Emotional spending is common and can cause a big problem if you do it consistently. Too much emotional spending — and even one trip that results in particularly expensive purchases — can consistently derail a budget. It’s easy to rationalize spending when you are emotional, because sometimes spending in general, or indulging in a particular purchase, momentarily makes us feel better. However, when we make financial decisions based primarily on our emotions rather than our needs or budget, we later experience buyer’s remorse.
Emotions have the power to affect everything in your life, and your spending habits are no exception. It’s useful to learn how emotions can alter or affect your decisions — then, you can hopefully avoid making the same spending mistakes over and over again. Otherwise, you risk financially paying for your emotions. Here are five ways that emotions can affect your spending habits.
1. Emotions can convince you that you are what you own
We’re all guilty of comparing ourselves to others, and this habit can be emotionally damaging in addition to shrinking your wallet. It’s easy to want the newest car or other purchase when we see how cool they are or what fun someone else seems to be having with them. When we see another person who seems really happy, we sometimes allow ourselves to believe that what they have is what makes them happy (or beautiful, or smart, and so on).
Then we want to purchase what they have. However, though buying a nicer car, house, or even a better phone might momentarily give you relief and happiness, it won’t make you happier overall. If we make purchasing decisions based on our need to be happy, we will lose money, but we will never be satisfied.
According to Mint, although happiness can’t be guaranteed by having money, knowing how much you need to pay for your expenses and saving for your future goals can give you more fulfillment. But you can’t focus on those goals if you emotional-spend too often.
2. Emotional spending can convince you that products will make you more accepted
There are so many products designed to convince us that we can be more beautiful or more handsome if we purchase them. Name-brand clothes are often much more expensive than lesser-known labels, yet we sometimes pay for them simply because we want other people to recognize the signature design or emblem. We also might purchase specific brands because we feel loyal or we have had positive experiences in the past, but often we are buying that brand because we think it will make us more accepted.
The same is true of items that are designed to make us look different — think hair dye, makeup, skin care products, and so on. These items are used to make you look better. While the idea of looking your best isn’t bad, if you go shopping when you are feeling down, your emotions can lead you to spend more. When you are feeling unattractive, you can easily justify spending more than you should.
3. Emotions can convince you that spending will end your boredom
It’s so easy to go to the mall, go to a restaurant, or even shop online when you are bored. There are a number of interesting items you can purchase, and it’s easy to rationalize spending when you are bored because you need something to do. However, no matter how interesting or neat a product is, once you buy it, you will eventually lose interest.
If you spend your money going out to dinner, you might still be bored after, and the food and your money will be gone. Even activities that momentarily cure boredom — such as bowling, or going to a movie — won’t make you feel good for very long if they require you to overspend or go over your budget. A better option is to find free things to do when you are bored.
4. Emotions can affect your judgement
In addition to spending more and making bad purchasing decisions when you are feeling emotional, emotions can also affect bigger financial decisions that you might make. If you are emotionally tied to a situation, it can be hard to separate your feelings about the situation (or the people involved) from the financial decision at hand. This is particularly true when a spouse or family member is involved. If you see that your child is hurting, you might be tempted to try to fix some or all of their financial woes in order to make them feel better.
You also might want to help a friend or family member by co-signing on a loan. If you can afford to do so, this isn’t really a problem — unless it enables the other person to always expect money from you and not be financially responsible — but sometimes your emotions can lead you to take on problems that you really can’t afford to fix. It’s also possible that your loved one will never be able to pay you back.
Emotions are a part of our everyday life, and it is a good idea to learn how to overcome them when it comes to spending. Investopedia suggests avoiding impulse buys, limiting exposure to advertising, and making yourself accountable.
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