Reasons Why You Spend Money
by, 05-01-2009 at 03:48 PM (620 Views)
Have you ever thought about why you spend money? If you are like most people, you never have. The problem is that not understanding the motivation behind why you spend will make it much more difficult for you to limit your spending (if that is what you want or choose to do). While the following is not a comprehensive list of why people spend, it does hit on many of the common reasons that people do. If you recognize your motivation among the following common bad spending habits, you can take the first step to bringing any overspending youíre doing under control:
Canít buy happiness: This is an easy trap to fall into, since most advertising goes to great lengths to associate a product with happiness. You make purchases with the belief that doing so will somehow make your life better. While the purchase itself may give you some instant pleasure, the feeling of happiness is usually fleeting. The result is that you end up having to purchase something else to find more ďhappiness.Ē
Lack of patience: Some people want instant gratification. They see something and they want it immediately, regardless of whether they have the money to afford it. They lack the patience to wait even a short amount of time, and therefore they spend even when they donít have the money available to cover the purchase.
Guilt: There are many people who purchase items to compensate for their feelings of guilt. It may be that you canít spend enough time with your children, so you try to make up for it by buying them gifts. The thing to remember is that most people know when you are trying to buy away guilt and it rarely works. Itís far more productive to work on why you are having the guilty feelings and do something to change them than to try and cover them with gifts.
Canít buy love, either: The saying goes, ďa diamond is forever,Ē but they conveniently forget to mention how much itís going to drain your bank account. Commercials do an excellent job of equating spending money on your partner to your love for him or her. The problem is that while gifts are nice, they arenít enough to show love. If you feel that the only way to show your love is through material objects, you will end up spending vast amounts of money trying because the exercise will be never ending.
Keeping up with the Joneses: Spending in the attempt to bolster your image is dangerous, especially when you are trying to create the image for your neighbors. The sad truth is that in many cases, the only reason that the Joneses are spending so much is that they are trying to keep up with you.
Not being able to say ďnoĒ: Some people have a hard time dealing with any type of confrontation. Whether itís kids who want the newest fashions, a spouse who wants the latest gadget or friends who ask to borrow money, these folks simply canít say ďno,Ē even when they donít have the money.
Shame: Often it is hard to admit to friends that you donít have the money to do certain activities, so you instead go along and pay for things that you canít afford. Maybe itís a monthly dinner at a fancy restaurant, or constant gifts. Instead of admitting that you canít afford it, you continue to participate because of shame.
Laziness: Some people spend too much simply because theyíre lazy. Instead of doing the necessary research, looking for deals and spending their money wisely, they pay much too much for things ó and often, it isnít even exactly what they want.
ďThings will get betterĒ: Even though they donít have it at the moment, some people spend with the expectation they will have more money soon. Maybe theyíre banking on a raise or a bonus from work. Theyíre sure more money will be available next month, so they go ahead and purchase something they canít yet pay for. But if the bonus or raise doesnít work out quite as expected, there will be a lot of debt to account for.
Just charge it: Some people who donít have the cash in their hand donít see credit cards as real money. Why should they? They can buy something and only have to pay 3% each month back to the credit card company. This, of course, can get you into a lot of financial trouble, since eventually it all needs to be paid back ó with interest.
Lifestyle maintenance: People can leave the workforce, lose a job or even go through bankruptcy but continue to spend as they had before. They are going to run into financial problems, since their new situation canít support their old habits.
Entitlement: Some people shop because they believe they deserve things, even if they donít have the money. The reasons someone might feel a sense of entitlement can be numerous. Maybe they were poor growing up, or they scrimped and scraped through college and now have their first job. Whatever the reason, feeling entitled to something you donít have the money for will cause a lot of financial distress.
Lack of knowledge: Some people simply donít understand how finances work. They believe that if they have qualified for a credit card with a $20,000 spending limit, then they can max it out. Not understanding the true costs of different financial instruments can have a huge negative effect on your finances.
Power: Some people spend money to feel powerful. Being able to carry around large amounts of cash and purchase expensive items on a credit card is a boost to their ego, even if they really donít have the money to pay for it.
Self-worth: Some people equate the things they buy with their self-worth. In order for them to feel good about themselves, they need to spend money, even if they donít have it.
These are just a few reasons behind overspending ó some people are motivated by a combination of several. Whatever your reasons, understanding the motivating forces behind overspending can help you address the issue and turn your financial life around, but first you have to be willing to take an honest look at yourself and why you pull that money out of your wallet.