THE PSYCHOLOGY OF MONEY: HOW EMOTIONS SHAPE YOUR SPENDING
What if the way you spend money has very little to do with what you earn, and almost everything to do with how you feel?
I know this from research. But I also know it from my own life.
In my early twenties I spent three years living overseas, between the UK and Canada. It was one of the best decisions I ever made. But when I came home, I landed on a mattress on a friend's floor with very little to show for the adventure. No savings. No home and no clear pathway of how I was going to build a life from that point.
What followed was about $20,000 worth of debt accumulated in a relatively short period of time. Some of it was practical, getting myself set up. But a significant part of it was emotional. I was struggling with low self-worth. I felt behind. I felt invisible because no one spoke about what it was like to return after being absent. And money became the way I tried to close that gap, to look the part, to feel like I was someone who had it together even when everything underneath said otherwise.
When I moved into the finance industry, that pressure intensified. There are industries where the expectation to look and perform a certain way is unspoken but unmistakable. Finance is one of them. Legal is another. Medicine is another. The external signals of success become part of the job description, and for someone already navigating insecurity, the spending that follows can feel less like a choice and more like a requirement.
I didn't stay in the debt. I made a decision to spend less than I earned, to put savings aside even while I was paying the debt down, to use each small financial win as traction forward rather than sitting in what I can only describe as debt depression, that low hum of shame and paralysis that makes it almost impossible to look at your numbers clearly.
But it took understanding why I was spending the way I was before any of the practical steps actually held.
What the research tells us
The idea that our financial decisions are driven primarily by logic is one of the most persistent myths in personal finance.
The work of Nobel Prize-winning psychologist Daniel Kahneman tells a different story. His research into what he called System 1 and System 2 thinking shows that our brains operate across two distinct modes. System 2 is the deliberate, analytical thinking we associate with careful decision making. System 1 is faster, automatic, and largely subconscious. It operates on instinct, pattern, and emotion.
Because System 1 handles the vast majority of our daily cognitive load, the research suggests that roughly 90% of our immediate financial decisions are driven by emotional and subconscious processes rather than logic.
Kahneman's Prospect Theory, developed alongside Amos Tversky, adds another layer. We don't evaluate financial decisions mathematically. We evaluate them emotionally. And we feel the pain of a financial loss far more acutely than we feel the pleasure of an equivalent gain. That asymmetry explains a great deal about why financial avoidance, panic selling, and emotional spending are so universal.
The dopamine connection
There's another layer to this that doesn't get talked about nearly enough in mainstream financial conversations.
Spending triggers a dopamine response in the brain. That hit of pleasure when you make a purchase, the brief sense of relief, excitement or satisfaction, is neurological. It's real. And for many people, particularly those who are neurodiverse, that response is more pronounced and more compelling than it is for the general population.
In our current month of episodes on neurodiversity and money on Money Talk Real Talk, we've been exploring exactly this. In our conversation with Katherine Spitzkowsky, a neuro-affirming financial adviser and founder of Yulania Financial who was diagnosed with both ADHD and autism in her early forties, we talked about what managing money actually looks like when your brain is wired differently. When the systems everyone recommends feel impossible to maintain. When impulsivity shows up at the checkout not as a character flaw but as a neurological response.
And in our conversation with Tina Mathams of ADHD Money, we went deeper into the specific relationship between ADHD, dopamine seeking, and financial decision making.
What both conversations made clear is something I see consistently in my own work with clients. The spending isn't random. It's purposeful, even when it's unconscious. It's meeting a need. And until you understand what need it's meeting, no budgeting system in the world will make it stop.
What emotions are actually driving
Emotional spending shows up differently for different people. For some it looks like retail therapy, the brief lift that comes from a new purchase when life feels heavy. For others it looks like keeping up appearances, spending to signal a version of success that doesn't yet feel true on the inside. For others still it looks like avoidance, not opening the statements, not looking at the balance, because the number feels like a verdict on your worth as a person.
I see this particularly in professional women who are earning well and leading in every other area of their lives. The external markers are all there. But underneath, the relationship with money is still being driven by old stories. About whether they deserve to have what they're working so hard to build. About how hard money has to be earned. About what it means about them if they get it wrong.
These aren't spending problems. They're emotional responses to money that have never been examined.
The way through
Understanding this isn't about adding shame to an already complicated relationship with money. It's the opposite.
When I finally understood why I had accumulated that $20,000 debt, the low self-worth, the pressure to look the part, the attempt to close the gap between where I was and where I thought I needed to be, the practical steps became possible in a way they hadn't been before.
I spent less than I earned. I put savings aside even while paying down debt. I used each small win as evidence that forward movement was possible, rather than staying stuck in the paralysis of shame.
The awareness came first. The structure followed. And the structure held because the awareness was real and acknowledged.
That's not a coincidence. That's how lasting financial change actually works.
Where to start
If you've recognised yourself anywhere in this post, the place to begin isn't a new budget or a stricter spending plan. It's with honest curiosity about what's underneath the pattern.
The Explore Your Money Story Workbook is a good first step. It's a free guided process to help you uncover the beliefs, emotional patterns and experiences that have been quietly shaping your financial decisions.
Download the Explore Your Money Story Workbook here .
And if you're ready to go deeper, a Wealth Alignment Clarity Call is where that conversation starts.
Book your Wealth Alignment Clarity Call here.
Suzanne
Suzanne Alexander is a Certified Money Coach and creator of The Aligned Wealth Method™, helping professional women and couples get to the root of their financial decisions and build aligned wealth.
The information above is general in nature and is to be used for education purposes only. Before acting on any information, you should consider the appropriateness of the information provided and how this may impact your personal needs, objectives, and financial situation which have not been taken into account. It is recommended that you seek guidance from a qualified financial specialist such as a financial adviser, accountant or tax agent before implementing.
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