How to Keep Emotions from Dictating Your Spending Choice

2 March 2024 12:00 am Views - 96

With Wellness Curated, my goal is to empower listeners to explore expert-driven strategies across a variety of topics. This article will assist you in identifying the emotional triggers that lead to unnecessary spending and in mastering practical strategies to address them.

In a world where consumerism is constantly fuelled by marketing and social media, it's easy to let emotions drive our spending habits. A series of studies published in the Journal of Marketing Research show that people experiencing stress show compulsive spending behaviour, directed specifically toward products they perceive to be necessities. It gives them a sense of control in an otherwise uncontrollable environment.

Emotional spending is often a response to feelings rather than needs. It can lead to financial instability and regret. In my podcast, I talked to Luis Miranda, chairman of the Centre for Civic Society and Coro, founder and director of the Indian School of Public Policy about the psychology of spending and he says, “There’s nothing right or wrong in spending your own money. What’s dangerous is spending more than you can afford; it could get you into trouble. It is important to save first. It’s about the freedom to spend when you have enough tucked away because you started investing earlier. People spend because they’re comparing themselves to others. Just because your neighbour has a big car doesn’t mean that you also need to have a big car.”

A survey conducted by survey software company QuestionPro on behalf of online marketplace LendingTree, gathered responses from 1,950 American consumers aged 18 to 77 years. This 2023 survey revealed that nearly 70% of Americans acknowledge that their spending habits are influenced by their emotions. Millennials (at 76%) and Generation Z (at 75%) are the age groups most likely to be swayed by their emotions when it comes to purchases. Among those who spend emotionally, the primary feelings driving their purchases are stress (50%), excitement (44%), and happiness (38%).

Although it may provide temporary reprieve, emotional spending will not only result in depleted savings and increased debt, emotional spending can become compulsive. It could lead to a shopping addiction, where the act of buying becomes a primary way to cope with emotional issues, creating a cycle that's hard to break.

Impulsive versus compulsive buying

While often used interchangeably, impulsive buying and compulsive buying are distinct from each other, according to Shreya Malik, clinic psychologist at mental health start-up Lissun, which runs on a phygital model.

“Impulsive buying is characterised by spontaneous, unplanned purchases, often triggered by external stimuli like a sale or an attractive display. It's a momentary lapse in self-control where the immediate gratification from the purchase outweighs the long-term consequences. Compulsive buying, on the other hand, is a chronic, repetitive behaviour that fulfils an internal emotional need. It's often used as a coping mechanism for negative emotions and is associated with feelings of distress or guilt post-purchase. Compulsive buyers may feel a sense of compulsion to buy, which is not necessarily linked to the actual need or use of the item purchased,” says Malik.

Exorbitant scenarios and counter strategies

Scenario 1: After a long, stressful day at work, it's tempting to indulge in some retail therapy. The instant gratification of buying something new can feel like a balm for stress. However, this habit can quickly lead to unnecessary spending.

Strategy: Before making a purchase, take a moment to pause and reflect. Setting a 'cooling-off' period for purchases can also help; wait for 24 hours before buying anything non-essential. “Ask yourself if this purchase is a need or a want. Consider other stress-relief alternatives that don't cost the earth,” suggests Malik.

Scenario 2: Celebrations often encourage splurging. Whether it's a promotion, a birthday, or an anniversary, the joy of the occasion can lead to extravagant spending.

Strategy: Malik suggests planning for celebrations in advance and setting a budget for gifts and festivities. “Ask yourself, 'Do I need this item or am I just looking for an excuse to shop?' Remember, the essence of celebration is about the experience and the people,” she says.

Scenario 3: In times of sadness or loss, shopping can seem like a way to fill a void. This emotional vulnerability can lead to impulsive and regrettable spending decisions.

Strategy: Malik says the best thing you can do is to understand it as a coping mechanism. Recognise that material possessions cannot replace emotional healing. Seek support from friends, family, or professional counsellors to cope with negative emotions.

Scenario 4: Being with friends who love to shop or dine out can lead to peer pressure and impulse buying. FOMO can make it hard to resist spending.

Strategy: “Set healthy boundaries. Indulgence is fine only up to the point that it doesn't put a financial strain on you. Plan outings that don't revolve around shopping. Be open with friends about your financial goals. Suggest alternative budget-friendly activities to them. When faced with temptation, remind yourself of your long-term financial goals,” says clinical psychologist Shreya Malik.

Managing emotional spending requires mindfulness, discipline, and a clear understanding of one's financial goals. I've always believed that the key is not to suppress our emotions but to find healthier ways to respond to them without compromising financial well-being.