Buying but not budgeting - the true cost of impulse buying

Britons continue to impulse-buy despite economic woes but they are failing to budget for household bills and essentials, according to new research from the Santander 123 account which has found that eight out of 10 Brits have made impulse purchases in the past 12 months.

More than half of women (55 per cent) and 42 per cent of men said their purses most regularly fell prey to food or drink not on the supermarket shopping list.

Top five impulse-buys by men and women

Women
Food/drink not on the shopping list (55%)
Clothes (46%)
Books/magazines (37%)
Takeaways (36%)
Going out for dinner (32%)

Men
Food/drink not on the shopping list (42%)
Takeaways (34%)
Clothes (29%)
Going out for dinner (29%) Wine/beer (29%)
Books/magazines (25%)

Also nearly a third of women (31per cent) said they spontaneously spent on toiletries like make-up and perfume, and almost one in four men (23 per cent) couldn’t resist electrical gadgets or equipment.

But as a consequence of out-of-control spending, many people surveyed said they had found themselves in financial difficulty, often left unable to pay household bills and expenses or severely in debt.

Around 16 per cent of impulse buyers, equivalent to around 6 million people, have on occasion been left short of cash because of these impulse purchases, and around 1 million people (3 per cent) have been left unable to pay household bills or buy essentials.  Another 1 million impulse buyers (3 per cent) have on occasion been left in severe debt because of their expensive habit.

With Santander’s recent findings revealing that the cost of household bills has risen by 71 per cent in the past decade (almost twice as fast as the 38 per cent increase in inflation over the same period), it is a stark warning of the importance of effective budgeting.

Budgeting neglect

The findings reveal the negative knock-on consequences of impulse buying are exacerbated because millions of Britons do not manage their household finances effectively.

Almost half of people don’t budget for their water (47 per cent) or gas bill (45 per cent). Some 42 per cent of people don’t set aside money for their council tax payments, 40 per cent fail to budget for their broadband and landline bill, and 34 per cent for their electricity bill.

The research also found more than half of UK adults surveyed (55 per cent) don’t budget for rent or mortgage payments and 61 per cent don’t allocate a budget so they can pay for motoring costs such as fuel. Three-quarters of people (75 per cent) say they don’t budget a certain amount to put money into savings every month.

Carlos Palacios, banking director at Santander, said: “Impulse buying is fine if you can afford it but many people are putting themselves in financial difficulty by failing to control their spending and their budgets. It is important to ensure you prioritise the essentials like household bills and make sure you can afford to cover the cost of these necessities before spending money spontaneously.”

What drives impulse buying?

Two-fifths of impulse buyers (39 per cent) say they just can’t resist bargains when they see them and 36 per cent claim they do it to reward themselves. Some 15 per cent impulse-buy because they feel depressed or stressed while 13 per cent of impulse buyers say they just have a lack of self-control.

Well over a million people (4 per cent of impulse buyers) ‘regularly’ make impulse purchases when they know they can’t afford them and 12 per cent ‘occasionally’ do so, putting themselves under financial strain.

Carlos Palacios continued: “Increasing household bills are one of the biggest causes of squeezed consumer finances so people should look at what they can do to reduce these costs, such as installing home energy monitors, analysing their energy usage or changing their utility suppliers.

“Our new 123 Current Account can also help make a real difference to people by providing interest on balances and cashback on their everyday bills.  It’s the only account of its kind available and a completely new way to manage your money and household finances.

People are most likely to make an unplanned purchase in the supermarket, cited by 57 per cent of impulse buyers as a likely place to make one. Nearly half (46 per cent) of impulse buyers say they would be likely to splash their cash unexpectedly when browsing the internet, and 11 per cent when in duty free at the airport.

Food and drink is the most common type of impulse buy, followed by clothes and takeaways. Other common impulse purchases include going out for dinner, accessories such as handbags, and even holidays.