Money is a powerful tool that affects our emotions and behaviours in various ways. Unfortunately, overspending is one of the most common issues that people face when it comes to money management. Overspending occurs when we spend more money than we have or more than what is necessary, and this can have serious consequences on our finances, emotions, and well-being.
EMOTIONS AND SPENDING
Why do emotions play a significant role in our spending habits? 90% of our money decisions are driven by emotions. Which means, we often use money to fulfill our emotional needs and desires. For example, we may use shopping as a way to relieve stress or boredom, or we may use money to show our love and appreciation for others. However, when we rely on money to fulfill our emotional needs, we can fall into the trap of overspending.
The emotional attachment to money can also lead to impulsive buying decisions. When we feel happy, excited, or anxious, we may be more likely to make impulsive purchases without considering the long-term consequences. This can lead to buyer’s remorse and regret, especially when we realize that we have overspent or bought something that we do not need. Have you ever been in a situation where you overspend not to pay postage or maybe there’s a discount applied to a predetermined minimum spend.
THE LINK BETWEEN MONEY AND HAPPINESS
Money is often associated with happiness and success, but the reality is more complex. Studies have shown that there is a positive correlation between income and happiness up to a certain point. After a certain income threshold, the correlation between money and happiness weakens, and other factors such as social relationships and personal values become more important.
Therefore, overspending to pursue happiness may not lead to the desired outcome. Instead, it can lead to financial stress and anxiety, which can negatively impact our mental and physical health. It’s essential to prioritize our emotional well-being over material possessions and to find healthy ways to manage our emotions without relying on money.
TIPS TO AVOID OVERSPENDING
To avoid overspending and manage our emotions, we can follow some simple tips:
1. Create a budget: Set a budget for your monthly expenses and stick to it. This will help you avoid impulsive purchases and ensure that you are spending within your means.
2. Plan ahead: Before making any big purchases, take some time to research and compare prices. This will help you make an informed decision and avoid overspending. When we don’t plan we can fall into the camp of impulse buying. The flip side to this is the outcome of procrastinating on a purchase which can lead to desperation buying, due to lack of time or not wanting to think about the purchase or you buy based on cost (usually more expensive) than value.
3. Identify triggers: Be aware of your emotional triggers that may lead to overspending. If you feel stressed or anxious, find healthy ways to manage your emotions, such as exercise or meditation. Separate yourself from the decision making process until your emotions have settled. Shopping on-line? Leave the items in the shopping cart for 24-48hrs. Shopping in store, ask for the items to be put on hold.
4. Use cash or debit: Using credit cards and buy now pay laters (BNPL) services can be a convenient way to purchase items, but it can lead to overspending. When we use credit, we delay the emotional pain connection that comes with paying with cash or using a debit card and this can result in high interest rates that make it difficult to repay the balance.
5. Practice gratitude: Instead of focusing on what you don’t have, focus on what you do have and practice gratitude. This can help you appreciate the things you have and avoid the temptation to overspend.
Money is a powerful tool that can affect our emotions and behaviours in various ways. Overspending is a common issue that can have serious consequences on our finances, emotions, and well-being. By understanding the link between money and emotions and following some simple tips, we can manage our emotions and avoid overspending. Remember, happiness does not come from material possessions, but from within ourselves.
We delve deeper into how your emotions are affecting your spending habit as part of the Money Mindset Reprogram to help you transform your own relationship with money.
Working with a financial coach can help you to gain clarity around creating money and managing money. If you would like to explore this further, please book in for a free 15 minute chat.