Most people understand that overspending can wreak havoc with their financial goals. Spend less than you earn, don't take on unnecessary debt. Our rational mind gets it.
But there are external forces at work, out to undermine our resolve. Advertising is notorious. Look at the beautiful, happy couple using this product. Translation: I, too, will become beautiful and happy if I buy this product. My life will be perfect, just like theirs.
My movie idol endorses that product. It must be good.
And we care too much what other people think. The old adage, "Keep up with the Joneses," comes into play. Everyone on my block drives a new car. What will the neighbors whisper to each other if I don't trade in my five-year-old Honda for the latest Lexus? I want them to know I'm doing just as well as they are—maybe even better.
Even if you don't care what others think, your children do. Your child needs designer sneakers. Do you want him bullied at school for wearing some uncool generic brand? What will his friends say about him—and about his parents—if he doesn't upgrade to the latest iPhone? And don't be surprised if he makes you park that five-year-old Honda down the street when you pick him up.
Some people equate love with how much money they spend on others. You buy the flashiest, most expensive bouquet so the recipient won't think you're cheap, or that you don't really love her. I once had a vacuum-cleaner salesman tell me I was jeopardizing my family's health, that I must not love them, because I wouldn't buy his over-priced product.
Guilt is another reason people overspend. You miss your child's game, so you make it up to her by buying her that fancy new toy she's been talking about. You fight with your wife and then try to make amends with a pair of diamond earrings. You lend your sister money you can't spare because she reminds you that you were always the favorite, the reason she could never catch a break. You invest in a cousin's ill-conceived start-up because he's family, and you don't want your refusal to help to be the reason his business fails.
We spend to treat ourselves, to celebrate a victory or other joyous event. We indulge in "retail therapy" when we're depressed.
And if something is billed as a bargain, we can't resist, because we want everyone to know we are savvy shoppers. Save 75%! Buy a pair of $400 shoes for only $100! Hurry, before the deal disappears! Of course, if you didn't plan to buy those shoes in the first place, you could save 100%, and use that $100 for something you really need.
My husband and I used to drive past a furniture store that had a "Going out of Business Sale" sign up every week. A year later, they were still having a "Going out of Business" sale. We joked that they must have made enough money from the "Going out of Business" sales to stay in business.
Product placement is also designed to lure us into forsaking our budgets. Necessities like milk are located at the back of the grocery store. Impulse indulgences—a mouth-watering candy bar you've seen advertised, a magazine with a salacious story about the latest celebrity romance, lottery tickets promising you instant wealth—are right by the register, so the cashier can ring them up before you've had time to decide you really don't need them.
One of the lessons I learned in Weight Watchers is, before taking a bite, ask yourself why you are eating. If the reason is emotional and not hunger, stop. Visualize your future slim, healthy self. Think again about what you must do to get there. This lesson can be applied to spending as well.
What tips can you share about controlling spending? I'd love to hear your comments.