The Psychology of Overspending and How to Overcome It

Most of us are guilty of spending too much on an item that seemed like a necessity at the time. While treating yourself occasionally is fine, overspending can become a dangerous habit for some. In this guide, we will cover the psychology of spending more than you need to and how to stop overspending.

Social Pressure

Overspending is commonly attributed to social pressure and social media hype. In a world where people are always competing and comparing themselves to others, one may feel pressured to spend more in order to keep up.

 It is important to keep in mind that different people have different budgets and financial goals, meaning you shouldn’t purchase something just because others are doing it.

Sense of Scarcity

In addition, shops tend to introduce a sense of scarcity with limited-time items and sales in order to induce a fear of missing out. This can be used to encourage buyers to purchase items they may not necessarily need at absurd prices.

The best way to avoid this would be to take some time to weigh your options before purchasing an item. This will help you decide if you truly want it and can afford it.

Emotional shopping

Emotional spending is when you buy something as a result of your emotions or mood. This can be due to stress, sadness, happiness, and more. Emotional shopping is more commonly referred to as impulse shopping as it happens in an instant without much thought being put behind the purchase.

For example, someone may feel inclined to buy an expensive shirt they can’t really afford in celebration of their birthday.

Similarly, those feeling stressed out after a long day at work may want to order takeout from their favorite restaurant. Why? Because that will brighten their mood. Of course, spending occasionally is a good way to keep you motivated. However, these financial decisions shouldn’t be purely emotional.

Overspending due to emotional shopping can be reduced by not making major financial decisions or purchases when you aren’t in a stable mood. Train your mind to postpone the decision until after you’re feeling normal.

Easy access to money

When studying the psychology of overspending, it is essential to understand how paying with credit cards affects your spending habits.

When paying using the card, the money being spent is easily accessed and not physically taken out of your wallet.

This can lead to the false belief that the purchase hasn’t really affected your finances. So that may encourage you to spend more. Credit cards also make it easy to access money that you may not necessarily have at the moment.

To remedy this, try refraining from paying using a credit card and opt for cash purchases instead. If you don’t have enough cash to buy a certain item, then you probably shouldn’t buy it.

The Takeaway?

Don’t bite more than you can chew. Avoid going for credit card purchases. Get hold of your emotions. Living a life on a budget is better than living a life in debt.

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