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Need or Want?

Sundar Mohan Rao

DECADES AGO, WHEN I was trying to save consistently for retirement, I found that my impulse purchases were standing in my way. Like many, I wanted feel-good stuff or the latest gadget, and I was willing to spend money to get it.

Once, I saw an expensive jacket in a store and badly wanted it. I was about to buy it when reality struck. I said to myself, “Let me think it over for a day. If I really need it, I’ll buy it tomorrow.”

Guess what? The next day, I didn’t think about it. I had other things to worry about, and I saved some serious money.

This was a revelation. I could avoid impulse buying simply by postponing the decision. Thereafter, this became my mantra when making any big purchase—wait a day before buying.

On further thought, it became clear to me that I was confusing wants and needs. If the expensive jacket was a real need, I would have gone back to the store the next day and bought it. But the truth is, it was a want, and I could live without it.

Now, the question I ask myself before buying anything big is, “Is this a want or a need?” For decades, this simple question has helped me save money by avoiding impulse purchases.

I preached it to my sons as they were growing up, but I was never sure whether they’d put it into practice. Proof came a few years ago. One of my sons told me he was going to buy a fancy electronic gadget on Black Friday because the deal was too good to pass up.

After a week, when I asked him about it, he said, “Dad, I followed your mantra. I waited 24 hours before clicking the buy button and the deal didn’t look all that good, so I didn’t buy it.” I was happy to know my simple strategy worked for him, too.

Impulse buying is one reason that six out of 10 American families report living paycheck to paycheck. Even among Americans earning more than $100,000 a year, four out of 10 say they live this way, according to a survey by LendingClub.

It’s not easy to resist the siren song of purchases. Products are promoted to make you want to buy them, whether you need them or not. Social media makes the situation worse. When your friends show off their new purchases online, you also want to buy them.

Impulse buying can extend to stock trading. We’ve seen momentum stocks take off as everyone piles in. Getting in on the action seems attractive. A recent example is the meme stock craze. FOMO, or fear of missing out, is an immensely powerful emotion.

Rushing to buy a stock based on an analyst’s recommendation is another pitfall. I’ve made that mistake on multiple occasions, and I’ve lost money every time.

These days, I take a more disciplined approach. First, I’m wary of buying individual stocks, instead focusing on exchange-traded funds. Even if a stock looks extremely attractive and its price is spiking, I’ll take time to do research before buying. By that time, often the crowd’s impulse buying has waned and the stock has dropped to a more reasonable price.

My advice: If you’re about to make a significant purchase, don’t be in a hurry. Make sure it’s something you truly need—and not an impulse purchase.

Sundar Mohan Rao retired recently after a four-decade career as a research and development engineer. He lives in Tampa in a 55-plus community. Mohan’s interests include investing, digital painting, reading, writing and gardening. His previous article was More Than Money.

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