The Psychology of Spending Money

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The Psychology of Spending Money

It is often said that shopping is therapeutic, but you can have too much of a good thing. So what is the psychology behind our desire to spend money?

Many psychologists believe that those of us with low self-esteem are more likely to purchase things we don’t really need. The so-called “urge-to-splurge” that provides a short term euphoric rush can turn to despair when we come to the end of the month and try to juggle our available money against our inevitable bills.

By realising that the amount of money you have has no bearing on your worth as a person; you take the first step towards taking control of spending habits. Here are a few vital tips that can help you keep your spending within your limits.

Use cash whenever you can
Studies have shown that using cash for purchases gives us a more direct relationship with our money. Using credit cards divorces the unpleasant feelings of laying out the money from the pleasure of the purchase. You are more likely to avoid impulse buying when you reach for those banknotes in your wallet.

Avoid sales and discounts
It may sound crazy to avoid discounted or sales items, but before you rush to grab that bargain, ask yourself whether you would buy the item if it were not on sale. If you really need the item, you can consider the discount as a bonus, but don’t let that be the only reason for your purchase.

Save up for those items you really need
Instead of the instant gratification rush of buying a new TV on instalments, rather save up until you have sufficient funds to pay cash. Not only will you be sure that you can actually afford it, but you’ll avoid interest charges.  Also you can often get a better deal when paying cash.

Before you buy something, it’s a good idea to first create a wishlist, instead of making an impulsive purchase. Review your list after 30 days and you may well find that you can actually do without that new item. If you still want it, save up for it until you can afford it.

Make a budget
Take the time to record your spending for at least a month. At the end of the period, go through your records and you’ll often be shocked at where your money has gone. Use your spending history to make a budget for those things you really need. By applying these simple tips, you can control your spending and break the urge-to-splurge habit. Give them a try!


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