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| Uncommon Sense | 7 ways to control your emotional spending
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Some people shop because they're unhappy or giddy, or anywhere in between. But retail therapy can leave your budget in sad shape.
By MP Dunleavey
Editor's note: Columnist MP Dunleavey and seven other women have come together online to strip away the myths surrounding money, speak frankly about their finances and liberate themselves from debt. Follow the quest for financial fabulousness of these Women in Red every other Monday in Dunleavey's column on MSN Money.
"I never believed in emotional spending until about two years ago," admits Lyndsey, 26.
"I'd had a really bad day at work, so I went out and spent about $500 at Banana Republic. And afterward I was, like: 'Wow! I just bought all these pretty things and I feel so much better!'"
By contrast, Stephanie, 27, the newest member of the Women in Red, has never doubted the relationship between spending and just about any feeling. "Bad mood? Shopping and finding the cutest skirt or a slammin' deal will make you feel better," she told me. "Good mood? Buying a pair of ridiculous, bug-eyed, Dior-wannabe sunglasses will make you feel that much more the rock star!"
When spending leads to trouble
Lots of people share the fantasy that retail therapy is a reasonable way to cure what ails you. And on the surface, it looks innocent enough. It's not illegal, immoral or cancer-causing. It doesn't involve the use of hazardous substances. But as Lyndsey and Stephanie are realizing, there is often a financial price to pay for emotional spending.
Lyndsey acknowledges that her stress-related splurges led to her $12,000 in credit-card debt. "I shop out of boredom, too," she adds. "If I'm online to get some shampoo, I'll end up getting some magazines, a pack of gum -- and my $5 purchase turns into a $40 one."
Stephanie thinks that spending can come from a misguided search for self-esteem.
"As a society we're programmed to believe that we neeeeeeed these things -- so we can get a job or have friends or be seen in public," she says. "We base our emotional stability on it at times. It's almost like you'll feel worthless if you can't buy that awesome suit."
Is it compulsive -- or just impulsive?
A while ago I wrote a column about the dangers of compulsive shopping, but some researchers estimate that only about 2% of the population has a bona fide shopping addiction.
I think there are many of us in the remaining 98% who indulge in a less extreme form of spending -- mainly as a way to:- Cope with stress.
- Cure the blues.
- Diffuse feelings of anger or frustration.
- Ease boredom.
- Feel special.
- Soothe ourselves after a bad day (or reward ourselves for a good one.)
And while the occasional mood-boosting splurge may seem harmless (what's wrong with a little pick-me-up?), the problem I see is that people underestimate how these impulses perpetuate their financial problems.
Don't shop after tear-jerkers
Jennifer Lerner, Ph.D., director of the Emotion and Decision Making Lab at Carnegie Mellon University, has actually studied the way feelings from one situation can spill over into our spending behavior.
More 'Women in Red' on MSN Money
Lerner and her co-researchers showed subjects three emotion-inducing movie clips -- one revolting, one depressing, one neutral -- and then asked people to estimate how much they'd be willing to spend on a certain product.
The people who had seen the sad movie clip were willing to spend the most.
Thus far, they haven't studied folks who just had a fight with their boss, who sat fuming in traffic for 45 minutes or who are dealing with a divorce. But I suspect that a raft of circumstances can lead to unnecessary spending.
There was a time in my life when emotions were the reason to go shopping. Sure, I occasionally bought things out of necessity. But that wasn't fun! I looked forward to those mad impulses that would blow through me out of nowhere, the haunting inner voice that would convince me it was OK to buy anything I wanted right now.
I still feel that way sometimes. I've just learned that the inner voice is a big fat liar. While spending, like any other addictive behavior, is harmless in small, responsible doses, it won't make your problems go away.
Emotional spending adds up
I've been concerned about emotional spending because so many people allow this silent undertow of feelings to suck them into a variety of dubious financial decisions. The consequences aren't always disastrous, but the impact of these impulses can exact a financial toll if you're not careful.
In talking about this issue, Lyndsey realized that she spends not only out of boredom, but because "I need some kind of instant gratification." The other day, she grew restless while waiting for a friend and splurged on $150 jeans.
Stephanie, who has $30,000 in debt, recently moved into a new apartment and has spent more than $800 (by my account) on new furnishings and decorations.
The point isn't whether those expenditures were necessary, but whether the feelings behind them inspired good financial choices.
I'm no saint. I just bought a pair of the new "no laces" Converse sneaks. I love them. Would that $54.22 have been better invested in my IRA? Well, if you make a federal case out of it, yeah.
So I'm not saying "never." I'm saying, "Choose carefully." Emotional spending can take many shapes. Here are some of the other WIR members' spending habits that make me wonder:
Jill hates to shop, for example. But she spends hundreds each month eating out. "I love good food," she says.
Carole likes to shop, but one area where she overspends is on treating her friends to dinner. "I'm not sure what that's about," she admits.
How to fight the urge
Stephanie, Lyndsey and I brainstormed some ways to combat emotional spending, and thus gain even more control over your financial life. Here's our collective wisdom:- Notice the feelings. We all agreed that you have to cultivate an awareness of what feelings are propelling you to spend, whether it's wanting to erase the fallout from a fight or to celebrate a sunny day. Lyndsey, for example, says she never appreciated how much that desire for instant gratification fueled her spending behavior.
- Sort out the fantasies. Stephanie pointed out that it's tempting to spend when you want to impress a friend (by treating them to dinner, say) or to buy the outfit you imagine will make you a star at work. The fantasy is fine, just don't play it out financially.
- Beware of small purchases. I have two friends who shop constantly, and they justify it because they always buy on the cheap. The discount myth falls apart when you realize that spending little bits of money all the time is just as bad as spending less often, but extravagantly. Stop and ask: Why do I need to buy something all the time? What am I trying to give to myself?
- Treat yourself. The 60% Solution Budget (ideally) lets you spend a 10% chunk of your gross each month on pure frivolity. The wisdom of this is that no matter how tight things are, it's better to allot a specific amount for a treat than it is to impulsively spend the big bucks.
- Avoid retail situations. Again, I'm no saint, but I try hard to identify those threats to my financial sanity -- and avoid them like the plague. I rarely visit a mall. I don't do eBay. Catalogs: in the trash (mostly). If dining out is your undoing, consider cheap eating alternatives.
- Create unique solutions. Lyndsey and I agreed that she might save herself hundreds of dollars each year simply by carrying a juicy thriller in her purse to get her through dull moments. I've found that taking the scenic route (i.e., one without tantalizing shop windows) helps me.
- Let your priorities be your guide. There will always be bad days at work, fights with your spouse, loneliness, tension, etc. But rather than spend as a result, I try to keep my priorities in mind: Do I really want to spend on X? Or do I really want to get out of debt? As Stephanie put it: "It's like doing the opposite of what you feel like doing, but it still satisfies that emotional thing, because you're fulfilling a goal."
There is no perfect system, but as a recovering shopper, I can say for certain that every little bit helps. Financial sanity isn't achieved in a day or a month or six months. TTFC, Taking Total Financial Control, is more like taking control of each decision, one at a time.
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