Higher costs leave many shoppers with ‘decision fatigue’
BY FRANCINE KNOWLES Business Reporteremail@example.com January 31, 2012 12:26PM
Updated: March 1, 2012 8:09AM
Feeling overwhelmed in dealing with higher prices on a range of products and services, while your pay has dropped or flatlined?
You’re not alone, and there are successful strategies to tackle the challenge, experts say.
Many consumers are suffering from “decision fatigue” in dealing with higher prices, said Nina Diamond, who does research on consumer behavior and is associate professor of marketing at DePaul University.
“They’re trying to effectively allocate the same resources or fewer resources over an array of products and services that are more expensive than they used to be,” she said. “Every day they have to make hard decisions about where to deploy those resources, about whether to pay the mortgage or whether to pay tuition or whether to buy food or what food to buy. That tires people out, and they have less and less decision-making energy available.”
Prices in the Chicago area from food, to gasoline, to homeowners insurance, parking, tolls and other necessities have risen in recent years. To keep the situation from wreaking havoc on your budget, here are some tips from Brenda Williams, associate director of DePaul University’s Financial Fitness Program:
† Recognize that budgeting doesn’t mean you can’t enjoy life. Where you can, instead of cutting out, look for ways to cut down on your spending in certain areas.
† Don’t estimate. Track your spending for 30 days, so you’ll know exactly where your money is going and can set up a realistic budget.
† When putting together your budget, 70 percent should be allocated to living expenses, including rent or mortgage, food, transportation; and 20 percent to savings. The savings allocation should include 10 percent for retirement, 5 percent for an emergency fund and 5 percent for short-term goals, such as saving up for vacation or to buy seasonal clothing.
† No more than 10 percent of your budget should be eaten up by debt. If debt is consuming more than that, when considering what to cut from your budget, focus on reducing the 70 percent you spend on living expenses, instead of cutting savings.
† Examine your food and entertainment spending. They can be budget busters. Look at reducing your food budget by shopping at less expensive grocery stores, buying in bulk and using coupons.
† Use the envelope method. If you’re having trouble adhering to your budget, use cash instead of your debit card. Place money for your budgeted item, such as food, in an envelope. As the money dwindles during the month, it will help you be more conscientious about spending.
† If you’ve run out of places to cut, you may need to get a second job.
† Shop smart online. When shopping online, be alert for deals. Take advantage of websites like retailmenot.com, where you can get promotional codes for discounts on purchases or free shipping at various retailers; farecast.com, which tracks airline prices; and restau
rants.com, which offers discounted restaurant gift certificates.