Understanding Your Money Mindset

This content has been archived. It may no longer be relevant

From emotional spending to impressing your friends, understanding  your money mindset could be the key to regaining your financial power.

Spending money that you know you shouldn’t spend is a universal experience. It stresses not only your budget, but also your psyche, and it can lead to feelings of guilt, shame and disappointment.

But uncovering your individual motivations for spending money, including the money beliefs you grew up with, can be the first step toward breaking the cycle.

Your approach to spending, and what you regularly buy, can also be related to your current financial circumstances and whether you’re feeling strapped—in ways that might surprise you.

Here’s how to start understanding your money mindset and use that knowledge to regain power over your finances.

Why You Spend Money

When you’ve made a purchase you didn’t need and it left you feeling distressed, it’s possible you responded to one of these common spending triggers.

Pressure From Social Media

When you look frequently at others’ Facebook and Instagram profiles, seeing their new cars, vacations or shopping trips can pressure you into spending, too. There’s a reason that marketers on social media are called “influencers.”

You may also be targeted by ads for items that brands believe you’ll like, based on your demographics and browsing history.

Online shopping makes it even easier to spend as an emotional reaction to social media scrolling, said Meghaan Lurtz, president of the Financial Therapy Association.

“Couple ease of spending and feeling not great about something you saw on Facebook, and it is a recipe for disaster,” said Lurtz, who is also a senior research associate at financial planning website Kitces.com.

Your best bet is to ignore the ads and to understand that you can’t know others’ financial details — friends’ lavish vacations could be funded by credit cards they can’t pay off.

Temptation To Pay With Plastic

When you pay for an item with cash, the effect can feel immediate. Less cash in your wallet means less money to pay for other expenses throughout the day, but a credit card erases that awareness.

If you regularly overspend on credit cards, put yourself on a cash-only spending plan for a week, or even a day if longer feels too overwhelming. You might notice yourself spending more mindfully.

Family’s Spending Habits

Many of us grew up with money beliefs passed down from parents or caregivers. If one or both of your parents had an impulsive money mindset or did not track spending carefully, it’s understandable you’d do so, too.

Or, maybe your parents were extra frugal. If you didn’t want your life to feel as restrictive, perhaps you’re on the other end of the spending spectrum.

Take an honest inventory of the beliefs passed down to you, and acknowledge that some of your negative spending behaviour may not be your fault.

Emotional Spending

Shopping when we’re feeling down is a common way to make ourselves feel better, temporarily. But the boost from emotional spending is short-lived, and it could make you feel disappointed in yourself in the end.

Next time you’re tempted to buy something on a hard day, call a friend or spend time outside to improve your mood instead.

Special Occasions for Others

You may justify spending if it’s for holidays or others’ birthdays, since it seems more selfless than spending on yourself. But it will have the same negative effect on your budget.

Set a spending limit for these occasions, and aim to make do-it-yourself gifts if money is tight.

Behind on Finances

It might sound counter-intuitive, but if you’re already in debt or recently overspent on another purchase, you might be more likely to spend more. Or perhaps you’re stressed over having little money and you feel you’re owed a nice item, such as a new TV or pair of boots.

Your socioeconomic status can affect the type of spending you do. According to a study published in 2018 in the journal Psychological Science, consumers with high incomes and education levels felt happier spending money on experiences, such as concerts and travel, than on material things.

But the study found that spending money on material things was more likely to make those with lower incomes and education levels happy.

 

This piece was written by Brenda McGurran and appeared on Her Agenda.

Image via Pexels