Credit cards and one-tap payment systems have made buying something convenient and fast but at the cost of our financial discipline.
With one tap of our card, we can buy things we don't need only because they appear lucrative, and we can pay for them using our credit cards.
I was, too, on this hamster wheel of needlessly purchasing things and doing shopping therapy for years before I finally tightened the straps on my financial discipline and ended this rogue behaviour.
And I did this with an easy-to-follow questioning framework I developed over the last five years.
In this blog post, I'll discuss this framework in detail and how you can adapt it to ensure your purchases bring you joy and not needless debt.
Let's start with:
A little backstory
I entered the workforce in 2015, and with that first job came access to a decent chunk of capital that I could spend on anything I wanted.
I was 22 years old, fresh out of college, and had no student loans or other debts. That meant whatever money I had left after paying for rent, food, and transport was money I could spend on buying the things I had silently wanted throughout my non-working years.
That is what I did.
Every month, when my salary hit my bank account, it rapidly vanished, transforming into gadgets, clothes, and other luxury items.
I was young, at the start of a booming career. Saving money seemed like an afterthought that I could entertain when I have spent a few years working, not right away.
A couple of my close friends even had a nickname for me: Richie Rich. While they trod frugally when we went to the mall, I spent my money liberally.
One month, I blew away close to half of my salary on a pair of expensive headphones after I saw one of my coworkers get one. Now that I think of it, that decision sounds incredibly stupid, but at that time, that is how my brain operated when it came to buying things.
I didn't think much. I just bought whatever I liked and could afford.
Thankfully, this crazy kid soon met a sensible woman, and the maddening shopping spree ended.
With help from my girlfriend at the time, who is now my wife, I started tracking my daily expenses, budgeting my monthly spending, and thinking carefully before making any purchase.
Over time, my financial discipline improved, my savings grew, and I started treating money as a powerful tool that could make or break me.
Now, while tracking daily expenses and budgeting made me more mindful of how much I was spending and had left in the bank, the crucial factor in stopping this reckless spending was questioning every purchase.
Not all questions are relevant to every single purchase I make these days, but here's the starting one:
How big is this purchase?
For small purchases under $20, I don't question the purchase too deeply. I buy it if I need it or even want it as hobby material.
Things like books, stationery, domain names, digital assets, desk accessories and apps come under this category.
$20 is a reasonably small amount to experiment with, even if the product ends up being unused or not as useful as I expected.
For example, I ordered a new probiotic supplement this morning, which cost me around $9. I saw this new brand on Shark Tank India a few days ago, and I wanted to try this product. Not much rational thinking went into this purchase. It is, as I said earlier, a small experiment.
However, reasonably sized purchases, even $50 or more, are carefully considered.
I don't immediately buy the thing; instead, I wait a couple of days, weeks, or even months before deciding whether to pull the trigger and buy it or let it vanish into the abyss.
The judging factor is whether I'm still considering buying what I initially wanted. If I am, I buy it if I can afford it then.
The magic of this hold-out period is that it cuts off any impulse purchases. There were many times when I desperately wanted to buy a fancy gadget or something expensive, and after a week or two, I didn't even remember what I wanted to buy.
That purchase didn't pass the hold-out test. It was an impulse buy which disappeared as fast as it came. Had I truly wanted that item, it would still have lingered on my mind two weeks later.
It's a simple test, but it works flawlessly every time.
A fantastic example of this test is the mechanical keyboard on which I'm typing this blog post.
After seeing plenty of my friends and colleagues at work use and recommend a mechanical keyboard, I was intrigued to get one, too. I love to write, and a mechanical keyboard promised an elevated typing experience that my built-in laptop keyboard couldn't provide.
However, I wasn't sure whether this would be a good return on my money since it was quite an expensive gadget. It cost $120 and would be the most expensive keyboard I've ever bought.
To put this purchase decision to the test, I deferred it for later. I got urges to make the purchase every time I saw a mechanical keyboard somewhere, or someone talked about using one, but the feeling was fleeting.
Then, a year later, still strongly urged to use a mechanical keyboard, I finally made my purchase. Yes, the hold-out period was an entire year, and the purchase passed that test.
I have been loving typing on this keyboard for around a year now, and every time I have to type on a laptop keyboard on someone else's computer, a part of me strongly desires to plug in my mechanical keyboard and use it instead.
Even my professional camera gear, which cost a whopping $3,625, came in after I intermittently thought about upgrading my camera setup for over two years. And I've never regretted this purchase decision.
Now:
This hold-out period usually applies when I'm buying something general.
For other purchases, it's a different game altogether.
That's why a follow-up question that I often ask myself before buying is:
What kind of purchase is this?
Ramit Sethi, the author of I Will Teach You To Be Rich, is famous for discussing a framework for making guilt-free purchases called conscious spending.
Conscious spending is allocating more of your money to the purchases that mean the most to you and less to the things that don't.
For example, if you are passionate about art, spending guilt-free on vintage collectables or paintings will bring you more joy and be an excellent use of your money rather than buying, say, the latest pair of Nike sneakers.
Therefore, to leverage this mindset, we must identify where spending money brings us more joy than guilt.
For me, this is travelling. I don't mind spending good money travelling in and out of the country and having new experiences.
To me, travelling is not a one-time activity. The eye-opening learnings, cultural values, and cherishable moments that come from travelling stay with me for years. I still reminisce flashes of moments from my Europe trip in 2019 and my Thailand trip in 2022 and feel happy and grateful that I've had those experiences.
While I still travel overall on a budget, I often sprinkle in luxury experiences like staying in a 5-star hotel room for one night and private tours to exotic places on my international trips.
The same goes for trying out fine dining places around my city. My wife and I often visit or order food from restaurants that cost five times what a meal at a regular restaurant would cost. We do it because these dishes offer an authentic and memorable experience when they hit our taste buds. It's one of those tiny joys of living that we like to have now and then.
In essence, conscious spending means using money to maximise enjoyment and happiness. This simple question will guide you in that direction:
Does your purchase fall under a category that means something to you or brings returns in happiness dividends?
This category could range anything from owning fancy items like designer shoes to something related to your hobbies. Like photography, for me.
When I bought my last phone, I intentionally bought the base model instead of the top model because I could spend the difference between these models on something I really wanted — a camera lens.
It's been two years since that decision, and I have never regretted it.
But here's the thing:
Regardless of how meaningful an activity might be or how exotic an experience can be, I always know my spending limits. This means I never take on debt or go broke trying to experience luxury items I can't afford.
Financial stability is more important than experiencing luxury in life. The You Only Live Once (YOLO) mantra only works when your essential expenditures are met and some financial security is built.
I have seen friends who have reached beyond their means to buy things they couldn't afford, only to meet an utter financial crisis years later.
Stability first, luxury later.
Now:
Knowing my limits, the third question I ask and is a deciding factor between two or more choices is:
Will this product last?
When I'm looking to buy things that I intend to use for a long time, say a year or more, questioning the quality of the product is crucial.
I've, on many occasions, bought cheaper options that broke down or stopped working weeks after purchasing. Ultimately, I had to spend more money getting a replacement.
Nowadays, I prefer spending extra money on buying things that will last longer, be more reliable and serve me better than opting for cheaper alternatives to save a few bucks right now.
A prime example is when I bought a chair for my home office. Being the conscious spender that I am, I scrolled through various chair options on Amazon and ordered the one that seemed a cheap and decent option at the time.
Not only was that chair uncomfortable to sit on for a long duration, but it also started tearing off and breaking down after a year or two of moderate use.
Eventually, I replaced it with a better-quality chair that cost more than double the previous one's price, but even after a year of heavy use, it still feels brand new.
Quality matters when you're looking to use something for the long run. Spending more money on quality products over cheap knock-offs will eventually give you more value for your money.
The same goes for food options. Spending a couple of bucks extra to buy high-quality foods instead of cheaper chemically grown ones will reward you over time with good health.
But again, I go up to the level of spending I can afford without breaking my finances.
Returning to the chair example, there were many more chair options that felt even more comfortable and looked fancier than the one I bought, but they also cost way more than my maximum budget, making them not an option for me.
Now that we've discussed the various questions that help in making smart buying decisions, it's time we:
Put these questions into an actionable framework
The next time you're on the verge of making a purchase other than your household essentials like groceries, follow this questioning pattern:
- How big is this purchase? Decide a budget that you're comfortable experimenting with, say $20–30, and classify the purchase into small or big based on that budget. If it falls below your budget, it's a small purchase, and you can buy it without much deliberation. If it exceeds your budget, use the hold-out technique we discussed to test whether the purchase is essential.
- What kind of purchase is your big purchase? For the decently-sized purchases you've identified in the last step, see if they fall into your guilt-free spending category. If it does and is something you can afford without breaking the bank, buy it. You'll be thankful later.
- Will this item last long, or is it good for me? Prefer high-quality items if you can afford them. Low-quality stuff will perish faster and often cause more harm than good in the long run.
- What is my spending limit? Beyond all the questions, the most important one is understanding whether a purchase will destabilise your finances or merely make a dent. Always choose the latter.
Here's an example from my life right now:
I've been considering buying a computer monitor to plug into my laptop for some time now. I don't desperately need it, but it would be a good experience if I could get my hands on one.
Now, I could take a risk and buy a $150 monitor, but it won't serve my purpose. I want a big screen, but I also want one with a high pixel density that looks good, accurately represents colours, and lasts long.
A monitor that fits all these requirements costs upwards of $950.
Because it's a big purchase and I'm unsure whether it would be a good fit, I'm currently in the hold-out phase. I'm deferring buying the monitor until I either make the purchase or completely forget about ever wanting to buy it.
With this framework, I know whatever I do will be a well-thought-out move rather than a reckless one.
Why don't you try this framework with one of your purchases today or this week?
You'd be shocked at how much restraint it can help you build in your spending.
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