Why Does Everyone Have Terrible Spending Habits?

Money is a crucial part of your life.

How you spend it, is as important as how you earn it, if not more.

While financial literacy is important, understanding the psychology of spending is also valuable.

Let’s take a deeper dive into factors that influence our spending, and what we can do to make better decisions.

Your Emotions

When you make purchasing decisions, your emotions play a bigger role than you realise.

Emotions influence the decisions you make, and your spending habits are no different.

You might buy a certain product because it makes you feel:

• Happy

• Confident

• Successful

Or, you might avoid certain purchases because you’re afraid of feeling guilty etc.

Look at investments.

Why is everyone so scared to invest their money?

The risk causes you to experience negative emotions.

Like the idea of losing your money, when in reality, there’s a better chance of growing your wealth.

The best example of this is “retail therapy.”

Many people turn to shopping as a way to cope with negative emotions.

It’s the same as people resorting to drugs or alcohol, only more accepted.

Shopping can be a way to distract from negative feelings and to gain a sense of control.

But, the temporary joy that shopping provides can spiral into a habit of overspending.

Social Influence

You’re influenced by the people around us when it comes to spending.

We’re all guilty of this.

Social media can also play a big role in shaping your spending habits.

Everyone’s competing with each other to outdo their peers.

If a celebrity or content creator promotes a product, their followers are more likely to buy it.

Seeing other people’s purchases can create “FOMO”, leading you to buy things you don’t want.

Peer pressure can also play a role in your spending decisions.

If you’re shopping with friends and they all buy something, you might feel pressured to buy it too.

This social influence can be difficult to resist. But, it’s important to remember that your financial well-being should always come first.

My advice?

Follow this simple spending habit…

We’re Wired to Seek Pleasure

Our brains are wired to seek pleasure and avoid pain, or any form of discomfort in fact.

You’re often drawn to products that promise to make you feel good.

This could be through:

• Improving appearance

• Making lives easier

• Providing entertainment.

Marketers and advertisers know this. They often use it to their advantage by creating ads that appeal to our emotions and desires.

A car commercial might depict the driver as successful. A perfume ad might suggest that wearing the fragrance will make you more desirable.

This desire for pleasure can lead you to make impulsive purchases that you may later regret.

One way to combat this is to practise delayed gratification.

Instead of buying something right away, wait before making the purchase.

This can help you assess whether the purchase aligns with any long term goals that you might have.

Habits are Hard to Break

Our spending habits are ingrained and hard to change.

You might have routines that you’re not aware of.

Or, you might be stuck in a pattern of overspending that’s difficult to break.

This is the problem with a lot of habits.

They’re subconscious.

One way to break out of these habits is to become more mindful (conscious) of spending.

Paying attention to emotions, as well as taking the time to reflect on spending decisions.

It also means being intentional about setting financial goals and tracking spending.

Lack of Financial Literacy

A lack of financial literacy leads to a lack of money.

If you don’t know how valuable money can be for your future, by…

Investing

Starting a business

Building an emergency fund

…it’s going to be easier to spend, especially on things that don’t bring value to your life.

The more you learn about money, the better your financial future will be.

And if that’s something you want to do, you’re in the right place.

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