Avoiding Financial Setbacks Part 3: Splurges

This is a five-part series designed to educate readers on Avoiding Financial Setbacks.
These will not be displayed daily but as time passes on.

In the last “Avoiding Financial Setbacks” series entry, I spoke on how my splurges towards video games caused my bill payments to be paid late, resulting in late fees and sometimes even brought about unexpected overdraft fees. In this session, I want to focus on splurges and how you to avoid these in becoming a financial setback in your personal financial journey.

Cut Splurges
Video game purchasing was severely cut when I experience my turning point. I would probably spend $100 per month on video games, regardless if it were new or used. I made sure that I supplied myself with the latest titles. If you haven’t viewed the Episode 2 Video Blog & Podcast, I suggest you watch so you can get some sense as to why I was obsessed with video games.

In the end, I realized that this obsession was really taking a toll on my financial livelihood and ultimately making my situation worse than better. It did give me short-term relief and comfort as an escape from reality but long-term it was very costly and I was making no progress with my REAL life. After that first month of not purchasing a single game, I found myself with extra cash, that was my newfound hope. Determined not to buy games, I had no idea what to do with the money. Believe it or not, that’s a good thing for a first step.

So if you too have those little splurges, whether it may be video games, shoe shopping, or whatever the case may be to where it is taking a serious toll on your finances. Cut it for just one month and see how much extra cash you have saved. Maybe you’ll see yourself with an extra $50-$100 (it may even be less or more), but it’s still extra cash that can be saved that can be applied to your savings and over time build up considerably.

Am I saying don’t ever buy another pair of shoes ever again? Of course not, but what I am saying is cut on the splurges. Cut on those monthly leisures. Cut on those expensive outings. It’s time to learn how to sacrifice. If you can’t completely cut the costs, reduce it as much as you can, but the first and primary rule to this is be honest with yourself on how much you know you can reduce it to. Then stick with it and fight those urges. Using my example of video games again, I can’t tell you how many times I had to fight off the urge of getting another game. Especially after reading good reviews and seeing those promotions and drooling when I see the covers of those games that deserved to be in my system. Then I realized that by continuing to play the games I already owned, I began to appreciate it even more than before. And this example can be applied to all types of splurges.

Consider Used on Depreciating Assets
Since it is not so easy to “Cut Splurges”, then you will have to take steps to control your shopping impulses. I could have saved a LOT of money on video games if I waited for price drops and purchased them used. Actually, that is the exact system I implement now. I have a short list of most-wanted games that I am waiting on price drops. Did you know in a matter of months a top-title game can drop over 10% in price? And then when you buy a fairly good game used, you will have saved nearly 17% to 20% off the original price for waiting at least 6 months! Shamefully, I knew of this when I was an avid gamer, but I didn’t care. I still wanted to pick up these products when they were first release. It’s because of gamers like me, Activision’s (ATVI) stock is continuing to rise over 100% now (Good thing, I’m vested in this company).

So that is my challenge to you. Wait on your purchases, then purchase used. Companies, today, will not hold used products unless if it is nearly up to par with new products , then a lot of times they’re equipped with special warranties and guarantees to help protect their sale so quality isn’t a huge issue. Especially for major purchases such as cars. You will save a considerable amount of money on your purchases and you will have a quality product that you’ve always wanted by just waiting a couple of months.

Another great reason why waiting is a great idea is that you’ll learn to see if it is something you really want. I even own a few games that I hardly play anymore. Taking my list of games I’m intending to buy, I have already scratched a few off of that list because the title no longer interests me. Maybe I feel that it is a title that may not excite me and want me to play over and over again to really get my money’s worth. Maybe it received bad press and is ultimately not worth the buy any longer. There could be several reasons for this that you can even apply to your own tactics and situations.

• Do not buy on impules
• Wait for prices drops
• Buy used whenever possible.
• While you wait, continue to research the product from a critic perspective, not a consumer perspective. You may learn you may not want it after all.

Note: There are two games that I plan on purchases brand new within the next couple of months. Grand Theft Auto IV and Ninja Gaiden 2. Those are at the top of the lists and must haves for my library. But I’m not buying on impulse. I’ve been waiting for these games to drop for years now.

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