Is mindful spending crucial to you at this time of the year? 2022 has run its course.
We’re now in December, a festive month filled with love, cheer, and an emotional burden to create happiness in the lives of your loved ones that promotes irrational spending, enticing you to completely disregard your own boundaries.
Despite the unemployment rates and the looming recession, people across the nation aren’t exercising mindfulness as much as you would think. According to Deloitte’s Holiday Retail Survey, American consumers expect to spend approximately $1,455 — a sum almost equal to the monthly rent for a one-bedroom apartment in New York City currently.
Your ability to exercise efficient money management skills is a crucial part of maintaining balance in your life this holiday season and heading into 2023.
In this post, we’ll break down emotional spending, what causes the habit to form, explain why it increases around this time of year, define mindful spending, and provide tips to help you embrace mindful spending.
What is Emotional Spending?
When you make a purchase that is motivated more by your emotions than your necessity for a particular good or service, this is known as emotional spending, sometimes known as “retail therapy” or impulsive shopping.
These emotional urges are inspired by deep desires that override your ability to make thoughtful decisions about the purchases you make.
Dopamine is a hormone that’s released in the brain to make us feel good and elevate our spirit. Research has proven that the shopping experience is correlated with the secretion of this hormone.
Although emotional spending might not always be detrimental to your life, it can develop into a routine and put a strain on your finances if you’re not careful. When we excessively indulge in the shopping experience, we get a rush of positive emotions that pass quickly, but the negative emotions we may be trying to escape still remain, negatively influencing our mental health.
This becomes addictive, cyclical behavior that puts you on the edge of your seat, constantly anticipating that next “hit”.
What Causes Emotional Spending?
If your intention is to curb a habit, it’s in your best interest to analyze what might be causing you to indulge in the first place. All addictive behavior is promoted by triggers and the responses to those triggers.
Based on an article from Verywell Mind, some of the feelings that could lead someone to make emotional purchases include:
- Sadness
- Jealousy
- Confusion
- Low self-esteem
- Anxiety
- Depression
- Stress, including stress related to a lack of financial stability
- Loneliness
- Boredom
Why Does Emotional Spending Increase Around the Holiday Season?
As we mentioned previously, most people rely on “retail therapy” when they want to put themselves in a better mood.
The holiday season is a key time of the year when people are sad or bored due to a lack of companionship, jealous over the positive reception other family members receive, their material possessions, or their social status, confused or anxious about where they’re life is heading as the new year approaches, or stressed about carrying the financial load.
Consumers typically use impulsive shopping as a way to cope with these feelings or avoid them all together, which we know isn’t going to happen without you actually addressing these feelings and committing to the actions that will create the changes you want to see.
To overcome the temptation to mask your true feelings, we suggest you get familiar with mindful spending.
How Can You Stop Overspending?
When you take a disciplined approach to managing your spending habits, this is considered mindful spending.
Mindful spending relies on a budget plan, a great tool for managing your personal expenses, but it can be challenging to commit to it. We naturally oppose the idea of being restricted, but without a structured approach to making purchases, we create our own inevitable demise.
10 Tips to Embrace Mindful Spending
- Create a Wish List
Sometimes we see things and we want it right then and there. However, we don’t always need newer clothing or footwear, cutting-edge technology, or a weekend trip. We’re just looking to usher fresh energy into our lives.
You can use a notes app, a wish list on a website like Amazon, or a physical notebook to take note of the items you have the desire to buy. Include the date when you add each new item to your list and enforce a waiting period, like 30 days, to ensure you truly want or need this item.
After the waiting period, you can assess the wish list to see if this product or service is still a top priority, or if another item needs to be prioritized.
- Pay Attention to Your Spending Triggers
Discovering the instances or circumstances that influence you to spend more money can help you eliminate the threat of overspending.
Ask yourself questions like:
“When do I usually spend the most money? Do I spend more money online or in person? Am i more likely to spend more money when I’m alone or with my social circle?”
You might find that you spend more money when you’re battling anxiety or stress, when you’re trying to impress your friends, when you’re trying to control your family’s perception of you, or when you’re trying to attract a potential partner for your own selfish reasons.
Knowing when you overspend could help you reduce your expenses or help you identify circumstances when you shouldn’t spend unnecessary amounts of money.
- Track Your Expenses
Recognizing where your money is going can also help you stop frivolous spending. You can use tools like Excel spreadsheets or Google Sheets to document the date, amount, and category associated with each expense. It’s likely that you’ll start to notice patterns in how you use money daily.
Small costs do add up, and this is one pattern you’ll probably be more aware of after you start recording your expenses.
- Pay with Cash
If your cash runs out, then there’s no cash to spend. Keeping cash in your pocket or wallet gives you direct insight on the amount of money that’s available to you. If you’re down to your last $20 for the day, you might be more hesitant to give it away.
- Use a Zero-Sum Budget
A zero-sum budget is a financial plan that allows you to allocate all of your funds to specific purposes. Keep your emergency funds or savings in mind.
Quick tip: Whenever you get paid, immediately take at least 10% of your funds and place it into your savings account.
- Set Specific Goals
If you see that you’re spending a lot of money in one particular area, consider setting a monthly goal.
Instead of spending $300 on uber rides, maybe you’ll spend $150 this month. If you spent $100 eating out last month, maybe this month you can spend $60 this month.
This mindful approach ensures you can gradually make adjustments that create more financial stability. Make sensible reductions and take “baby steps” until you find a happy medium.
- Designate a Specific Debit Account for “Pocket Money”
You might be more inclined to spend more when all of your money is instantly accessible.
Set up a separate bank account just for “pocket money”. We suggest you use a debit account that has overdraft fees so that you’re not tempted to go over your limit.
- Go with Less Expensive Choices
Living within your means is a skill that helps you limit overspending.
Here are a few ways to spend less money:
- Buy foods for the grocery store that aren’t manufactured by popular brands
- Go to the movies on a day where the tickets are cheaper
- Instead of going out to eat, cook dinner for a friend
- Determine the Hour Value of the Purchase
Determine how many hours you had to put in at your workplace to pay for whatever purchase you make.
Equation: Cost of Item / Hourly Wage = Value of Your Purchase
This method puts you in a position to thoroughly analyze if the hours you spent working for the item is really worth the money you paid for it.
- Use Budgeting Apps
Budgeting apps support you by helping you stay on pace with your goals and highlights your spending habits.
You’ll want to use a budgeting app that gives you the ability to categorize your expenses, links to your bank accounts, has manual input options, and automated alerts.
Here’s a list of apps you may want to consider:
By using these tips and applying yourself, you’ll make financial stability more of a reality rather than a dream.
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Make your health and wellness a priority again by getting in touch with our Lead Coach, Iulian Bofu. Book a call now!
