COLLECTION: BUDGETING & SPENDING

4 budget-busting rationalizations to be aware of

Being rational when spending money on the things you want can be tricky. Budgeting guidelines create awareness around these popular spending rationalizations.

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Imagine getting home from a day of running errands and realizing that you've spent money you didn't intend to. If your unexpected purchase is no more expensive than an occasional pack of gum or a latte, then no harm no foul.

But if you are regularly falling victim to money rationalization—where you talk yourself into a purchase you really don't need or can't afford—then you are doing yourself and your budget no favors.

It happens to the best of us, but have you told yourself any of these comforting lies recently?

1. It's on sale!

There's a very good reason why retailers put things on sale, offer 2-for-1 deals, and give discounts: It does a whammy on our thought processes. By offering something on sale, it gives the consumer a sense of urgency about purchasing the item. You know that the sale or discount will not last forever, so you want to snap up the item before you lose out on a great deal.

The thing is, it doesn't matter how good a bargain the price is if you don't need that item, because it's still too expensive. If you are tempted by an item that's on sale, put it down and walk away. If you still want it the next day (or even the next week), go ahead and buy it. The sale will probably still be in effect, and you will know that this is a good purchase and not just an exercise in retail psychology.

2. I'll buy now and save later

"Later" is a great time to do things you don't want to do, whether that's budgeting or dieting. It's very easy to promise yourself that you'll pay for today's splurge by saving money in the future, but people are no more virtuous later than they are now.

If you are trying to rationalize a purchase by thinking about what you can give up next week or next month to pay for it, then you simply can't afford the purchase.

This rationalization falls into the category of thinking of yourself as a better budgeter in the future. But if you haven't learned how to budget (or diet, etc.), you're not going to magically wake up knowing how to do this in the future. Telling yourself "no" now will be the first step in being the savvy budgeter you hope to be tomorrow.

3. I need a reward

After a stressful period at work or at the end of a major project, it can be easy to want to reward yourself with something nice. But looking at a new pair of shoes or an expensive car and thinking "I deserve this!" is backward.

What you really deserve is a well thought out budget that will not leave you stressed over money. And unfortunately, giving in to impulse buys because of stress will not help you achieve what you deserve.

Though saving money and living within your means is not nearly as great as the newest pair of Jimmy Choo stilettos, it will ultimately lead to you living the life you deserve, rather than a life of more stress.

4. I want to fit in

Sometimes the worst purchasing mistakes come from peer pressure. It's much easier to spend money when everyone around you is doing the same. This is why direct marketing professionals host parties for people to buy their products: It feels good to spend when your friends are spending. Even if your friends would never dream of putting pressure on you, just seeing them spend money can influence your decisions.

If this is a problem for you, then shopping should no longer be an activity you do with friends. Find other ways to socialize with the people in your life. Your bank account will thank you.

The best weapon you have against spending rationalization is to know yourself. If you are aware of the things that sucker you into purchases, then it will be much easier to avoid them.

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Article copyright 2018 by MoneyNing. Reprinted from the December 15, 2018 issue with permission from MoneyNing.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
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