“Whoever said money can’t buy happiness simply didn’t know where to go shopping”, Bo Derek.
That was the eighties, I’m pretty sure Bo wouldn’t be talking like that in America now!
So what is emotional spending?
“A new dress and a pair of shoes will make me feel better”.
“I feel great after a massage and a facial”.
“Forget the expense, let’s order that $150 wine with dinner”.
How do you know if you an emotional spender? Consider these questions:
- Do you derive great emotional satisfaction from spending money?
- Do you buy things you don’t need?
- Do you go shopping on the weekend because you’re bored, or lonely, or depressed?
- Have you ever used the term “retail therapy”?
- Have you bought a house or a car you can’t afford – maybe even to keep up appearances?
- Do you take five star holidays when you can only afford a three star lifestyle at home?
Emotional spending is like emotional eating: it is just not good for your health. Emotional spending, or spending beyond your means, makes you feel worthless. Why wouldn’t it? It literally does make you worth less.
Don’t get me wrong, I love gorgeous things as much as you do. But I also know there is no handbag or eye cream on the market that makes me feel emotionally in charge. Watching my spending does.
I’m not an emotional spender, I’m a sensible spender. I consider my choices, because I can’t afford not to. I realise being sensible doesn’t sound sexy, but being in control of my money and life does. Spending with thought has given me a better quality of life and financial security. That looks better on me than anything I’ve got in my wardrobe.
But I’m not perfect. I’ve bought things that I knew I couldn’t really afford, and it freaks me out, every time. I dwell on it because know I’ve been silly and that makes me unhappy. Then I get super tight and save whereever I can until I have covered the cost of my stupidity and I get myself back on track as soon as I can.
If your credit cards are maxed out, or you cover up your crazy spending patterns, if you have ever got home and felt regret, guilt or shame after shopping then you have been emotionally spending. That’s okay, we’ve all done it. I’m a financial adviser and I’ve done it. Just don’t put your head in the sand and expect everything to be alright. You need to make some changes for a better life and a better you. That’s all.
Recognising you spend emotionally is the first step towards taking control of your spending. It’s not about never having fun or buying something you like, it’s about spending less than you make, with more intention and wisdom.
You need to have a think about why you go shopping. Do you do it to boost your ego, to relieve depression, to waste time?
How to avoid emotional spending
- Don’t over-commit to high levels of debt
- Don’t buy too much house
- Don’t buy a new car unless you can afford to pay it off in a few years
- Don’t use spending to compensate for other areas of your life that may be lacking
- Have a weekly spending plan and stick to it
- Don’t shop unless you need something
- Never shop when you are hungry or unhappy. You know you buy the wrong food when you are hungry. But do you realise you’ll probably also buy a pair of shoes you will never wear when you’re upset or unhappy?
- Don’t do sample sales, you will buy things you don’t need or want, and what’s worse you’ll be buying things that nobody else needed or wanted either!
- If you’re not sure or you need a second opinion, walk away. You likely don’t need it and you don’t even know whether you want it.
If you can’t afford to buy something with your own cash, don’t buy it. Use debit cards only and cut up your credit cards. Credit cards are pure poison for an emotional spender.
Don’t kid yourself that you’ll save money on eBay or any other on-line stores. You’ll end up with more stuff you don’t need, that you don’t like or doesn’t fit you, that you can’t be bothered returning.
Take a step back from any major purchase and ask yourself, are you buying this with your heart or your head?
Can you afford it?
Do you need it?
Can you wait for it?
Change your mindset – Savings is the new black
Most people spend their money in the following order: bills, fun (which includes shopping), savings. All you need to do is turn the order around so you pay yourself first. Before you pay any bills, buy groceries, go shopping, or go to the movies, take something out of your pay and put it in a high interest savings account. 10% is good, but anything is better than nothing. That will be the start of a beautiful friendship between you and your money. It’s going to last a lifetime so the healthier that relationship is the better your life will be.
There was a time, before credit cards were invented when debt was something to be avoided. If you wanted something you had to save up to buy it. Lay buys, savings plans. Those were the good old days. Without credit it was difficult for people to live beyond their means. People lived simply.
Credit has ruined a whole generation of people. The banks will always give you credit, until they give you too much and you get yourself into all sorts of trouble and then they don’t want to know you.
“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain”. Mark Twain.
He was so right. You need to spend less than you earn and you need to save the difference and eventually invest. It’s as simple as that. There is nothing lucky or tricky about it.
You don’t need a new dress. You need a new mindset. You need a spending plan. You need to get rid of all consumer debt. You need to cut up your credit cards. You need to save 10% of your pay. And you need to stick to it forever.
If you can do that you will have the sense of power and freedom you deserve.
I’m not saying you can never shop; I am saying you have to get real and only buy things you can afford. You have to grow up. You have to delay gratification. You will never have a sense of financial wellbeing until you take control of your spending.
Just give up a few things today, and a few things next week and a few more next month that you really don’t need, and you will end up with less junk and more money to save and invest.
Spending your money wisely, not emotionally, is the only way you can have a life of choice and freedom.
Take control of your spending and get happy! Isn’t that the emotion you were always looking for after all?