Overcoming Spending Temptations
When things seem to be falling apart, we naturally gravitate towards things that make us feel better. Financially, that could lead us to spontaneous spendings, like retail therapy. Fighting the urge to treat yourself is difficult, especially when 2020 has been a rollercoaster for many of us, and buying things may give us a form of gratification or comfort. To make it even more complicated, the holiday season is approaching us, so you'll start to see many advertisements with holiday deals and sales. A good first step in overcoming spending temptations is to define your personal needs and wants clearly
When it comes to money, our brains sometimes jump to conclusions based on our biases or heuristics. Heuristics are problem-solving short-cuts we create based on our own experiences. Sometimes those "rules of thumb" can be twisted in a way that distorts our ability to make sound money decisions. Relying too heavily on heuristics can create cognitive biases that impact our spending. Our spending choices can be swayed by our experiences with money, whether that be good or bad. For example, you might avoid buying things on your credit card because you have made mistakes with it in the past, and you do not want to make the same mistakes. Twisted heuristics can also cause you to fall victim to spending more by not comparison shopping since comparing costs can be a time-consuming activity. Bulk purchases often cater to the heuristic that buying bulk saves you more money, which may not always be the case. It is hard to confront biases, but being aware of them can foster better habits or "balance."
To get you started with some ideas, below are some tips on how to overcome spending temptations.
Creating a spending plan or budget can allow you to avoid unnecessary spending temptations by outlining a map for your money. Understand that your budget might look different in certain months (e.g., holiday seasons). In that case, consider planning or shopping earlier to spread out holiday purchases. Planning gift purchases out for the year can help you take advantage of sales and spread out costs.
Avoid shopping as a "social event." Shopping alone can help tune out social pressures and allow you to focus on your budget. Although you might still get tempted by deals or sales on things you weren't planning to buy, you can make a solid decision by yourself without others influencing you. If you plan to shop with friends, make sure to have "FUN MONEY" added to your budget. Behavioral economics research shows that we tend to spend more when we shop with others. In their study, Rice. et al. (2020) developed a Spending as Social and Affective Coping (SSAC) scale to measure the extent to which people (consumers) spend to cope with negative emotions and their social environment. Their findings state that the SSAC Affective Coping scores were associated with compulsive and impulsive buying (Rice. et al., 2020), affirming that people are more likely to spend impulsively during hard times, such as this pandemic.
It is always a good idea to do some research and price comparisons before you spend your money. Now that shopping online is more popular than ever before, you can hold on to items in your carts before making any decisions!
Essential vs. Non-essential
Determining essentials and non-essentials is a recently popular concept due to the pandemic, but it's the same idea as understanding your needs and wants. In this case, your needs are essential because, without them, you could jeopardize your health and safety. A need is very personal as they're based on your own responsibilities and values. Your wants are typically non-essential things, but it also depends on your particular situation and could become essential if your situation changes. A good tip to remember in this case is to avoid buying sale items or using coupons just because you’re “saving money.” A deal isn’t a deal if you don’t need it.
Be Honest with Yourself
As long as you are honest with yourself, it will be easier to fight spending temptations. Sometimes we tell ourselves lies or ignore red flags to justify our bad habits, but that eventually prohibits us from rectifying them. Remember making a purchase will likely not change your spending behavior or habits, so work on changing the behavior first. Give yourself time to improve your spending habits; it takes time!
Pull It All Together
To tie it all together, making a list of things you plan to buy helps limit impulsive spending. As the holidays are approaching, consider starting a gift list and putting some of the suggested points into action. Overall, it is safe to say that 2020 is one of the most difficult years in recent memory. Economically, we hit some of the highest unemployment rates ever in the United States. Overcoming spending temptations is always important, but this year, it adds another layer of financial safety in unexpected income loss. Track your spending habits to help inform future financial decisions and planning, set SMART goals, and develop a budget (or spending plan) to help you keep track of your spending. Again, it takes time to develop good financial habits and rectify bad ones, so start small.
You can also watch our latest "Budget Hacks" webinar to get more helpful tips. If your current strategies become daunting or try to change many things at once, start with one task, and then adjust accordingly throughout your progress.
Rice, A., Garrison, Y. L., & Liu, W. M. (2020). Spending as Social and Affective Coping (SSAC): Measure Development and Initial Validation. Counseling Psychologist, 48(1), 78–105. https://doi-org.proxy2.library.illinois.edu/10.1177/0011000019878848
Budget Hacks #GetSavvy Webinar Recording, https://youtu.be/cQA18aa6kwg