Avoiding spending pitfalls in retirement
Many retirees turn shopping into a full-time job, says a consumer behaviour expert
Financial success in retirement requires more than just being smart about saving money. It should also include an analysis of how you’re going to spend your money.
Consumer psychologist Kit Yarrow, 55, author of new book Decoding the New Consumer Mind says retirees should avoid spending pitfalls such as making too many bargain purchases for things they don’t need or turning shopping into their new fulltime job.
Yarrow is a professor of psychology and marketing at Golden Gate University in San Francisco and has interviewed thousands of consumers, including retirees.
People who are retired may also want to avoid impulse buying and make sure they have other ways to socialize besides shopping, says Paco Underhill, 62, author of What Women Want: The Science of Female Shopping.
Research shows that people aged 50 to 74 spend about 12 per cent of their income on food, 9 per cent on entertainment and 3 per cent on clothing, according to a report from the non-profit Employee Benefit Research Institute. More than 40 per cent of their spending goes to their home and home-related expenses, the analysis says.
Yarrow and Underhill offer these shopping tips: 1. Create a new budget. Retirement is a fresh lifestyle that deserves a fresh budget, and it starts with thinking about what’s really necessary and what brings you joy, says Yarrow. Make a detailed list of essential and discretionary expenses, she says. That way you can enjoy shopping when it’s appropriate and not get side-swiped by unanticipated expenses, she says. 2. Make a shopping list and stick to it. Much of the way stores are organized is to propose things that aren’t on your list but you buy on impulse because you think you might need or want them, Underhill says.
Don’t shop when you’re hungry or tired, he says. About 20 per cent of produce purchases get thrown out because the food spoils before it’s used, he says. Buy only what you need, and use the leftovers for soups, stews and smoothies before they go bad. 3. Distinguish between shopping for necessity and for socialization. Some people use shopping as their main reason for getting out of the house to see other people, Underhill says. It’s fine to get out once a day for some milk or vegetables, but realize that is fulfilling the need for socialization, not just the need for acquisition, he says.
Part of being a good shopper in retirement is not getting your needs mixed up, he says.
If you need socialization, then volunteer at the local hospital on a rou- tine basis where you get to fulfil your social needs. 4. Don’t let anxiety control your spending. “We’re all more anxious today, and that anxiety is a bit more ramped up for retirees,” Yarrow says. Anxiety affects people differently. For some it leads to an unnecessarily austere life. For others, anxiety is at the heart of impulsive, feel-better purchases and hoarding. For many shoppers simply being aware of how anxiety may be distorting their decisions helps, and so does waiting before making impulsive purchases, she says. 5. Be careful about bargain shopping. Consumers often use bargains for psychological permission to buy, Yarrow says. Sales allow shoppers to cave in to tempting purchases they might otherwise regret. “I’ve found that shoppers who are in the throes of bargain fever can become so focused on the thrill of getting the deal that they lose sight of what they’re spending and often actually spend more than less bargain-oriented shoppers. 6. Don’t make shopping your new job. Some retirees have turned shopping into their new profession, Yarrow says. The act of selecting and choosing an item can deliver a sense of mastery and competence that mimics a sense of professional expertise, she says. But for most people, the more they shop, the more they’ll buy. 7. Resell, bargain and barter. Retirees should use technology to sell things they’re not using as well as search for the best prices, Yarrow says. “I know one retiree who has mastered the marketplace through technology. She negotiated lower rates for her cable, phone and exterminator contracts. She sold some designer handbags on a luxury resale website, and she purchased a new chandelier at a local store for 30 per cent less than the marked price by showing the owner of the store an online listing on her smartphone.”