We’ve all been there before. It’s been a long week, so you decide to treat yourself to some retail therapy. As you peruse the aisles looking through endless shelves stocked with tchotchkes, you see something that catches your eye. Next thing you know, you’re surrounded by shopping bags, a receipt that stretches around your legs like a paper boa constrictor, and a mountain of credit card charges.
But what if all the money you spend on eating out, subscriptions you don’t need, and flat white mocha cold brews could be doing more? What if the subscription movie service you ordered on a whim so you could watch a series about a flamboyant tiger enthusiast was, instead, invested in the stock market? I think you know where I’m going with this, so let’s dive in.
Why Do Americans Buy So Much Stuff They Don’t Need?
People buy things for a lot of reasons. If you’re familiar with Maslow’s Hierarchy of Needs, you’ve likely seen the pyramid featuring food, shelter, and water at the bottom and self-fulfillment and self-esteem items toward the top. As you move up the pyramid, what you need becomes less about maintaining homeostasis and more about growing as a person. For example, you need to eat but you don’t need an awesome exercise bike unless you’re in growth mode.
For better or worse, most of us today can meet our basic needs for food, shelter, and safety. That means we can jump up Maslow’s pyramid to meet our self-esteem and self-actualization needs. These areas are typically focused on our feelings of achievement and creative growth and are where we may experience the urge to buy more things.
Achievement and accomplishment take many forms. While a high-powered job might be an accomplishment for some people, a brand new car, pumpkin spice latte, or a pair of sweet new kicks might provide the same feeling for others. However, the need for accomplishment and status has snowballed in recent years. Take our homes for example.
According to U.S. Census data from 1973, the size of the average home in the United States was a paltry 1,660 square feet. In 2015, the average had exploded to nearly 2,700 square feet, and today sits at around 2,300 square feet. Sometimes, it means buying stuff we don’t need just to fill space in an otherwise empty house.
It’s easier than ever before to buy things. Only a couple of decades ago, if you wanted to buy something, you either had to see it in the store, on TV, or in a magazine. Today, you can order anything you want from anywhere you want and have it shipped to your home in as little as a few clicks and a couple of hours. Convenience is king, and when you can quickly get what you want, it makes it pretty easy to spend… or overspend.
According to a 2019 survey conducted by OnePoll for Ladder Life, the average American spends close to $1,500 each month on non-essential items. By the end of the year, we’ve spent about $18,000! Breaking down the costs by month, Americans spend, on average, $20 for coffee, $108 on impulse buys, and nearly $178 on takeout and delivery.
Takeout + Delivery
of Americans Who Feel They Can’t Afford to Put Money into a Retirement Account
Yet, in the same study, a whopping 38 percent of those surveyed said they felt they couldn’t afford to put money into a retirement account. Oof!
Ghost Money: Not as Spooky as You Might Think
When you spend money on things you don’t need, you’re creating what businessman and Beanstox Chairman and Co-owner Kevin O’Leary calls “ghost money.” Typically, these expenses are tied to impulse buys, memberships you don’t use, and other unnecessary things that might seem small, but add up over time.
Those same small expenses, if invested, could help you build wealth rather than debt over time. Let’s take a streaming service subscription valued at $9/month. If you were to cut it out of your budget right now and invest the money, along with a $100 initial investment, you’d have invested $208 after a year. Keep investing $9 each month over 30 years (at an assumed 8% annual growth), and at the end of that period, you’d have more than $14,000. Not bad for missing out on a couple of must-see series. The best part? As you invest more money, your expected returns can also increase.
This isn’t to say you should go off the grid, cancel all of your subscriptions and memberships, and squirrel away money. Small changes like the example above can have a large impact on your financial future. The key is to condition yourself into making those decisions more often, then follow through with your plan to invest.
Get Rid of Shopping Apps on Your Phone
If you were trying to get in shape, you wouldn’t start by eating an entire chocolate cake. If you’re trying to invest money, delete the shopping apps installed on your phone. Get rid of them, and you’ll immediately have fewer opportunities to buy things you don’t need.
Clean Up Your Inbox
This is a pretty simple action. Unsubscribe from all the retail emails currently flooding your inbox. It’s amazing how quickly “out of sight, out of mind” can set in.
Sleep on It
Impulse buys don’t have to be impulse buys. Any time you see something you want, take a night or two to sleep on it and think things through. If you didn’t want it too badly to begin with, you likely won’t make the effort to revisit the purchase.
No, this doesn’t mean you should be tracking every dollar that comes in and goes out. You should have a macro-level view of your general income and expenses each month. If you see you’re not using a subscription or spending a little too much on takeout, adjust accordingly. It’s ok to splurge sometimes – just don’t go crazy with it.
This might seem scary or difficult, but it doesn’t have to be. Opening a Beanstox account is seriously simple, and it helps you work toward achieving your investment goals. With as little as $100, you can start investing. You can also set up weekly or monthly recurring investments. Answer a few questions so we can understand your financial goals, fund your account, and let us take it from there. No muss, no fuss.
The Final Word
In the end, whether or not you buy something is totally up to you. You are in control of your finances and with only a few changes, you can start investing. As Maslow taught us, we’re always trying to improve and build the best lives possible for ourselves, and that means balancing the things we want with the things we need.
Everything in life is about moderation. You don’t have to live like a hermit to set yourself up for financial success, but keep in mind your cheeseburger and fries today could someday become a beach vacation with enough time and patience.