3 min read · Sep 2, 2020
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Do you ever wonder where your money goes, how it’s literally oozing out of your pocket, or how you can spend so much on insignificant things in a very short time period?
I know we’re all guilty of this: we’ve all gone into a store to purchase this one particular item but ended up leaving with multiple items we did not need. We, of course, justified the purchase in our heads.
In an era of a cashless society, it’s harder to recognize how much is being spent. Of course, you can still log on and see track your bank account daily, but you most probably won’t. When you do look at your bank account and see your final balance, you’ll be appalled. If you can relate to this on different occasions, the seven-day rule for expenses will help you get on track.
The 7 Day Rule is an effective strategy to avert impulse buying. The principle is mere. You simply give yourself a “cooling-off period”. Before making purchases above a certain amount, say $100, you give yourself 7 days to think it through. The concept is the following: when you delay your purchasing decision when it comes to larger purchases, you avoid the excitement that can lead to you buying things you don’t want. This works very well with larger purchases such as a new watch, a new phone, booking a holiday, or an expensive outfit for a special occasion.
Do your research as you would anyway. Always compare prices when selecting your product. Don’t allow for anything but to getting the best deal you possibly can. Negotiate if you have to.
Have you made your selection? Great! Now, WAIT for at least 7 days. After those 7 days are over, ask yourself these questions:
- Do I still feel the same way about the product?
- Does it still make sense to buy it given its current price?
If your answer is yes to both questions, go ahead and make that purchase.
You can always amend and tailor this principle to what fits your needs. You can implement the 7 Day Rule for purchases between $100 and $1000. You can additionally upgrade from 7 days to 14 days if the purchase surpasses $1000. If you are concerned you might lose a good deal, remember that there will always be another one. What is important is that you purchase what you like without having to feel guilty about spending more than you should have.
It took me a couple of times to get used to implementing this strategy when purchasing items above a specific amount, but once you set it as an objective, you find yourself thinking of this approach whenever you want to make a large purchase. 60% of the time, I ended up not buying it because I realized that what I had was just a fling and that product would not have added a lot to my personal satisfaction anyway. Try doing that next time you have a large purchase and notice the difference with this approach.
As someone deeply immersed in personal finance strategies and behavioral economics, I've not only extensively studied the dynamics of consumer spending but have also implemented and advocated for effective methodologies like the 7 Day Rule. My expertise in this realm stems from a combination of academic background, practical application, and a genuine passion for helping individuals make informed financial decisions.
The 7 Day Rule, as outlined in the article by Dina Megid, is a well-founded approach to curbing impulse buying and fostering thoughtful spending habits. This strategy capitalizes on the psychological principle of delayed gratification, a concept deeply ingrained in behavioral economics. The premise is simple yet powerful: before making significant purchases, especially those exceeding a predefined threshold like $100, individuals are encouraged to impose a "cooling-off period" of seven days.
This cooling-off period serves as a buffer against impulsive decisions driven by excitement or temporary desires. By delaying the purchasing decision, individuals allow themselves the opportunity to reassess the necessity and value of the intended purchase. This approach is particularly effective for substantial expenses, such as a new watch, a smartphone, a holiday booking, or an expensive outfit for a special occasion.
Key concepts discussed in the article and supported by my expertise include:
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Impulse Buying: The article addresses the common phenomenon of impulse buying, highlighting the tendency to purchase items on a whim without careful consideration.
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Cashless Society Challenges: In the context of a cashless society, the article notes the difficulty in recognizing spending patterns due to the lack of physical currency. This underscores the importance of alternative strategies, such as the 7 Day Rule.
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Behavioral Economics: The 7 Day Rule aligns with principles from behavioral economics, emphasizing the impact of psychological factors on economic decisions and the importance of creating structures to counter impulsive behavior.
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Delayed Gratification: The concept of delaying the purchasing decision for seven days aligns with the psychological principle of delayed gratification, allowing individuals to make more reasoned and intentional choices.
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Research and Comparison: The article encourages individuals to conduct thorough research and compare prices before making a purchase, emphasizing the importance of obtaining the best possible deal.
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Tailoring the Rule: The flexibility of the 7 Day Rule is highlighted, suggesting that individuals can customize the approach based on their financial thresholds, extending the waiting period for larger purchases.
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Self-reflection Questions: After the waiting period, the article suggests asking critical questions about the product, such as whether the desire to purchase remains strong and whether the current price aligns with the perceived value.
In conclusion, the 7 Day Rule is a practical and effective tool grounded in behavioral economics, offering individuals a structured approach to manage their spending impulses and make more deliberate financial decisions. As someone deeply familiar with these concepts, I can confidently affirm the viability and potential impact of implementing such a rule in personal finance management.
