It’s often said, “You are the average of the five people you spend the most time with.” While this idea can motivate personal growth, it also speaks volumes about how the people around you influence your spending habits.
Whether it’s trying to keep up with friends, engaging in group activities, or dealing with the emotional pull of peer pressure, your social circle plays a key role in shaping how you spend your money.
Let’s dive into the ways your circle influences your spending and explore what you can do to manage these impacts.
What is Impulse Spending?
If you’ve come across trends like “girl math” or “loud budgeting” on social media, you’re already familiar with the creative ways younger generations approach personal finance. Impulse spending—sometimes referred to as “doom spending”—is another growing trend. It refers to spending money despite a grim economic outlook, often as a way to cope with stress and uncertainty.
In a world where many factors feel beyond our control, the act of buying something provides a fleeting sense of power. However, this short-term gratification can easily lead to long-term financial pain if not kept in check.
Why Do We Engage in Impulse Spending?
Over the past few years, a series of global challenges—ranging from the pandemic to inflation, political instability, and job insecurities—has fueled a sense of financial and emotional exhaustion. For many, spending money on a new gadget or a luxury item feels like an immediate relief from this ongoing stress.
Impulse spending often arises from the perception that saving for larger goals, such as buying a home or retiring comfortably, is futile. When major life goals seem out of reach, it’s easy to justify spending on small pleasures that bring instant gratification.
A study conducted by the Institute of Policy Studies (IPS) and Channel NewsAsia found that younger people, particularly those aged 21 to 24, are more prone to buying things to boost their mood rather than planning for the future. This age group may have fewer financial obligations and more disposable income, making it easier for them to engage in spontaneous purchases.
The Role of Social Media
Social media further amplifies impulse spending by creating a “fear of missing out” (FOMO). Platforms like Instagram and TikTok are filled with influencers flaunting products, services, and experiences, which can make these luxuries feel like necessities. The constant exposure to aspirational lifestyles can make it harder to resist the urge to buy items, even when they’re not affordable or necessary.
The Long-Term Impact of Impulse Spending
The danger of impulse spending lies in its ability to disrupt long-term financial planning. Without mindful spending habits, individuals risk accumulating debt and finding themselves in a negative cash flow situation.
While treating yourself occasionally is fine, it’s crucial to budget for these treats. Establishing emergency funds, tracking expenses, and avoiding unnecessary debt are all key steps toward building financial security. The consequences of neglecting these practices may not be immediately visible, but over time, the lack of a savings or investment strategy can leave individuals unprepared for mid- and long-term goals such as retirement or purchasing a home.
Psychological Roots of Impulse Spending
Impulse spending often stems from deep-rooted psychological behaviors influenced by our upbringing and social environment. If you’re surrounded by family or friends who also spend impulsively, it may be harder to break the habit. This is why financial literacy is so important—it helps people recognize their behavioral biases and resist temptations that could lead to long-term financial harm.
Building Financial Literacy to Combat Impulse Spending
Young adults, in particular, have the advantage of time on their side. Every dollar they save and invest early in life has the potential to compound and grow over the long term. By improving financial literacy, individuals can learn how to create budgets, stick to saving plans, and adopt a long-term approach to investing. These practices can help them build sustainable finances, not just for themselves, but also for their loved ones.
Here are some practical steps to build better financial habits and resist the urge to engage in impulse spending:
6 Ways to Curb Impulse Spending
- Track Your Expenses – Keeping a close eye on where your money goes is the first step toward responsible spending. Use financial apps to categorize your expenses and adjust your budget where needed.
- Set a Monthly Budget – Create a budget for different spending categories, such as entertainment, dining out, and shopping, and stick to it.
- Create a “Feel Good” Budget – If you enjoy treating yourself, allocate a small, designated amount for those indulgences. This way, you can satisfy your desires without derailing your financial goals.
- Adopt the “Pay Yourself First” Approach – Automate your savings by setting up a standing order to transfer money into a savings account every month. This ensures you prioritize saving before spending.
- Unsubscribe from Shopping Apps and Websites – Limit the temptation to spend by removing easy access to online shopping platforms. Unlink payment methods to make impulsive purchases less convenient.
- Limit Credit Card Use – If you find it difficult to control your spending, consider reducing or canceling credit cards to avoid unnecessary debt.
Focus on Building Healthy Financial Habits
While it’s fine to reward yourself occasionally, your long-term financial health depends on cultivating habits that will serve you in the future. Here are four healthy financial practices to focus on:
- Save: Set aside at least 10% of your income for savings. Aim to build an emergency fund that covers 3-6 months of living expenses.
- Protect: Invest in insurance to guard against large medical bills or loss of income. Consider hospital coverage and life insurance.
- Grow: Invest regularly and diversify your investments. Make sure at least 10% of your take-home pay goes toward building wealth.
- Plan for Retirement: Work toward generating passive income. Aim to meet the CPF Full Retirement Sum and diversify your income streams.
Conclusion
Impulse spending may offer temporary relief from the stresses of life, but its long-term consequences can be far-reaching. Without a solid financial plan in place, what begins as a small indulgence can snowball into debt and financial instability. The key is to strike a balance between enjoying the present and preparing for the future. By tracking your spending, setting a budget, and adopting healthy financial habits, you can ensure that your financial choices today lead to a more secure and fulfilling tomorrow.
Incorporating financial literacy into your daily life will empower you to resist impulsive spending and focus on building a sustainable financial future. Remember, the small decisions you make now will shape your financial well-being for years to come.
Ready to take control of your financial future?
Consider scheduling a financial health check with a Financial Advisor. Whether you’re just starting your financial journey or looking to optimize your existing plan, a Financial Advisor can provide personalized guidance tailored to your unique goals and circumstances.
Learn more about: How Your Friends and Social Circle Shape Your Spending Habits