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Many of us have experienced the desire to buy things to get a quick dosage of comfort when everything else seems to be caving — something you might have heard called “retail therapy.”
Say you’ve had a particularly tough day at work, and afterward, you unwind by browsing Etsy. You find yourself making impulsive purchases for a fleeting sense of satisfaction, only to experience buyer’s remorse shortly after and realize that your emotional spending has put a strain on your finances.
Emotional spending can wreak havoc on our financial well-being, especially during times of high inflation. It’s important to recognize the negative impact of emotional spending, engage in healthier coping mechanisms and take steps to regain control over our finances.
What is emotional spending and what triggers it?
Although the term retail therapy may seem like a fun play on words, buying stuff can turn into a real emotional outlet for some spenders. Emotional spending can cause you to quickly spend more than your budget can sustain, with repercussions on your wallet.
When you encounter an emotional trigger, you may experience a series of reactions that lead you to making a purchase. You might be triggered to spend by a range of emotions but here are a few examples:
- Sadness. After a bad day, you decide to go shopping to make yourself feel better.
- Boredom. A boring morning at the office leads you to splurge on snacks to make the afternoon feel less deadening.
- Fear. A supply shortage sets in and you immediately stockpile pantry items that you won’t need for a while.
- Insecurity. While you’re out shopping with friends, they brag about their latest purchases. That makes you feel like you’ve been left behind, and you purchase a similar item to compensate.
Emotional spending can also perpetuate a vicious cycle of financial stress. As you spend more to cope with stress, it puts a greater strain on your finances and may exacerbate stressful feelings.
Here’s how to keep emotional spending under control
If you want to get your emotional spending under control, the strategies below may help.
1. Identify your triggers
The best place to start is by identifying your triggers. In order to identify your personal triggers, Erin Papworth, a financial coach and founder of personal finance app Nav.it, recommends tracking your mood to identify triggers and emotions that cause you to spend without your overall financial wellness in mind.
“Over time, people start to identify habits and trends that equate to unwanted behavior,” Papworth says. “Self-awareness is the first step to any behavior change.”
With a better understanding of when you are prone to overspending, you can recognize the signs before you complete the transaction.
2. Avoid impulse buys
Impulse buys can happen at a moment’s notice. If you weren’t planning on buying the item before you arrived in the store, then it’s an impulse buy. These spontaneous purchases can add up quickly.
To avoid the draining cost of impulse buys, take some time to think about your purchases.
“A great way to prevent impulse spending is to have a rule that you must wait a minimum of 24 hours before buying anything over a certain amount, such as $50 or $100,” says Marlene Schmidt, a money management coach at Insight Spending Planners.
The benefit of sleeping on it is that you’ll have a clear mind when you make the decision whether to proceed with the purchase and can avoid having to regret it later.
“Often, you’ll change your mind and realize you didn’t need or want it anyway,” she says.
3. Limit exposure to digital marketing
We’re constantly bombarded by advertisements, and with highly trained online algorithms, those ads are often specifically targeted to appeal to our individual wants and needs.
One of the most prominent mediums for targeted ads is social media. In fact, a Bankrate survey found that 49 percent of social media users made an impulse purchase on a social media platform — and nearly two-thirds (64 percent) of them had regrets about it.
You can avoid this temptation by minimizing your interaction with advertising where you can. Unfollow accounts that frequently tempt you with product placements, and unsubscribe from retailers that regularly clog your inbox with ads.
4. Find other activities
When you try to refrain from emotional spending, determine what other activities will fill that emotional gap. For example, you might choose to meet up with friends for a free walk around the park instead of shopping at a mall. You’ll still enjoy the connection of catching up without the temptation to bring home whatever is on sale.
5. Make a budget
If you don’t already have a budget, then it is time to build one.
“A lot of overspenders aren’t using a budget to set parameters for their habits,” says Nishank Khanna, chief marketing officer of Clarify Capital, a service that provides financing to small businesses. “When you don’t track what you spend or have goals in mind, it can be hard to feel in control of your financial situation.”
With a budget in mind, you’ll have a better idea of what you can afford to spend before you allow your emotions to take over.
6. Set savings goals
Beyond setting up a budget, create savings goals based on your values. The goals you build for your money can range from funding a vacation to building your retirement accounts. Since you are tying your emotions to future money goals, you might have an easier time holding off on an immediate emotional purchase.
Cameron Burskey, partner and managing director of retirement security at Cornerstone Financial Services, recommends posting these goals in places that you will often see, such as a phone lock screen or background or on a bathroom mirror.
“There are a lot of places you could put your financial goals, as it is important to constantly remind yourself of them,” he says.
7. Seek support
Seeking support from peers or professionals is not a sign of weakness, but rather a proactive step toward achieving financial stability. Others who share similar goals and experiences can provide invaluable guidance and accountability.
Consider looking into local support groups or workshops that focus on financial management, budgeting and curbing emotional spending. Often facilitated by financial experts or counselors, these groups offer a relaxed environment for learning practical strategies and gaining motivation from peers. You may be able to find free workshops through your state or local government.
If you find yourself struggling with emotional spending and financial management, it can be beneficial to seek guidance from a financial advisor. These professionals can offer objective insights, help you create a financial plan and provide ongoing support.
In a world filled with enticing advertisements, social pressures and emotional triggers, controlling emotional spending is a skill worth mastering. As you implement these action steps in your life, remind yourself of the long-term financial stability you can achieve over short-term emotional satisfaction. Keep yourself motivated by tracking your financial goals.
— Bankrate’s René Bennett contributed to an update of this story.