As I was writing this article, I received my weekly newsletter of newly listed properties in my area. I browsed through the million-dollar townhouses fresh on the market and the 800sqft condos quickly being snatched as "investment properties".
With such a hot market and young people frequently being reminded of the importance of a home purchase, how it's meant to be our nest egg and how we are throwing away our money with rent, it's no wonder we feel the pressure.
Properties on my street went up $150,000-$200,000 in just a couple of years, FOMO is completely understandable.
Yet I couldn't help but wonder how many of these purchases quickly turned into regret once the buyer's high faded. Buying a home is a great achievement but it's also a big commitment, were all the buyers really completely happy with their purchases?
Serendipitously, my husband sent me a recent article claiming that "64% of millennials have regrets about buying their current home".
That sold me, I had to figure out buyer's regret.
What is Buyer's Remorse?
You went shopping, it was fun, therapeutic even for some. Then you come home with the goods and suddenly the feeling flips.
Welcome to buyer's remorse.
Suddenly, you feel anxiety about the purchase. Was it the wrong item? Did I overspend? Do I even like it?!
Some people regret their purchase because they overspent, maybe even went into debt for the purchase, or maybe they can afford it but still feel like they'll never actually use the item. Either way, it feels like regret and it sucks.
This is no illusion, it is so real that there are buyer's remorse laws, The Cooling-Off Rule. While it doesn't cover every purchase, it allows a buyer to change their mind within a certain number of days and return their purchase.
But let's be real, even returns are a bit of a hassle.
I've dedicated my work to helping people with their finances and to this day it is mind-boggling how the human mind works and how our quickly feelings can change, especially when it comes to money-related subjects. Buyer's remorse is a majorly intriguing one.
The Psychology Behind Buyer's Remorse
It seems like I'm not the only one, psychologists have performed in-depth studies into buyer's remorse. It is based on a concept called cognitive dissonance, which means a state of psychological discomfort due to an internal conflict. Here's where it gets juicy.
there are 3 main elements related to cognitive dissonance and buyer's remorse: effort, responsibility and commitment.
Effort - How much of your resources were invested in this purchase? Purchases requiring lots of resources but returning low rewards will lead to buyer's remorse.
Responsibility - Did you buy this out of your own free will? Purchases that are beyond your control tend to lead to less buyer's remorse, in other words, you didn't even have a choice, so why worry?
Commitment- How long will this purchase affect you? Buying a house or a car is usually a longer-term commitment than let's say, a cookie! The longer the commitment the more likely you are to experience buyer's remorse if you don't love the purchased item.
Sometimes, we buy to keep up with the Joneses. That can quickly lead to destructive financial behaviour, check out our article on Herd Behavior to make sure you're bulletproof when it comes to that, it's more unconscious than we tend to think!
Why Does Buyer's Remorse Happen
Ultimately, it boils down to the experience not matching your expectation.
The trouble is that we've all become accustomed to our consumption-based lifestyles. Or shall I say, overconsumption?
We've become enamoured with shiny things and have come to believe that the next purchase will fulfill us, make us happier, better, sexier, smarter, etc. We build lofty expectations for consumption.
But does that ever really work?
Sure, buying can be fun, it can certainly create temporary enjoyment, some lasting more than others. But ultimately, no purchase will absolutely change your life, we all fall back into our median happiness and that is a product of much deeper aspects of life.
It's no wonder the 3 main purchases that cause the most buyer's regret are :
Those regretting their home purchase say it's because their purchase was hurried and the property wasn't right for them.
Especially millennials, where 63% regret their home purchase. The common regret among all age groups is underestimating costs such as maintenance and mortgage rates.
So, don't feel bad if you're renting or crashing at your parents' for a while longer, regret feels worse!
Those regretting their car purchase feel like they overspent and were influenced by the magic of car salespeople.
Those regretting their education decision are disappointed by the employment opportunities and the heavy debt-load they end up.
Knowledge is great, but its real power is in its application, so how do we apply this information to improve our own financial states and reduce financial and psychological stress?
How to Avoid Buyer's Remorse
Financial education is always the best defence against financial mishaps, stress and outright bad decisions. When it comes to buyer's remorse, it's all about practicing smart and conscious spending.
In my book, Millennial Money Queens, I devoted an entire chapter into becoming a smart spender We cannot avoid spending money altogether, so let's learn how to make it work best for our mind and for our bank accounts.
Here are 3 strategies to help you beat buyer's remorse:
1- Give yourself time
Before any purchase, especially big ones, give yourself time before buying. Impulse buys almost always end up in regret. Practice walking away from things you may not absolutely want or need.
You can easily save hundreds of dollars a month this way.