The Psychology of Spending
Some of us have a love-hate relationship with money.
For some, shopping sprees can be extremely pleasurable; however, overspending can lead to unmanageable debt and feelings of guilt and depression.
Studies have shown that most people don't consciously consider money spent on credit cards as actual money spent.
Consumers with credit cards are more likely to pay more for items than people who pay with cash because they don't feel as though they are spending their own money.
According to the Federal Reserve, the average American household carries an average of $8,700 in credit card debt—and by the end of 2008, 4.79 percent of credit card accounts were considered delinquent on payment.
The Recession Effect
Because of the economic recession, some people feel obligated to spend and guilty if they don't - even if they don't have the money to spend.
Last year's stimulus plan was meant to improve the economy by allowing people to go out and spend.
But for many, the tax rebate checks came just in time to pay overdue bills and little was left over to stimulate the economy.
Many of those who still felt obligated to stimulate the economy by spending did so—and ended up deeper in debt.
Impulse Control
For some, spending is impulsive and can be difficult to control.
When compulsive shoppers have credit cards, it can result in financial disaster.
Other people may not consider themselves “compulsive shoppers”, but they do view shopping as a recreation activity. As long as there are funds to cover this type of hobby, there may be no problems; but in reality, few people can afford to have a frivolous shopping habit.
Retail Therapy
The term retail therapy refers to an emotionally driven shopping spree.
This type of shopping (which is done, in theory, to make the shopper feel better) can lead to further upset and depression when the retail therapy shopper receives their credit card bill.
In order to control our negative spending habits, it’s helpful to identify what makes us overspend, which is the first step in making a conscious choice to control spending habits.
By controlling your spending, you can stick to a budget, reduce debt and establish savings – all of which are far more rewarding than a habit of emotionally driven spending that could potentially lead to bankruptcy.