Life

How To Avoid The Pressure To Spend

By Nest Wealth on 11/05/2016Article 5 Minute Read

Read More

We all like spending money on the things we enjoy, whether it’s dinners at nice restaurants, clothes, cars, or vacations, because when we buy we receive instant gratification. However, problems begin to surface when we overspend on wants instead of needs, or, when we spend money we don’t actually have.

We all like spending money on the things we enjoy, whether it’s dinners at nice restaurants, clothes, cars, or vacations, because when we buy we receive instant gratification. However, problems begin to surface when we overspend on wants instead of needs, or, when we spend money we don’t actually have.

Much like all behaviours, our buying habits reflect our backgrounds, experiences and psychological make up. And while shopping preferences and disposable incomes may differ, the logic behind our spending habits is pretty well the same – spending money allows us to feel in control.

As I mentioned last week, according to a study in the Journal of Consumer Psychology, people usually shop when they’re feeling sad – an emotion strongly associated to feelings having to do with a lack of control. In short, a fundamental reason we like spending money is because it allows us to feel in control over our lives, even when we’re not. While I’m not a psychologist, in my experience, retail therapy and the notion of “Keeping up with the Joneses” are two of the biggest factors that influence consumer spending. As a refresher, retail therapy is shopping in order to make yourself feel happier, and “Keeping up with the Joneses” is an idiom that illustrates our need to measure financial success to that of our peers, encouraging us to spend money (that we may not have) on material things (that we probably don’t need).

There are ways to curb spending (even during the holiday season). Here’s how to avoid the pressure the next time you get that itch to spend:

1. Have a shopping list. 

Have a grocery list before you go to the grocery store (and never go grocery shopping hungry!). Also, have a gift list for when the holidays roll around. There’s no worse feeling than starting a new year broke. Having a list will help you stay on track.

2. Ask yourself, “do I need this?”

Before you spend, ask yourself if what you’re about to buy is a need or a want. If you’re tight for cash and the item in question is a want, you’d be better off leaving it behind.

3. Look at your social situation. 

Are the people you spend your time with constantly spending on material stuff they don’t need? Are they good with money, or do they avoid the topic? Who you surround yourself with can greatly impact your spending habits. I’m not suggesting you dump your friends or peers because they spend differently than you, but perhaps next time you’re asked to go shopping, suggest meeting for a coffee instead.

4. Stop comparing. 

You’ve probably heard, “we buy things we don’t need with money we don’t have to impress people we don’t like.” This goes with “Keeping up with the Joneses” – just don’t do it. You’ll end up unhappy, and probably broke.

5. Track your spending. 

Create a spreadsheet in excel and keep track of every purchase you make over the course of a month. Separate your transactions by wants and needs, and then total both at the end of a month. You’ll probably be surprised to learn how much you actually spend on wants. Knowing what you’re spending and where your dollars are going, will help you recognize (and hopefully curb) bad spending habits quickly.

6. Leave the plastic at home. 

You’ve heard it before! Leaving your cards at home and only using cash will force you to consider how much you’re spending, and if you really need it.

7. Live within your means. 

Spending less than you earn is the secret to saving and will help you reach your financial goals sooner. Put together a budget that suits your needs (maybe even set up automatic payments for your bills while you’re at it), and stick to your plan.

8. Watch out for sales. 

First, a sale doesn’t necessarily mean you’re getting the best deal. Second, even though an item may be on sale, you don’t have to buy it. Would you buy the item if it weren’t discounted? If the answer is no, then you definitely don’t need it and can live well without it.

 9. Look to the future. 

Make sure your emergency fund has enough to cover 6 months of expenses (life happens, it’s better to be prepared), you’ve paid your future self by contributing to your retirement savings (ongoing), and savings for your other financial goals are in good shape.

 

Avoiding the pressure to spend may require some lifestyle and attitude changes, but the end result is worth it. Just remember that the quality of your life doesn’t correlate with what you own, and many studies have shown that to be true. If you can commit to living within your means, have a plan of where you want to be financially, and an idea of how you’ll get there, you will have a healthier relationship with your money and reach your financial goals sooner.