Spending traps are designed to make people spend more money – even money they don’t intend to shell out. You can see these tactics everywhere, from small stores to large shopping centers. They are meant solely to compel people to buy more.
If you are not careful, spending traps can easily put a dent in your budget. You can be vulnerable to these traps even if you are wise with your money. They use psychological strategies, so you may not be aware that you’re already hooked. But with awareness, you can avoid them. Here are five of these spending traps to watch out for.
Avoid These 5 Spending Traps
1. Sales and Discounts
When you go inside a store, chances are you will find items that are on sale. It could be anything from a 10% to a 70% discount – sometimes even more, especially on holidays like Black Friday and Christmas Day.
Who would not want to get something at a discount? If it saves you money from the original price, it must be a good deal. Except that it often isn’t. What you may think is a good deal ends up ruining your budget.
For instance, you buy an item at 50% off for S$100. The original price is S$200, so you may think you saved S$100 on that purchase. But if you were not planning to buy that item in the first place, you did not save S$100. Instead, you spent S$100 which was out of your budget.
The same principle applies to all items on sale or at a discount. If the item is not on your budget, you don’t save money by buying it on sale. You are spending more money than you intended to.
2. Buy One, Get One Free
The trap behind Buy One, Get One (BOGO) works similarly to sales and discounts. The idea is if you buy one item and get another for free, you are saving 100% of the cost of another item.
This is only a good thing if the item you buy is included in your budget. If it’s not, you are not saving money. You are again spending more money than you intended to.
Also, take note that items that are on BOGO may not be in their best condition. There may be some damage, or in the case of food items, they may be nearing their “use by” date. Be aware of these when deciding to buy BOGO items.
3. Buy Now, Pay Later
Another spending trap is the trend of Buy Now, Pay Later (BNPL). In case you’re short of money to buy an item, you can defer the payment but still get the item right away. You will only be charged a few months later. This can work if you are sure you have enough money coming in the next few months. Some online money lenders in Singapore even use BNPL to acquire more clients.
But BNPL can inadvertently encourage you to overspend. Since you will not be paying right away, it’s easier to underestimate the numbers. If you end up buying too many things, you’ll be surprised at how much you have to pay after a few months. You may even have to cut into your savings or emergency fund to pay them off.
Many things these days come in subscription models. Streaming services, for example, are prevalent. You can subscribe for a monthly fee and watch all the movies and shows that you want. The thing is, you don’t always have the time to watch, so your subscription ends up unused for some months.
You may then forget about it, but the subscription continues to charge its monthly fee. This becomes a waste of money since you don’t get to use the service that often anyway. So be aware of the services you are subscribed to. If you find anything you don’t use anymore, cancel it right away. You will save a significant amount of money that way.
5. Bank account fees
Bank fees can easily make your budget bleed money. You may not be aware of it, but your bank account could be charging you an annual or monthly fee. This applies to credit cards as well – some credit card accounts charge ridiculously high fees.
Check your bank accounts and credit cards to find out how much they charge you just to keep the accounts open. If you find that the charges are a bit too much, it may be time to switch banks. The money you pay for those fees can be put to better use.
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No matter how careful you are with your money, you can still fall into these well-designed spending traps. Marketers know how to exploit psychological tricks to get people to buy more. But if you are aware of these techniques and the catch behind each of them, you can make better purchasing decisions. You can then save money instead of overspending. If you have any doubts related to money management please feel free to ask us in the below comment section. Thanks for your visit.
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