Thursday, 28 January 2021
Getty Images
Spending money that you know you shouldn’t spend is a universal experience. It stresses not only you budget, but also you psyche, and it can lead to feelings of guilt, shame and disappointment.
But uncovering your individual motivations for spending money, including the money beliefs you grew up with, can be the first step toward breaking the cycle. Your approach to spending, and what you regularly buy, can also be related to your current financial circumstances and whether you’re feeling strapped—in ways that might surprise you.
Here’s how to explore your own spending behaviors, and how to use that knowledge to regain power over your finances.
When you’ve made a purchase you didn’t need and it left you feeling distressed, it’s possible you responded to one of these common spending triggers.
When you look frequently at others’ Facebook and Instagram profiles, seeing their new cars, vacations or shopping trips can pressure you into spending, too. There’s a reason that marketers on social media are called “influencers.”
You may also be targeted by ads for items that brands believe you’ll like, based on your demographics and browsing history.
Online shopping makes it even easier to spend as an emotional reaction to social media scrolling, said Meghaan Lurtz, president of the Financial Therapy Association.
“Couple ease of spending and feeling not great about something you saw on Facebook, and it is a recipe for disaster,” said Lurtz, who is also a senior research associate at financial planning website Kitces.com.
Your best bet is to ignore the ads and to understand that you can’t know others’ financial details — friends’ lavish vacations could be funded by credit cards they can’t pay off.
When you pay for an item with cash, the effect can feel immediate. Less cash in your wallet means less money to pay for other expenses throughout the day, but a credit card erases that awareness.
If you regularly overspend on credit cards, put yourself on a cash-only spending plan for a week, or even a day if longer feels too overwhelming. You might notice yourself spending more mindfully.
Many of us grew up with money beliefs passed down from parents or caregivers. If one or both of your parents had an impulsive mindset or did not track spending carefully, it’s understandable you’d do so, too.
Or, maybe your parents were extra frugal. If you didn’t want your life to feel as restrictive, perhaps you’re on the other end of the spending spectrum.
Take an honest inventory of the beliefs passed down to you, and acknowledge that some of your negative spending behavior may not be your fault.
Shopping when we’re feeling down is a common way to make ourselves feel better, temporarily. But the boost from emotional spending is short-lived, and it could make you feel disappointed in yourself in the end.
Next time you’re tempted to buy something on a hard day, call a friend or spend time outside to improve your mood instead.
You may justify spending if it’s for holidays or others’ birthdays, since it seems more selfless than spending on yourself. But it will have the same negative effect on your budget.
Set a spending limit for these occasions, and aim to make do-it-yourself gifts if money is tight.
It might sound counterintuitive, but if you’re already in debt or recently overspent on another purchase, you might be more likely to spend more. Or perhaps you’re stressed over having little money and you feel you’re owed a nice item, such as a new TV or pair of boots.
Your socioeconomic status can affect the type of spending you do. According to a study published in 2018 in the journal Psychological Science, consumers with high incomes and education levels felt happier spending money on experiences, such as concerts and travel, than on material things. But the study found that spending money on material things was more likely to make those with lower incomes and education levels happy.
Once you’re aware of what encourages you to spend, you can start addressing these triggers one by one. If you need help, finding a therapist — particularly one who has experience discussing financial issues — is a good start.
Psychology Today offers a database of therapists. Or, you can use your health insurance company’s online portal to search for one who takes your insurance.
When you have goals to visualize and work toward, you’ll be more likely to identify if the ways you’re currently spending are in line with them.
Picture yourself five or 10 years in the future. Are you in a home you own? Are you traveling the world? Write down your goal, and maybe open a savings account specifically for this purpose.
Every time you’re about to spend on something you’re unsure you need, consider whether that would take you further from your goal.
Use a budgeting app or spreadsheet to track all your purchases for at least a month. Ideally, the app you choose will categorize your purchases so you can see what you’re spending most on: meals out, personal care or clothes, for instance. Just seeing your spending might be enough to encourage you to cut back or reallocate money to certain segments of your budget.
You can also turn tracking into a spending journal, Lurtz suggested, and note how you were feeling when you bought each item. That can help you spot patterns.
“Did you shop while you felt sad, bored, angry, happy?” she said. “There is nothing wrong with shopping or treating oneself, but if we do it to mask another issue, it could turn into overspending.”
Taking too restrictive an approach to spending could backfire. Instead, set aside a percentage of your after-tax income — say, 10% — to non-essentials each month. Don’t create parameters on what you can spend on, but don’t go beyond that amount, either. It might help you get more creative in how you spend on entertainment, and you won’t feel that you’re unable to enjoy life.
If you have a tendency to make impulse buys, make it a rule to wait 24 hours before purchasing anything either in person or online. Ask if a store will hold the item for you, or leave the item in your online shopping cart for a day.
You might find you don’t need it as much as you thought you did, or that you forget about it altogether.
Perhaps a friend, partner, coworker or family member is also looking to reevaluate their spending. If so, reach out and suggest you keep in touch weekly or monthly about how you’re doing.
Meet to set up a budget or spending tracker together, share your goals and cheer each other on.
There will be times you overspend — or you’re tempted to — even after you’ve made progress. That’s normal. Instead of getting angry with yourself and potentially spending more thinking you’ve already messed up, be kind to yourself. Treating the issue with lightness will keep you from falling into a deeper spending spiral.
When you overspend, you face tangible consequences, such as accrued interest on credit cards, potentially missed bills and the resulting negative impact on your credit. Payment history accounts for the biggest share of your credit score, so not having enough money to pay credit card or student loan bills could harm your score and your ability to borrow money in the future.
Plus, knowing you’re overspending can create a growing feeling of dread if you’re unsure of how to get back on track. You might be tempted to avoid looking at your credit card or checking account balances at all.
To avoid these consequences and control your spending, get to the heart of why you spend, and do your best to not feel so ashamed that you’re afraid to ask for help.
Many consumers struggle with overspending, so know that you have company. But the reasons why you spend will be specific to you, and it’s worthwhile to understand them. That will give you the insight to make changes that can help you feel more in control of your financial life.
<span class="fn" data-placement="bottom" data-content="
Disclaimer:
LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.
” data-original-title title>Disclaimer
<span class="fn" data-placement="bottom" data-content="
Advertiser Disclosure:
A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.
As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.99% (3.99% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).
” data-original-title title>Advertiser Disclosure
As low as 3.99% APR
VIEW OFFERS
<span class="fn" data-placement="bottom" data-content="
Advertiser Disclosure:
Fixed rates from 5.99% APR to 18.07% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of October 10, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.74% APR assumes current 1-month LIBOR rate of 2.05% plus 3.08% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
All rates, terms, and figures are subject to change by the lender without notice. For the most up-to-date information, visit the lender's website directly. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.
If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
” data-original-title title>Advertiser Disclosure
5.99% To 18.07% APR
SEE OFFERS
<span class="fn" data-placement="bottom" data-content="
Advertiser Disclosure:
Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans).Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions. For New York residents, rates range from 6.99% to 24.99% APR.
” data-original-title title>Advertiser Disclosure
<img src="https://www.magnifymoney.com/banklogos/marcus2_updated1.jpg" alt="Marcus by Goldman Sachs®” width=”67″ class=”img-responsive data-lazy-img”>
6.99% To 28.99% APR
SEE OFFERS
<span class="fn" data-placement="bottom" data-content="
Advertiser Disclosure:
*Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.
” data-original-title title>Advertiser Disclosure
4.99% To 16.79%<sup class="fn" data-placement="bottom" data-content="
Advertiser Disclosure:
*Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 4.99% APR with a term of 3 years would result in 36 monthly payments of $299.66.
” data-original-title title>* APR
SEE OFFERS
Recommended by
This Cash Back Number May Surprise You
Best Travel Credit Cards With No Annual Fee
Getting Approved For 1 Of These Credit Cards Means You Have Excellent Credit
Credit Cards Charging 0% Interest until 2021
Source: https://www.magnifymoney.com/blog/banking/spending-money/
