I remember my first (and last) store credit card. I had just begun a job at my favorite retail store and was instantly approved for a shiny new card that gave me seemingly magical access to beautiful new clothes with a simple swipe. A word of caution to those of you who love fashion: working in retail puts your willpower and budgeting skills to the test every minute of each shift. Add on a store card, and you are a goner.
I started off strong, only buying those items that came in at a reasonable price with my discount. However, as time went on, justification came naturally. Each time I would try on a new item, my coworkers would shower me with compliments. The excuses flowed easily; I kept buying, and rational thoughts were nowhere to be found.
My month-long shopping extravaganza came to a screeching halt when I received my first statement with an amount almost tripling my wages. I was mortified. As an aspiring financial advisor, this was the epitome of behavioral finance I had learned was potentially harmful to long-term financial freedom. During my next shift, I made a comment to a coworker about my own personal “Mount Debtrest,” and her response of, “Oh, my card will always have a balance on it,” gave me a glimpse into how easy rationalizing these purchases could become if I did not change.
The good news is loving fashion and being financially responsible do not have to be mutually exclusive if I can implement a few safeguards to keep me accountable. These are tools I use to keep my shopping habits in check:
FIFO: For those of you who chose to enjoy college and not study accounting, this is a term for inventory systems meaning “first in, first out.” I decided to adopt this method for my closet. When I am interested in buying an article of clothing, I will search my closet for something I have not worn in a six-month-to-one year timeframe and donate or sell it in order to make room for something new.
Online Shopping: I do recognize the limitations of ecommerce. However, something I have learned is I do less impulse spending when I limit shopping to the comfort of my home. Some additional benefits include not having the opinions of others influence your decisions, more time to think on the purchase, and the potential to save more money from coupon codes not offered in stores.
Cash Back Browser Extensions: Cash back from purchases sounds too good to be true. I can personally verify it is legit, though. I use Rakuten and earned over $100 from online purchases during the holiday season last year.
Renting vs. Owning: A few renting-specific websites and retail stores offer the option to rent clothes and try new styles via monthly subscription. You can choose pieces to try, keep them for a month, and then ship them back or purchase for a discounted price. Renting is a great option for people who like to try trendier styles without the risk of only wearing something once.
Some of you may roll your eyes at this entire story. Loving fashion may seem materialistic, but it feels like a hobby to me. Regardless, the core issue is limiting your purchases in general to pieces you truly love, whether it is a pair of shoes or a new car. Whatever your hobby, being practical and responsible with it will make your financial journey feel like walking a path instead of climbing a mountain.
The opinions expressed are those of PYA’s Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.
PYA Waltman Capital, LLC (“PYA”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about PYA’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. PYA-20-50