Break bad shopping habits to avoid a debt hangover

Personal Finance

Suffer from a bad holiday debt hangover last year that you’re hoping to avoid this season? You’ll need a lot more than willpower to change your shopping behavior, says Joseph Grenny, coauthor of “Influencer: The Power to Change Anything.”

At the very least, you need to arm yourself with knowledge, a notebook and a strong-willed shopping buddy. A few other simple moves will help a lot, too, other experts said.

“One of the reasons people are so bad at changing their own behavior is because they’re blind and outnumbered,” Grenny said. “They think it’s exclusively a willpower issue because they’re blind to how many things influence us.”

Grenny, who also is president of Utah-based consulting firm VitalSmarts, says his firm recently conducted an experiment with 9- and 10-year-olds to see what factors influenced their spending. The experiment can help illustrate what you’re up against this holiday season and how you can effectively combat it.

The researchers took two dozen youngsters and told them that they could each earn $40, which they could spend or save. Their cash -- or what they spent it on -- would be provided to them at the end of the day.

They asked the kids how much of the money they hoped to save, and the typical participant wanted to walk away with $30 to $35. (You may have done something similar in coming up with a holiday gift budget.) Researchers also gave each child a piece of paper and a pencil but didn’t instruct them on what to do with it.

Then they put these kids into “an impulse-rich” environment, a room decorated with posters of candy where the kids were asked to perform a task that involved touching candy too. (Think of the samples that many retailers hand out at the mall.)

The kids could buy items in the room by deducting the sales price from the amount they were going to earn, essentially providing them the ability to buy on credit.

Little bags of Skittles that normally would sell for less than 75 cents were on sale in this room for $8 -- a price that no one in their right mind would purposefully pay, Grenny said.

But other kids, confederates of the researchers, were sent into the room and started buying candy at that outrageous price, creating acceptance of the activity and peer pressure.

Researchers turned up the heat with “pricing pressure” by putting the candy on “sale,” slashing the price 50% to a still-outrageous $4.

Faced with all that temptation and peer pressure the kids spent like drunken sailors, going home with an average of only $13 in their pockets. Some were actually in debt.

At the end of the experiment, the kids got their candy and cash and were interviewed on camera. Those who had spent more than they planned were disappointed with themselves, but when asked why, “they answered the same way as adults have answered us for the past 25 years,” Grenny said: They blamed themselves for a lack of willpower, apparently unaware of how the researchers had stacked the deck against them.

According to Grenny, the most common responses to why they were disappointed with what they had done were “I don’t know” and “I guess because I was weak.”

How can you become stronger?

A second group of youngsters was introduced into a similar environment but given two new tools to combat it: a friend and information about what they should do with the pencil and pad.

Researchers told this group of kids that they should track their spending and see how close they were to meeting their savings goals.

They also introduced a number of “friends” into the room, who would subtly team up with the kids in the experiment, giving them emotional support to stay within their spending guidelines.

The results were dramatically different. This group of kids went home with an average of $34.44. Every one of them met their savings goals, Grenny said.

“We are incredibly naive about what influences our behavior,” Grenny said. “The best thing we can do is become conscious and competent about those influences.”

But before you figure that a notebook and a buddy are all you need to keep your shopping on track, Grenny emphasizes that it’s extremely important to have the right friend by your side. Too often, best friends can become enablers who encourage bad habits that we want to change.

If your friends are not accustomed to curbing your consumerism you need to talk to them before you hit the mall, explaining how much you need to stay on budget and enlisting their help, he suggested.

Other experts note that you can also arm yourself against overspending by planning your purchases in advance and getting enough information about what you’re buying to know whether it’s a bargain or a bogus sale.

What the kids did when buying the “bargain” Skittles is an exceptionally common money mistake, said Matt Wallaert, who consults for the money management website Thrive. A concept called anchoring makes us think that a “sale” item is a bargain because we anchor to the original price, even though the item may never have been worth that much in the first place, he said.

If you think about what you’re going to buy ahead of time, you can price-compare on the Web before you go to the mall. That can help you determine whether an item is a screaming bargain or simply marked down to a price that’s still too high, like the Skittles.

Planning can also help you find coupons that can reduce your price even further, said Sandra Hanna, who co-founded, a money-management website.

Although some of these coupons can be used only for online shopping, there are also lots of them that can be printed out and taken to stores.

If you searched Google with the keywords “Macy’s and coupon,” for example, you’d click through to a Macy’s advertisement that provides a “Wow Pass,” good for as much as 20% off selected items through last week. Bloomingdale’s is your retailer of choice? A site called RetailMeNot offers a host of coupon codes for online shopping.

Grenny adds that you shouldn’t be reluctant to bribe yourself for good behavior. It doesn’t have to be an expensive reward -- or even a financial gift. It can be a bubble bath or giving yourself permission to slack off later.

“By declaring intentional goals and giving yourself an award for achieving them, you increase your chance of success,” he said. “The one place where incentives always go right is when you are incentivizing yourself. You are the one person who knows what you really want.”