Think back to the last time you spent money. Perhaps it was yesterday or even a few hours ago. Perhaps you can’t remember the last thing that you bought. If so, think hard until you can pinpoint what you spent money on.Ask yourself the reason for making that spending decision. Did you buy something necessary such as groceries or medication? Was the item some- thing you needed or just wanted at that moment? Did you worry about having enough money to pay for the item? Did the purchase cost more than you thought it should or did you even worry about the price? Will this spending decision have a big effect on whether you’ll be able to purchase other things later? Did spending the money make you feel guilty or did it give you pleasure?
Now, try to recall a particular incident where spending money had a strong emotional impact on your life or the lives of your family members. What made that incident so emotional?One of the most important questions you can ask is: “How does spending money make me feel?” Through years of counseling thousands of people, we have heard count- less reasons why people spend money. Many of those reasons have more to do with a person’s circumstances and the way they feel about those circumstances than whether there is, or is not, enough money to spend. Let’s take a closer look at what we consider the three most significant reasons people spend money.
Impulsiveness
As we noted in the Introduction, we live in a world full of emotional media messages. These messages often play upon people’s deepest psycho- logical needs pointing out all the things a person may lack in his or her life. Responding to this supposed lack, many individuals spend money impulsively without thinking as a way to meet unfulfilled desires. Without the proper respect for money our current society has become notorious for impulsive, reckless spending. According to Richard A. Feinberg, professor of Retail Management and director for the Center of Customer-driven Quality at Purdue University, up to 50 percent of all consumer purchases are made on impulse.1
Here are some of the responses we get from people who spend money on impulse:
•“Spending money fills an emotional void in my life. . .I just feel like I can’t get the things I really desire, so I acquire material things to fill myself up.”
•“I like to give my children what they want because it gives me joy. Sometimes I feel like it’s the only thing I can really do right for them.”
•“Having the money I want to spend, when I want to spend it makes me feel important. I know my Dad never could feel that way and I always felt sorry for him.”
•“I can’t say no to my children. . .they pester me until I give in and get them what they want. They’re just plain stronger than I am.”
The Haywood* family is a perfect example of how emotions can trigger impulsive spending. They had a habit of going to All-a-Dollar, a bargain chain store that sells every bit of stock for $1 or less. Purchasing little items such as candy or inexpensive toys for the children gave the Haywoods plea- sure without making them feeling guilty, especially with the store’s low prices, which made the trips seem so innocent. But once the family started to keep track of how much they were spending at All-a-Dollar they were shocked to find it was more than $300 per month. Low prices combined with their impulsive desire to please their children cost the Haywoods some serious cash they would rather have spent elsewhere.
Most people are trapped in an impulsive mentality that prevents them from keeping much of the money they make for any length of time. Re- member the time/value of money we discussed in the Introduction? Impulsive spending completely eliminates the possibility of increasing the value of money over time. Did you know that 85 percent of all Americans who win lotteries spend every penny of their winnings on consumable goods rather than investing it in high-yield programs?2 Based on this statistic, it’s plain that the majority of Americans do not understand the profound power of the time/value of money and are destroying their future because of it. Are impulsive emotions affecting the way you spend money?
Economic Hardship
Experiencing a financial disaster is another thing that can greatly affect feelings about money and how it should be spent. Have you ever lost a job and had to come home to your spouse with the bad news? What kind of an emotional impact did that have on your family? After the trauma of losing a job, or some other economic hardship such as illness or di- vorce, we often hear responses like these about the way spending money makes people feel:
•“I just hate not feeling like I have enough money for the things I want. I get so depressed just thinking about it.”
•“Spending money makes me feel guilty, like I don’t deserve
the thing I bought or that it will come back to haunt me later.”
•“My divorce has wiped me out financially. I have nothing left after I pay child support and alimony for anything I might want to get myself.”
Doug* was a young father of three when he experienced the economic trauma of divorce. Within 12 months of the divorce, he began paying more than $900 a month for alimony and child support. Having recently graduated with a degree in graphic design, Doug wasn’t advanced enough in his career to make the kind of money he needed to support his three children and an ex-wife. He was forced to move in with his parents and sell his car. Even then, he barely made enough to meet his financial obligations. The only thing he indulged in was music, buying a CD or two every once in a while. Doing so made him feel extremely guilty because he worried that indulging himself would somehow affect the happiness of his children. Doug’s economic hardship was an emotional situation that had a huge im- pact on the way spending money made him feel.
When we are forced into a bad financial situation due to some kind of economic disaster, spending money can be a highly emotional issue that causes friction in marriages and personal unhappiness.
Daily Financial Obligations
The struggle for daily survival can also affect why and how we spend money. Even those who are frugal and don’t spend impulsively have heavy debt loads and excessive taxes and are impacted emotionally by the sheer effort of just making ends meet from day to day. We have counseled hundreds of clients who have felt burdened and depressed by this daily struggle:
•“I feel angry that I have to fight just to pay taxes and my debts. It leaves me nothing left over to spend on myself or kids.”
•“We were just audited recently and I felt so intimidated by the IRS. Taxes are the first thing that comes out of my paycheck and it just makes me sick that I still feel like the government controls my life.”
•“We were so poor growing up. I promised myself I would never make my kids wear hand-me-downs, but we don’t have enough money after all of our other expenses are paid for me to really give my kids what I dream of.”
• “I can’t believe that I have to work almost six months out of the year just to pay my taxes. It really upsets me just thinking about it.”
The Martinellis* are a good illustration of how this daily struggle to survive can greatly affect the emotional well-being of a family. Don and Keisha Martinelli were struggling to make ends meet on the East Coast where the cost of living is high. The couple had three boys younger than the age of 7 and were concerned about financing their children’s college education. Don was working 14-hour days as a controller for a corporation in Manhattan, but even with the long hours, they weren’t able to find enough money to build a savings program for their sons’ future education. In an attempt to earn extra money, they had in- vested in a business opportunity that never took off because they didn’t have the time to put into it, forcing them into further debt and farther away from the boys’ educational funding. This daily struggle simply to survive was draining the Martinelli family and was killing the fun times they wanted to have with their boys because they never dared spend money to take them anywhere or go on any vacations.
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