Why Do You Spend When You Should Not?

By Sanesh Mathew | June 12, 2018

Haven’t we all spent money when we know we shouldn’t? Why do we do it? Here are a few reasons why.

Haven’t we all done it? Spend more money than we planned to? Like when we go to the supermarket to buy essential groceries but end up buying everything that catches our eye. Or when we go to the mall to buy a shirt but we end up buying a pair of jeans and matching shoes too. No wonder we find ourselves stone broke, struggling to get through the month.

Additional Reading: 5 Daily Habits That Make For Frivolous Spending

But, why do we do it? Why do we spend more than we should? What drives the urge to spend too much even though we know we shouldn’t? Maybe we’re just wired that way or maybe it’s the irresistible deal in front of us.

Anyway, let us discuss why we are never able to attain fiscal responsibility even when we seem to be making the right moves.

The Jekyll And Hyde Experience

We are all aware that human nature is irrational and unpredictable. There is a constant battle between our emotional and rational selves. Remember Freud’s psychoanalytic theory where he talks about id, ego and super-ego and the constant battle between id and super-ego? We’re talking about something similar here.

As with the popular tale of Dr. Jekyll and Mr. Hyde, Hyde was everything Jekyll wanted to be. Hyde was Jekyll’s repressed self. Becoming Hyde was the only way that Jekyll could do everything that he ever wanted to do. Basically, Hyde was Jekyll’s irrational self, giving vent to all his repressed emotions.

That’s exactly what happens to each and every one of us as well. That’s why we spend even when we know we shouldn’t be spending. Our emotions take over our rational thinking.

The Plastic Culprit

But are Credit Cards to blame for our terrible spending habits? It’s just so easy to swipe your card at the billing counter and get done with your purchase. However, it’s up to use to exercise restraint.

Immediate gratification – that’s what our little plastic buddies offer us. However, most of the time, we tend to take them for granted. Credit Cards are great financial tools as long as they are used the right way. Keep this in mind the next time you swipe your card at the drop of a hat.

Additional Reading: How Your Credit Card Habits Can Kill Your Business

Our Mental Wiring

Our mental wiring or brain chemistry plays a role in the way we spend money too. As per a study conducted by researchers from the University of Michigan, the activity in an area of our brain called the insula affects our spending decisions.

Higher activity levels in the insula means that the person is not likely to spend when they shouldn’t. Less activity in the insula means that the person is more likely to spend. However, at a later stage in life, the savers who had hesitated to spend regretted everything that they gave up on, while the spenders found themselves in a financial mess.

The Deals Trap

Have you ever thought that the urge to save money can actually cause you to spend money when you shouldn’t? Meir Statman, a behavioural economist at Santa Clara University, observed this phenomenon.

If there are killer discounts at our favourite lifestyle store or restaurant, we tend to spend even though we shouldn’t be. When we are faced with discounts, we usually experience two emotions – the happiness in getting our favourite stuff at an affordable price and the pain of missing out on a great deal. And, of course, the decision that we make is always based on how much we are going to save rather than on the cost of the items.

The Money Bait

There are many of us who slog for hours and stress ourselves out with work to earn more money. But does earning more money actually make us happier than those who earn less than us? Not really! Let us tell you why.

These hard-working, stressed individuals usually compensate for the loss of leisure by spending money freely. So, basically, they feel the need to work harder to earn more so that they can spend more to make up for their hard work. This vicious cycle keeps repeating. And in this race, happiness is nowhere in the picture. You get the point here, right? Earning more money means you’re likely to spend more than you should.

Additional Reading: SIP – Your Way To Health, Wealth And Happiness

Do you identify with any of the above reasons? Or do you have any other explanation for why people spend money when they shouldn’t? Let us know in the comments section below.

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