Conscious Financial Living


Ideas and Opinions

Psychology, Money and Behavioral Finance: Overspenders and Underspenders



People are competitive. They want to be the best. The “Keeping Up With the Joneses {{ahm, Kardashians}}” situation shows that people are constantly trying to one up their neighbors with a newer car, bigger pool, more toys etc. This can wreck personal finances. 

I hear it from a friend all the time. She's broke. Zero in her bank account. Nil. Zilch. She has to make it ____ number of days until her paycheck comes in. Her siblings/parents/grandparents won't lend her any more money, so she asks if I can ...Awkward... 

She is a compulsive shopper. Payday comes along and she "treats" herself to manicures, fresh highlights, a new purse...she "deserves it." She lives a highly stressful life, and what's the sense of working if a person can't indulge in the fruits of her labor? Those few paydays a month she lives a more pampering lifestyle than I do in the entire month. I have no problem helping those in need. I'm a sucker for every cause/rally/fundraiser. Yet, is this friend truly in need? Yes, she is late (again) on her rent. Yes, her cell phone will get shut off. Yes, she doesn't have money to buy gas to get to work. BUT this happens every month. 

A study published in Psychology and Marketing found that people generally justify shopping sprees as an “I deserve it” activity that happens when the shopper is in a bad mood. Furthermore, the study found that grumpy people are more likely to spend money on objects, versus experiences, given buying objects give the buyer instant gratification, while buyers of experiences (concert tickets, vacations, etc) typically have to wait to receive the gratification. However, note that with buying objects, the gratification tends to wear off after the object is purchased. People who buy experience tend to have a longer lasting sense of gratification with the purchase, given some sort of emotional memory is made.

Ok, I get that a person wants to be cheered up when he/she is down. This is why so many people turn to vices, such as alcohol, sex and drugs. There is a temporary feel-good that is attached to these things. However, is compulsive spending on this same line? Is it an addiction, and if so, do people seek out treatment? A study previously published in the Journal of Consumer Psychology states that most people tend to shop when they are feeling down or have a feeling of lack of self-control. Researchers believe that spending money gives a person a temporary sense of happiness and self-control. Let’s highlight the word “temporary.” Those purchases may give a "temporary" sense of self-satisfaction, but what happens to that satisfaction/pride when "needs" cannot be met? More stress. According to the author of Wired for Wealth, three out of four Americans have said that money causes stress in their lives (see link  for the book!). 

Who is the one that needs help? I work hard to make ends meet, to contribute a high percentage to my retirement account, to invest, to pay down all my debt. After all this, there is no money left for me to pamper myself, let alone bankroll someone else's lifestyle. So am I a bad person for not financing her "needs" when she chooses her own "wants" over them? I have been told that I "need" to lighten up with my finances and to splurge/enjoy life. So am I the one in need?

I admit it. Even with having my finances in order, money still stresses me out. There are sometimes I want to go on a shopping spree. There have been countless times when I fill my online shopping cart with multiple items that I do not need. However, the kicker is when I see that total in the checkout page. Seeing that total makes me have anxiety. I start to contemplate every item in the cart. Most of the times I end up not purchasing anything. I have financial goals for myself and I work for those goals daily. I would rather set myself and family up for future success than wear fashionable labels, but who is to say that one way is right or wrong? I guess if I am comparing compulsive shoppers to addicts maybe it's only fair to say those with savvy/frugal/cheap habits have a money-spending phobia. There's always the opposite to the extremes.

The overall goal should be to live comfortably between those extremes-and obviously to find inner happiness-- Namaste ;)