understand clearly. Financial Planning is not buying a policy or starting a savings account or even taking out medical aid… No – financial planning, the same as accounting starts with what may seem two of the smallest of things, that is overlooked by many individuals …
Income should always be greater than Expense!
You fail to plan – you plan to fail!
This is where most individuals misinterpret financial planning and thus then fail to implement it in their own lives.
One of my own personal mentor’s favourite sayings is that “Money flows to where it is best respected and protected” … This is where proper financial planning adds not just emotional and physical value to the individual’s life… BUT when implemented, disciplined and managed, it will create monetary value for the individual.
Personal Financial Planning, in my opinion, should already be taught to children as soon as they are capable to understand what money really is… a tool to obtain and maintain wealth!
Purely by teaching them the correct basics of personal financial planning, we would not just raise a generation that would be capable of implementing this, from the first day that they start looking after themselves financially; but also a generation that will change any country’s economy in leaps and bounds.
For those who were not privy to this kind of upbringing or background understanding – I would urge those individuals to seek not just a financial planner/ broker/ advisor, but a financial coach/ mentor to guide them through a process of reconditioning of their own financial habits. This will include not just the initial planning but the accounting and recording of your own financial habits, teaching you how to constantly monitor and adjust your behaviour to ultimately achieve your own financial freedom.
So to come back to the original question – the importance of (proper) financial planning?
Financial planning is not just of vital importance for any individual who wants to live a financially sound lifestyle, but also impacts greatly on the economy of the country!
It all boils down to the less the country has to spend on taking care of those who could not, did not or cannot take care of themselves financially, the more the country can spend on progress in its own economic growth, instead of just trying to maintain its current standard.
I hope and trust that this information assists you in your article. Should you have any further questions or need information feel free to contact me via email.
With Love, Gratitude & Grace
- Yvonne E. Venter-Louw
- YEVL (Pty) Ltd.: Founding Director & Principal
- Researcher, Advisor, Educator, Coach, Mentor, Keynote Speaker & Host of the Financial Independent Coach show on YouTube
- Personal Thesis: The Psychological impact of past experiences (and the rehabilitation thereof) on daily driven financial decisions.
- Naturally creating and experiencing Freedom, Meaning & Wealth!
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