The source of emotional spending can come from a myriad of different factors, but the financial damage is almost always the same. What may start out as innocently as a walk around the mall to compensate for a stressful day, can easily snowball into years of debt and despair.
This is not to say that all spending is bad or spending, in general, will resign you to a life of debt. However, the truth is the connection between your feelings and spending behavior is stronger than you may think.
Curb Emotional Spending
Here are a few of my tips to help identify your spending triggers and to ultimately curb your emotional spending habit.
1. Identify the source of the problem
Often times our emotional spending goes undetected because it is so carefully intertwined into who we are. Its like when you finally get that job offer that youve been dreaming about and decide to splurge a little on a nice dinner and drinks with friends. Or, when youve had a terrible day at work and you decide to alleviate your frustration with retail therapy.
Neither example, independent of other variables, is necessarily bad. However, in both instances, you are spending based on emotion and these seemingly innocent purchases can quickly add up and crush your long-term financial goals
One way that I was able to identify the emotional spending in my budget was to print out my previous months bank statement and literally write next to each debit card purchase what I bought and why.
Sure this was a time-consuming task, but it forced me to discover the underlying reasons for my spending and find non-monetary ways to deal with the emotional triggers. If you would have asked me prior to that exercise about my spending, I would have explained how I had it all under control.
Fortunate for me, that harsh reality proved that there was still work to be done.
Try this exercise out for yourself and Im sure that youll find a few small tweaks that could be made to curb your spending habits.
Have you ever noticed that when you want to go out and have fun, its always so easy to find someone to join in on the spending extravaganza? Conversely, when you need someone to step in and help hold you accountable for your reckless spending habits, those same people are harder to come by.
To be clear, Im not saying to kick your spendthrift friends to the curb and replace them with misers, but you may want to give some thought as to how much time youre spending with people that encourage negative spending habits and find a way to scale back that influence.
Set out to find someone that you can share both your financial wins and losses without feeling judged or chastised. And keep in mind, a yes person just wont do. You will want a person that feels comfortable enough to tell you when you are wrong and help you get back on the right track. An even better scenario is if theyve been in your shoes and can help you avoid some of the same missteps that may have tripped them up.
You probably have someone in mind that fits this description perfectly but have never taken the time to ask them to be an accountability partner. Do yourself a favor and reach out at the next opportunity.
3. Budget Fun Money’
I have to admit, Im one of those strange people that gets really excited about budgeting. My excel spreadsheet budget has charts and graphs that break down spending categories by percentages and all types of fun formulas and what-nots.
Ninja budgeting prowess aside, one category that I refuse to neglect is my Fun Money. If theres one lesson that I have learned throughout my time spent budgeting, its that you will find a way to spend unaccounted for money.
Instead of letting your money dictate how you spend, you should carve out a small amount for fun spending and set a hard dollar amount to it. Using cash is also great because it wont allow you to overspend.
Do you ever notice how youll have every intention of just running into a store to pick up one item, but end up in the checkout line with a bunch of extra stuff that you really dont need? Well, youre not alone!
Companies pay the top marketing minds very well to ensure that you are distracted enough by every sparkle that you will mindlessly spend more money in their stores. The same is the case with flipping through magazines or leisurely browsing online.
In order to effectively reduce your emotional spending, you MUST remove the distractions. This may mean different things to different people. For example, I dont enjoy the mall AT ALL, whereas online window shopping was definitely a vice that I had to break free from. For you, it may be that you stop going to the mall to walk around or cancel a magazine subscription.
Only you can truly determine what is distracting you from achieving peak financial performance. The good news is, once youve really drilled down and identified the root cause, you can begin the elimination process which is likely very simple.
Emotional spending is a tough habit to break because of how great it makes us feel. To further explain, when you spend based on emotion, you will temporarily improve your mood but DO NOT BE DECEIVED, your mood will quickly go back to normal because the root cause was never addressed.
In order to truly stop the cycle, you have to tackle the underlying problem head-on and put a plan in place to ensure that you dont repeat the behavior. Initially it may not be as exciting as that new pair of shoes or an expensive night out, but several years from now when youre financially set and able to enjoy whatever luxuries your heart desires, you will be glad you made the decision to change.
What are some of your emotional spending habits? How have you managed to overcome them?
This post was written by Kelby from TheFrugalennial.com
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.