Opinion | A warning just before you click ‘pay now’

It was exciting to read that Barclays Bank has introduced a feature on its banking app that allows customers struggling with issues of addiction by putting a button within the app that will turn off payments to certain kinds of retailers especially those linked to gambling and alcohol. While the idea behind the Barclays app is more noble than curbing needless consumption-linked expenditure, why not consider something that will help us curb our indulgent spends too?

Recently I had a brush with a rather large indulgent spend, which gave me several hours of guilt-filled regret. If only the “pay now” button had not been pressed.

You be the judge. This Diwali break was a well-planned getaway for the family. All the bookings were done, paid for three months in advance. But as it happens with best laid plans, return travel arrangements got flipped unexpectedly. I was suffering from an eye infection and on the morning of the journey decided I couldn’t (or didn’t want to) endure the 11-hour train ride back to Mumbai. This meant last-minute flight tickets for a family of four. The dilemma: air fare for a flight less than 24 hours away doesn’t come cheap. That too for four seats. While we went ahead with it, the next 48 hours were spent deliberating on why we did it when it clearly was not an emergency. After relaying this story to a few others, I found solace in the knowledge that we weren’t alone when it came to indulging in avoidable, impulsive spends.

No matter how much in advance you plan, invariably you get confronted by one or many unexpected spends which are often non-essential and almost always impulsive. Let’s distinguish this from an unavoidable expense like a medical emergency or when a relative needs money urgently; these are beyond control and usually not optional. A few months ago, when I shared my disbelief at having to spend ₹10,000-12,000 on doctor’s fees and blood tests for what turned out to be a non-specific viral infection, my husband shot me a look of equal disbelief—wondering how I could care about money more than his health. Nevertheless, it was easier to reconcile with this inflated but somewhat essential spend than with what we spent on the last-minute air tickets.

The concern: too many impulsive spends can end up burning a serious hole in your pocket. The implicit assumption is that it is an easy spend—something you pick when you are out window shopping or that ₹400 jar of Italian pesto paste or a click on Amazon just because the advertisement kept showing up on the social media site you visit every half an hour.

The easier it is to do, faster the spends multiply, but can you justify them later when the credit card bill arrives or do you vow each month not to over-spend on non-essentials next month?

One way to manage this is doing a quick mental math; try to relate your pile of savings to the amount you are about to indulge in. Putting a limit in place may work. Say, the aggregate amount you are over-spending is up to 0.2% of your savings or even up to 0.5% for some larger indulgences, then you know it is easier to absorb. However, be forewarned that if the liabilities side of your personal balance sheet is heavy, over spending is going to pinch more. If you have high outstanding loan amounts, try not to over spend or, at least, subtract the loan outstanding from your savings and then reassess.

There is also a behavioural aspect to consider. Make the indulgences an exception rather than the rule. Do these spends happen in moderation? Spending ₹1,000 on your dinner takeout doesn’t sound like a big spend but do it every night and it becomes a substantial monthly expenditure. Similarly, impulsive travel is great for the thrill that spontaneity brings; however, done too often it will mean booking hotels and tickets at premium prices. Too much of that and your savings will start to deplete much faster than you anticipated. Credit cards help to hide over spending given that you don’t see the bill till later, making it easier to misbehave with your monthly budget.

Impulsive spends happen no matter how hard you try to avoid them. Sometimes if you try for too long, it happens at the eleventh hour by which time you would be paying a higher price for it. Sort of like a penalty for the indecision. If you are working hard and earning for a comfortable lifestyle, this penalty may feel like a petty price to pay. But is that experiment with your savings pool really worth it? Aristotle’s doctrine of the golden mean, moderation, applies beautifully when it comes to budgeting and spending. It may sound like an oxymoron, but you can indulge in moderation. Master that art and you won’t need a prompt from a mobile app; both your money book and emotion of guilt around the reckless spends get balanced too.

Lisa Pallavi Barbora is a consultant with Mint