What is spaving and how can you avoid this financial trap?

Have you heard of “spaving”? It is a portmanteau of the words spending and saving , and it refers to the phenomenon where individuals try to save money but end up spending more due to discounts, sales or special promotions , according to personal finance experts. In other words, people may think they are saving money by taking advantage of deals but, in reality, they end up spending more than they originally intended. “Spaving is the term used to describe spending more to gain access to such things as savings and free delivery or a discount on future purchases. It is a very clever marketing tactic that is used to get people to spend more than they otherwise would ,” explains Carol Glynn, founder of Conscious Finance Coaching. “It is often a clever way for stores to offer discounts or special offers without reducing their cash intake.” About six in 10 Americans (58 per cent) admitted to spaving in a 2020 survey of 3,000 respondents by personal finance management website Mint. The survey found that 32 per cent of those polled admitted to buying more online simply to qualify for free shipping while 15 per cent purchased items just to use a coupon and 11 per cent bought items in bulk only to waste them. Three common tactics advertisers use to convince shoppers to spend more to save include urgency, exclusivity and product bundling, the poll revealed. Typically, brands offer incentives such as discounts or free home delivery provided you reach a specific cart value, says Anselm Mendes, executive director of sales and technology at financial services provider Continental Group. It is not uncommon for people to pick up a few more nominally priced items to reach that value and inadvertently end up with unwanted products, he warns. However, the general idea of spending money now to save money in the long run can be a good idea, according to Adam Dalby, a chartered financial planner at Abacus Financial Consultants. For example, paying for a subscription annually instead of monthly can usually reduce your overall costs for the year, or another example might be paying more for a high-quality item that lasts for five years over the cheaper version that needs to be replaced every year, he explains. “To use a local example, Dubai residents will be familiar with the rental market here, where you’ll often be able to secure lower rental rates if you have the ability to pay the full year’s rent upfront in one cheque,” he says. “But spaving generally has negative connotations as it usually relates to impulse purchases, rather than carefully planned, sensible financial decisions – thus, we’re typically talking about spending traps, not clever financial planning.” For example, buying a new pair of running trainers because they were reduced to Dh500 from Dh1,000 ($272) might feel like you have saved Dh500, Mr Dalby says. But if you already have a perfectly fine pair at home and never planned on buying new ones, then you are simply spending Dh500 more than you had planned, he suggests. Similarly, Ms Glynn cites an example when she went shopping for a new couch during the recent Black Friday sales and there were two prices on offer. The in-store offer was to pay full price but get 50 per cent back in store credit, while the store’s online offer was 25 per cent off the full cash price. “Fifty per cent back is very tempting. So, I looked around the store to see if there was anything I needed or even wanted that I could spend the 50 per cent vouchers on. I realised quickly I would only be buying something for the sake of it,” she recalls. “I decided to buy the couch online, saving myself 25 per cent. I also found another 10 per cent discount code online so I saved even more.” This is saving because Ms Glynn got the couch, has no unnecessary clutter or items she does not actually want and also spent less. Spaving would have meant that she spent full price to get the couch and ended up with a lot of stuff that she never wanted. “It’s very important to ask questions about these offers. Be clear on the terms and conditions to make informed decisions,” Ms Glynn recommends. However, spaving can make sense sometimes, she says. For example, if you have all items in your cart and then realise you have to pay for delivery. “Let’s say, it’s Dh50. Often, they will offer free delivery if you spend a certain amount. Let’s say you are Dh50 or a little over Dh50 away from that limit,” Ms Glynn explains. “It can be worth adding something worth Dh50 that you actually want and will use. But just be careful to not end up spending a lot more than the Dh50 delivery cost to get an item when actually if you just paid for the delivery, it would have cost just that Dh50.” Sales are psychologically hard to resist – if we feel like we are getting a deal, we get a spike of dopamine. That, combined with the temporary spike in happiness levels as a result of getting something new, prompts people to rush to the mall, even when they do not actually need anything, says Alison Soltani, founder of savings website Leap Savvy Savers. “Sometimes, buying things on sale can be beneficial, especially staple items. If you need cleaning products, for example, and you see them on sale and buy them in bulk, this will benefit you as you’re highly likely to use them in the future,” she says. “However, buying things simply because they’re on sale is what often leads to overspending, not sticking to your goals and even debt. You will know when you’ve fallen victim to spaving because you may feel regret, anxiety or frustration after the initial buzz wears off.” Below are a few tips to avoid falling into the spaving trap. A shopping list is just a plan for how you are going to spend your money – and like most things related to money, it’s always best to remain calm and stick to the plan, Mr Dalby instructs. “If there are discounts and deals available on shopping list items, then brilliant,” he says. “But remember that spending on things not on the list is additional spending you have not planned or budgeted for, regardless of any associated deals or discounts – try to avoid these distractions.” Sticking to a stringent shopping budget may not be actionable if you shop with credit cards, Mr Mendes warns. Instead, earmark a specific shopping budget in cash or a debit card to avoid cost overruns, he suggests. If you come across a tempting offer, try delaying your purchase for a set period (for example, 24 hours). This gives you time to consider whether it is a necessary expense, says Sophia Bhatti, director of Dubai-based Wimbledon Wealth. Create space and time between the impulse to buy and actually purchasing the sale item, Ms Soltani recommends. This could be a personal rule that you do not buy for 24 hours or a week after you feel the impulse. That gives you time to decide whether you actually want to purchase or whether it was just an impulse, she says. “The 72-hour rule is a good rule of thumb to control spending habits. It simply states that for non-essential purchases, just wait 72 hours before making the purchase,” according to Mr Dalby. “When we do this, we shift the decision-making from the emotional part of our brain to the logical part. In most cases, you realise you never really wanted the item to begin with. And sometimes you’ve thought about it further and you have realised how useful the item would be, so you make a well-thought-out decision to buy it.” Retailers often send promotional emails that can tempt you to make unplanned purchases. Consider unsubscribing from these emails to reduce the temptation, Ms Bhatti suggests. “From emails in your inbox updating you on all the latest deals to targeted ads coming up in your social media feeds based on the personal data from your phone, we are constantly being marketed to,” says Mr Dalby. “Unsubscribe from email lists, turn off notifications and try to limit how much this infiltrates your day-to-day life.” The best way to resist spaving is to build awareness, according to Mr Mendes. Public domains are rife with information about various strategies that retailers employ to encourage spaving. The awareness of such practices will help you shop more intuitively than impulsively, he says. Create a monthly budget that outlines your necessary expenses and discretionary spending. Stick to this budget to avoid impulse purchases, Ms Bhatti says. If you are sticking to your budget – that is, you are saving and investing what you need to and on track to achieve all your short, medium and long-term goals – then despite not being optimal, there is probably no harm in spaving, Mr Dalby says. “People are not robots and if you enjoy getting a deal or picking up a few novelty gifts or gadgets at the checkout, then it’s not going to derail your financial future if it’s all within your budget,” he points out. “For example, if you follow a 50/30/20 budget [50 per cent on needs, 30 per cent on wants and 20 per cent towards saving and investing], then there might not be any harm done if your spaving habits are all within your 30 per cent limit.” Keep them visible, whether it is a file on your desktop or stuck on your kitchen fridge, Ms Soltani says. Refer to your goals and when you want to spend, ask yourself if your spending is helping you reach your goals, she says. Even better, find an accountability partner and ask them for their opinion on whether the spending is going to benefit your life or not. “Become consciously aware of your values: How do you want to live your life and what is important to you? When you feel the desire to rush out to a sale, ask yourself whether the spending aligns with your values,” she recommends. One of the best ways to practise financial discipline is to adopt the save first, spend later mindset, according to Mr Mendes. "By making sure that you’ve saved what you planned for right at the start of the month, as soon as you’ve received your salary, you remain disciplined and on track to your financial goals," he says. Consider using cash for your discretionary spending, Ms Bhatti suggests. When you have a limited amount of physical money, you are more likely to be mindful of your purchases, she says. Before making a purchase, compare prices at different stores or online platforms. This can help you find the best deal and avoid overspending, she adds. "Price comparison sites allow you to see the price trend of a product in recent months and rationalise whether or not the deal is worth it," Mr Mendes says.

What is spaving and how can you avoid this financial trap?

The marketing tactic is used to get people to spend more than they otherwise would