The odds are that we endeavour to be diligent about sticking to the budget we have set for ourselves, in order to be in a position to achieve our financial goals. We appreciate the difference between our discretionary and non-discretionary expenses, but more importantly, the importance of saving and investing. However occasionally, and for some people, discipline and rational thought goes out the window, and what seemingly is an impulse buy occurs.

Although we all engage in impulse buys, such as deciding to eat out when initially we had not planned to, this type of spending can put a serious dent in our wallet, if we are not careful. Moreover, what may seem like innocent and isolated incidents may in fact be a pattern of behaviour driven by our emotions.

 

Rational Spending Versus Emotional Spending

Typically, and for the conscientious shopper, very few purchases are made on-the-fly. Generally, there is an established want or need, for which some research or comparison shopping is done, in order to ensure that the best deal, or at the very least, value for money is secured. Once the prospective buyer is satisfied with the results of the research, the decision to purchase the product or service is made. Ideally, the buyer knows where the money will come from to cover the price payable, and once the product or service has been received, the buyer usually evaluates whether or not they are satisfied with that product or service.

Unlike rational spending, which tends to go through a process, with emotional spending much of our rational thought and reasoning is not readily evident. To that end, emotional spending is usually more impulsive, which may manifest itself in different ways. First, it may not necessary have at its root an established need, but frequently, is an item that is discretionary. Second, there is an underlying emotional trigger that is driving the purchase. Third, the time it takes between identifying the want and making the purchase may be relatively short. Fourth, minimal research may be done, and so concerns about best price or value for money are not necessarily a priority. Finally, and in some instances, little thought is given before the purchase is made as to where the money will come from to cover that expense.

Having sought to make a distinction between emotional and rational spending, it is important to highlight that very few of our purchases tend to be ‘purely emotional’ or ‘purely rational’. Even when making what might be considered a rational purchase, we might be prepared to pay a bit extra for a product or service in order to get the colour that we want, or prettier packaging, or some added features that do not materially change or improve the product, but is meeting some aesthetic or emotional need that we may not fully understand.

In a similar vein, when we want to make a pricey, but emotionally-driven purchase, we may employ some stages of the rational buying process, specifically, doing some research and comparison-shopping, whilst also trying to figure out how we might pay for the purchase. However, ultimately, we bite the bullet, and hopefully, are happy with the outcome.

 

Drivers Of Emotional Spending

It is interesting to note that relatively few of us are sufficiently self-aware to realise the times when our spending is emotionally triggered. According to the Harvard Business School, research has suggested that most of our purchasing decisions are made in the subconscious mind, and so the underlying causes may be deep-seated thoughts and perceptions that have been developed by, among other things, our upbringing, how we see ourselves, and how we see ourselves in relation to others. To that end, there can be several motives behind our purchases, including one or more of the following:

• Pride, which may be driven by wanting to be admired and respected by our colleagues, associates and friends. Hence purchases to highlight our status – be it real, or that which we want to project to others, such as expensive or luxury goods, may be an important focus.
• Imitation or a sense of belonging, which in large part is being driven by today’s celebrity and influencer culture. However, it could also be evident in our own circle, and we feel to the need to acquire certain things based on what people in that circle possess.
• A sense of being deprived, which can be evident when we grew up with very little and now want to have all the things that our families could not, or did not provide. In some instance, the behaviour is being driven by a need to overcompensate, and so can result in gratuitous spending (or over spending and ultimately, waste).
• Sex appeal, and the need to be seen as sexually attractive to others can be the driver behind the types of personal grooming products and services we purchase, and even the places that we frequent.
• To be unique, which may be driven by the need to not have what everyone else has or would typically purchase. As a result, we are prepared spend more, or secure more obscure or exclusive products, in order to stand out from the pack.
• To increase our self-worth, which may be connected to a sense of deprivation, but could also be drive by insecurity, low self-worth or self-esteem. Thus owning, or being seen to own, certain products, such as luxury goods, may increase our self- worth, albeit for a time, and may become its own cycle that is difficult to escape.

 

Getting A Handle On Your Emotional Spending

To be fair, you may never be able to completely eliminate emotional spending, but if it has damaged, or is in the process of damaging your financial future, it may be prudent to try to better manage it. In the first instance, it is worth the time and effort to try to figure out what might be driving your spending habits, and even the choices you make for non-discretionary expenses – cognisant that most of our spending decisions are not purely rational.

This introspection may require you to revisit your childhood, and even some traumatic experiences. You are likely to recognise some of your triggers, and may need to figure out how to reconcile yourself and your current behaviour, in order to make less impulsive choices in the future.

To be fair, spending can give some of us a bit of a high – a dopamine rush – which can be addictive. Trying to change our behaviour introduces tedium into what used to be a fun experience, and so it can be difficult to be disciplined and consistent. However, greater awareness of our behaviour and the impact on our finances, will hopefully help us to make more prudent choices, more often than not.

 

 

Image:  Jacek Dylag (Unsplash)