Imagine this. You’re walking down the aisle of your favorite store or shopping online when you see a special offer, such as buy two, get one free. Or buy one and get 50% off a second item. It sounds like a great deal, so you put the item in your physical or digital cart as you begin thinking about all the money you’re saving. Before you pull out your wallet, take a moment to ask yourself if you’re really saving or just spaving? Let’s start with a definition: what is spaving? The word “spaving” is a combination of “spending” and “saving,” and is based on the idea that you can save more money by spending more. Spaving is designed to get you to switch brands and encourage you to buy more, which always looks good on a brand’s sales sheet. There is good spaving and bad spaving that can damage your budget. Let’s take a look at both. And a few tips to help you avoid spaving.
When it can be good to spave.
Buying items you regularly use, such as toothpaste or toilet paper, in bulk can save you money. If you’re shopping for tires and there’s an offer to buy three, and you’ll get the fourth tire free, and your tires need replacing, this can save you money. Rebates are another form of spaving. Brands entice you to buy something, or more of an item, with the promise of a rebate, which can save you money. But only if you follow through; if you don’t, any anticipated savings are lost.
When spaving is not so good.
If you’re spending more money than you can afford or buying things you don’t need to get a deal, you could be damaging your budget. Here are some risks associated with spaving:
- Debt accumulation: One of the most immediate effects of spaving is the potential for accumulating debt – especially credit card debt. Interest rates on credit cards can quickly add up (average credit card rate as of this writing is 28.65% APR*), making it even harder to pay off the initial purchases. Your high-interest credit card erases any money you thought you were saving. As debts increase, so does the burden of monthly payments, which can strain other areas of your budget.
- Neglecting your savings goals: Spaving can significantly derail savings efforts. When you spend impulsively, you may divert funds away from essential savings goals—such as emergency funds, education, and retirement accounts, or future investments. The temptation to buy the latest technology or trendy clothing can overshadow the importance of saving for future needs. This neglect can leave you vulnerable in times of unexpected expenses, such as medical emergencies, car repair or job loss, ultimately leading to greater financial instability.
- Budget disruption: A well-structured budget relies on careful planning and discipline. Spaving disrupts this balance, as spontaneous purchases can throw off even the most carefully planned budget. When hit with unplanned expenses, you may struggle to allocate funds effectively, leading to overspending in other areas. This disruption can create a snowball effect, making it challenging to stay on track and meet your financial goals.
- Increased financial stress: The emotional toll of spaving cannot be overlooked. As debts accumulate and savings dwindle, financial stress often rises. Constantly worrying about money can affect your mental well-being, leading to anxiety and decreased quality of life. When you’re overwhelmed by your financial situation, you may resort to further spaving as a coping mechanism, creating a vicious cycle of spending and stress that is difficult to break.
- Compromising financial future: Engaging in spaving can jeopardize your long-term financial goals. Whether buying a home, funding education or saving for retirement, impulsive spending can hinder progress toward these milestones. Funds that could go to investments or savings spent on unnecessary items may cause you to fall short of your objectives. This not only affects immediate financial health but also compromises future stability.
- Social pressure and comparisons: In today’s consumer-driven culture, social media and peer pressure can amplify the urge to spave. You may feel compelled to keep up with friends or influencers, leading to impulse purchases that don’t align with your financial realities. This desire for social validation can undermine personal budgeting efforts and lead to financial choices that don’t reflect your true priorities.
Tips for breaking the spaving habit.
Now that we’ve covered the good and the not-so-good, here are some ideas to help you move forward.
- Set a budget: Creating a budget helps you monitor how much money you bring in (income), how much you’re spending, and where you’re spending it. Several online budgeting apps can help you get started. Or, grab a pencil and paper and start filling out this worksheet from our friends at Balance. Be sure to include all your big and little expenses, from random cups of coffee at your favorite coffee shop to parking meters to movie tickets to rent and insurance payments. Remember to include how much money you set aside for emergencies and saving goals. While not an expense, these amounts impact how much money you have available to spend monthly. Creating and sticking to a budget can help you avoid spaving and stick to your goals. If you need a little kick-start, visit our Financial Education Center for easy-to-follow, jargon-free videos on budgeting. It can help you know where your money is going rather than wondering where it went.
- Wait before you buy: Before you make a purchase, wait a day, especially for expensive items. This self-imposed cooling-off can help prevent you from making impulse buys. If the item you need is on sale, still shop around. You may find a better price by doing a little searching online.
Take a moment to think about where the item you’re purchasing will go. Do you have room for this item? Do you have a similar item you’ve forgotten about in your closet? Will the item stand the test of time, or will it break, wear out, or go out of style before you’ve paid off your credit card bill? - Save by not spending: The less you spend, the more you save. Before you buy anything, consider how you’d feel if you put that money into your savings account or added it to an emergency fund. Our Online Savings account is a smart place to put your money. You’ll earn 4.00% APY**, and there are no minimum deposit or maintenance fees. The time to start an emergency fund is before a rainy day. Our Rainy Day Savings account earns 3.04% APY† with no minimum balance requirement. To help you from using the money for impulse purchases, you’re allowed two free withdrawals per calendar year.
Final thoughts.
Spaving is more than just a bad financial habit; it’s bad for your budget and poses significant risks to your financial well-being. The consequences of impulsive spending can be far-reaching, from accumulating debt to neglecting savings goals and compromising future stability. By cultivating mindful spending habits, creating a realistic budget, and prioritizing financial education, you can avoid the pitfalls of spaving and pave the way for a more secure financial future, a greater sense of peace, and control over your financial life.
*Black, Michelle, “What is the average credit card interest rate this week? November 5, 2024,” Forbes.com. Published 7 October 2024. Accessed 12 October 2024.
**APY = Annual Percentage Yield. APY is the annualized rate based on a compounding period of one year. When the deposited money earns dividends and the accumulated dividends starts earning dividends as well, we are talking about compounding. Fees could reduce the earnings on an account. All yields except Certificate yields are subject to change retroactively to the beginning of the month.
Rate bonus is for a minimum of $1,000 monthly ACH Direct Deposit into a Farmers Insurance Federal Credit Union Checking Account. Rates are subject to change at any time.
No branch or call center access with this account. The national average for this type of account is 0.46% APY, based on rates published in the FDIC Monthly National Rates and Rate Caps accurate as of 9/16/2024.
†APY = Annual Percentage Yield. Rates are subject to change at any time.
Limit one Rainy Day Account per qualified membership. Rainy Day Savings is an interest earning savings account eligible for 3.04% APY interest on balances up to $2,000 and the standard Membership Savings rate on balances over $2,000 when funded via recurring ACH deposit or other qualifying external funds. Dividends are calculated by applying a periodic rate to the Average Daily Balance in the account for the Dividend period. Interest earned will be credited to the account at the end of the statement period. This account is limited to two withdrawals per calendar year, each withdrawal in excess of this amount will incur a $20 excessive withdrawal fee that must be paid at the time of the withdrawal. This account does not qualify for withdrawal access via debit or check and does not support transactions originating via VRU, online banking, mobile banking, or ATMs. Withdrawals can be made in person at a Credit Union branch or by calling us at 800.877.2345. This account does not qualify for overdraft protection. Account holder must be a member with a regular share account who is in good standing. Current interest rates and the annual percentage yield may be found at the Credit Union’s website, may be verified at a Credit Union Branch or by calling 800.877.2345. Interest rates earned and qualifying dollar amounts for interest earned are subject to change at any time. APYs and eligibility criteria are subject to change at any time. Fees may reduce earnings.
