Are you an emotional spender?
However good you are at managing your money, your emotions can urge you to make financial decisions that could end up costing you a small fortune.
Emotional spending occurs when we spend more money on something because we feel bored, lonely, worried or perhaps because we feel like celebrating a particular life event like getting a new job.
Unless you are a cold-hearted machine, it is impossible to keep your emotions in check when considering your spending decisions. However, the good news is there are numerous ways you can take advantage of in ensuring they don’t inhibit you in accomplishing your long-term financial goals, like getting on the property ladder, saving for retirement, or clearing existing debt levels.
According to the Money Advice Service, 19 million Britons are spending £26.5 billion on credit cards due to emotional life events.
Considering this whopping amount, Peachy has examined the different emotions that can impact your buying decisions, how to recognise your triggers and some of the methods you can use to manage them.
Emotions that can affect your spending
Several different emotions can trigger you to you overspend. The important ones are, although not an exclusive list:
- Loneliness – many turn to shopping when they suffer loneliness or sadness in an attempt to cheer themselves up.
- Boredom – often leads to impulse purchases, with many browsing online websites or hitting the high street to entertain ourselves by spending money.
- Stress – if we feel anxious or particularly worried about something, buying a purchase aids us in feeling better because we feel like we are in control of an aspect of our lives. Sadly, overspending often leads to more stress caused.
- Jealousy – envy is one of the worst feelings that spurs us to spend when we don’t need something. Envy over our friends and peers having some new clothes, accessories or holiday will urge us to compete and attempt to do the same, or worst spend more to seem even ‘better.’
- Excitement – all new things are exciting, whether a holiday is booked, tickets to a gig or a new handbag or tech gadget. This feeling of excitement compels us to spend.
Emotional spending and its impact
Whilst emotional spending will provide you with an instant sense of gratification, thus making you feel positive at that precise moment; the long-term outcomes can be dire, mainly if you’re relying on credit to fund your purchases.
Emotional spending is very similar to emotional eating. We are all acutely aware that cakes, chocolate and crisps are bad for our diets, yet we still eat them regardless because they provide that immediate comfort that we are craving. However, overeating will put on more body weight, making it harder to shift the pounds and kilos at a later date.
Similarly, overspending is precisely the same. If you frequently over-spend because you let your emotions get the better of you, it will take a long time to repay what you owe.
Even if you have not used your credit cards to pay for the purchases, it does not matter. Spending all of your disposable income you have each month will eat away at any financial goals you are seeking to achieve – clearing existing debt, saving for a deposit for a first-time buy or that summer holiday.
Identify what triggers your spending
To combat emotional spending, you will need to determine what are the triggers that set you off in the first place.
Carefully consider all the times you have overspent recently – did this occur after a life event like a pay-rise or a job loss? Did you embark on a spending spree to celebrate or commiserate?
Alternatively, did you see your friend’s new jacket on social media, namely Instagram, then felt envious and decided to go on a clothes shopping spree to compete?
If you cannot locate what precisely urges you to spend frivolously, attempt to record a simple ‘spending diary’ of where you note how much you spent and on what, and how were you feeling at that time.
Knowing your triggers and the feelings that produce them will help you avoid further emotional spending.
Control your emotional spending
So, the next time you feel prompted to spend your disposable income, ask yourself these following five questions:
- How do I feel?
- Why am I buying this?
- Do I actually need it?
- Can it wait for another time? (If it can, then maybe you don’t actually need it)
- How will I pay for it?
If you can pause for a moment and answer these questions, they will aid you in establishing whether you really must purchase something, or whether it is only an impulse purchase.
It is also worth noting other ways to react to your emotions rather than spending. For example, if you are feeling particularly stressed, maybe do some exercise instead of heading to your wallet? Getting out and being active is a wonderful way to relieve stress, and in the process, stop you from spending money you probably do not have.
Another good distraction is reading – keep a good book to hand and reach for it every time you feel the compulsion to spend. If reading is not your cup of tea, consider another hobby to distract you.
Moreover, if you’re still struggling, talk to a trusted friend and call them each time you feel tempted. Having someone you trust politely remind you of the impact of splashing out can have on your monthly budget is often a welcome shock you need to jolt you back into reality.
Being aware of what triggers your emotional spending and the ways you can distance yourself from acting on them can make a massive difference to the way you feel about managing your money.
Rather than your spending urges controlling you, you can empower yourself so you can use your money wisely and achieve those financial goals you have set yourself, no matter what they are.
How do you control emotional spending?
Do you have any tips to share with the Peachy community?
Let me know below.