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Always Over Budget? Dodge These Psychological Spending Traps

It happens to everyone. We spend more than we make in a given month, or worse, every month. Sometimes there is a valid reason, such as an unexpected necessary expense like a car repair or medical bill. But too often, there is no apparent reason for our dwindling cash flow. Or is there?

Advertisers and retailers are constantly laying sneaky traps to get us to spend more than we intended and more than most of us can afford. Once you understand the psychology behind these spending traps, you can train yourself to dodge them and keep more money in your own pocket.

SafetyNet explains: “Marketers study consumers’ lifestyles and world views to focus on specific psychological triggers.” They appeal to your desire for the latest gadgets and trends, to your fear for the safety of your family or property and to your jealousy of others.

One Psychology of Spending course says, “The challenge is to recognize the emotional appeals being made in most ads and minimize them so you can rationally judge the true value of what is being sold.”

Your friend buys a new car. Does it immediately make you want one too, even though you loved your car up until the moment you saw your friend’s shiny purchase? It’s human nature to envy others, but the need to act on that green monster isn’t a foregone conclusion, even though that is what advertisers and retailers want you to do.

Instead, compare financial situations rather than things. Acknowledging that your friend’s new car is the result of a job change helps you distinguish his purchase as solely about him and not you.

Whether it’s the grocery store shelves, the 100-store shopping mall, the miles of car dealerships or unlimited online sites, consumers today face an overwhelming number of decisions about how to spend their money. The American Psychological Association points out that this constant barrage wears down our will power to spend our money wisely.

When making big financial decisions, counter that trap by making one financial decision at a time. With everyday purchases, always make a list and stick to it to avoid making impulse buys and saving money on “bargains” that you don’t really want or need. The Chopra Center even suggests rewarding yourself with an inexpensive treat (a coffee) or a free experience (a picnic) for sticking to your list.

When you’re sad or stressed, do you shop to feel better? If so, you’re not alone. In 2017, Credit Karma surveyed 1,000 U.S. consumers about stress spending and found a significant number of them shopped to deal with anxiety and depression:

  • 52 percent admitted to stress spending when they were in a negative place
  • 43 percent of stress spenders spent at least $200 on their purchases
  • 83 percent of stress spenders later felt a sense of regret about their purchases

That last statistic is solid evidence that retail therapy doesn’t work. In fact, it actually creates more stress, especially if you are buying things you can’t afford.

According to Psychology Today, “The main psychological force of credit cards is that they separate the pleasure of buying from the pain of paying.” It’s one thing to pay with a credit card in order to earn the cash back rewards if you’re paying off your credit cards every month. But that’s a big if.

Too many of us use credit cards because we can’t afford the thing we want today and we’re not willing to wait until later when we can afford it. Nor is it usually just one item that gets charged, it’s many things—clothing, meals, vacations and more. That all adds up, and even though the pain may be delayed, it often feels far worse and costs much more than paying with cash as you go.

The desire for instant gratification has all but obliterated the virtue of patience that our parents and grandparents prized. Between globalization, immediate access to credit and 24/7 online shopping, there is almost nothing you can’t buy today and have in your hands within a matter of days—or hours. All of this ready availability blurs our sense of needs versus wants.

Our last trap buster—with every purchase ask yourself “Do I need this? Or do I just want this?” Items that fall in the former category should be your first priority. Those in the latter are not a priority at all.

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