The Psychology of Spending Money

The Real Culprit Behind Your Urge to Splurge

money spending psychology
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In a perfect world, we'd all avoid too much credit card debt and would never have to deal with the desperation of being unable to meet our credit card payment obligations.

We'd never have creditors hounding us for payment.

We'd never know the frustration of not being able to afford what we really want because every extra cent has to go towards keeping up with the minimum payments on our credit cards.

But this isn't a perfect world and unfortunately, these distressing situations are the norm for many people.

If you find yourself in this position, or headed there, it's better to take control of your spending now versus waiting until later. Here's how to rein in your bad spending habits. 

Focus on Your Spending Triggers

An important aspect of debt that isn't always addressed is why you got too deeply into debt in the first place. Why did you keep charging items you couldn't afford? Why did you feel the urge to use those little plastic cards for things that weren't necessary, even when you began to struggle to make the payments? What causes your compulsive shopping? 

Keeping a spending log and taking note of your moods can help you pinpoint what's behind some of your decision-making. Identifying the triggers that stimulate the urge to splurge can be uncomfortable, but if you don't face them, you may never get control of your spending and your debt. If you're always trying to pay off yesterday's purchases, many of which have long since worn out or been forgotten, you'll have a much harder time trying to plan for financial security tomorrow. 

Make the Switch From Credit to Cash or Debit

One negative aspect of using credit cards instead of cash is that you don't feel like you're spending real money. The pleasant feelings you experience when you purchase the item are disconnected from the unpleasant or painful feelings of making the payment when you get the credit card statement. That disconnect can lead you to overspend on credit, since you don't have to face any financial consequences until later. 

Putting your credit cards on ice temporarily and using cash,check, or a debit card doesn't afford you that same delayed response. Spending cash can be particularly powerful, since you're actually seeing the money leave your hands. You don't necessarily need to cut up all of your credit cards for good but using cash or your debit card for a month can give you some perspective on how much you're truly spending. 

Reexamine Your Money Mindset

To really get control of your spending and your credit card debt, you need to understand money means to you. That includes how you interact with money and what beliefs and attitudes you have about it. For example, studies also show that people with low self-esteem engage in more impulse spending and buying things they don't need. Your parents' attitudes and behaviors with money growing up can also influence the decisions you make as an adult. 

Remind yourself daily that money or a lack of it doesn't determine who you are. Your worth as a person has nothing to do with how much money you have. Once you truly believe this, and money is no longer connected to your sense of self-worth, you open up the psychological barriers that were keeping you from wisely handling the money you do have and limiting your ability to make more.

Right now, your unconscious limiting beliefs may be keeping you from being financially successful, but as you begin to build up your feelings of self-worth and develop a positive attitude about yourself and about money, you'll attract positive things into your life. As you do so, you'll feel less of a need to generate positive feelings by purchasing things, and you'll find it easier to stop buying items you don't really need.

Get Educated About Money

There are hundreds of books, magazine articles, and Internet web sites about getting rid of credit card debt. Some of them offer sound advice about the psychological aspects of money and spending that you'd do well to consider.

If psychological factors influence your spending, credit reduction programs are like using perfume to cover body odor: they will treat only the symptoms, not the root cause. Working on the psychological aspects while taking steps to reduce debt will greatly increase your chances of long-term success.

Several of my favorite books on this subject are listed below, all available at To explore this topic more, read one or more of them:

The Courage to Be Rich by Suze Orman

Your Money or Your Life by Joseph R. Dominguez and Vicki Robin

Money Harmony: Resolving Money Conflicts in Your Life and Your Relationships, by Olivia Mellan

Consuming Passions: Help for Compulsive Shoppers, by Ellen Mohr Catalano and Nina Sonenberg