Spending is where personal values and aspirations meet the ancient practices of hunting, gathering, trade and a touch of sympathetic magic. Money is one of the main tools we have for manipulating our environment. But while some spending is necessary for survival (and to stay out of prison) beyond that there are choices to be made, and this is where psychology enters the picture.
Exploring our psychological and emotional relationship with money is a vast topic. But if you narrow the focus to spending, or spending habits, it leaves the questions of how and why we spend, what we choose to spend money on and how we feel about it. It begins with that primary function of money – to control and change our environment.
The decision to spend or not to spend can relate to how we feel about the status quo. If you worry that your house is insecure, you buy a burglar alarm. If you feel in a rut, you might spend money on new outfit or home decor. The act of spending alone can feel like movement and progress. Now that I’ve bought the book or the exercise machine the world is a bit different – I’ve DONE something.
Psychologically, spending has an advantage over other means of altering our situation because, as long as the funds and items are available, it has an excellent chance of success. I might never use the exercise bike, but at least I was successful in buying it. I didn’t have to apply to get into the shop or prove myself worthy. I chose when and where to make the purchase and how much to spend. I might have to struggle and compromise in other areas of life, but in the role of customer, I am king.
The link between spending and control isn’t limited to the physical environment. People also use money to try and influence how they’re perceived, and it’s not limited to obvious status symbols like expensive clothes or cars. We can spend money to reinforce membership of a group. Teenagers, for example, often buy the same make and model as their peers to be seen as one of the crowd. But these youngsters are doing more than controlling the impression they make. They are also demonstrating a second psychological factor of spending – value.
The relationship between spending and value goes deeper than getting value for money. Making a sacrifice shows that something is important to us. We talk about valuing our appearance by spending money on it or being prepared to pay for quality. We send cheques to causes we support. The willingness of the teenagers to part with money to follow the customs of their friends is a way of saying “I value my membership in this group”. Throughout the world, gifts are used to express care, appreciation and respect because they say “I value you”.
But value is relative. We spend when we view the spending more important than having the money. This can work two ways – either the purchase or donation seems valuable, or parting with the money does not. A busy executive who buys family members gifts rather than spending time with them, for example, values time more than money. For some people, spending can be a form of a purge. They rid themselves of money they have mixed feeling about, or deliberately sacrifice it to ease feelings of guilt. It’s also why people often spend a windfall more readily than money they’ve worked for.
Credit cards, lay-away plans and two-for-one offers play to this idea by making the financial sacrifice appear minimal or hiding it from view. But why would we want to buy things we don’t need in the first place? Because it’s such a great deal! This is the third of my spending psychology factors – consumer prowess.
Shopping is our modern equivalent of the hunt. We even use expressions like “bargain hunting” or “bagging” a bargain. And we all like to think of ourselves as good hunters. Coming away with an apparent bargain demonstrates our prowess as consumers. It makes us feel skillful. Similarly, saying “no” can leave us kicking ourselves for letting it get away, regardless of how much or how little use for the item itself.
These factors are some of our most powerful psychological spending buttons, as advertisers well know. Watch a few commercials and you’ll see attempts to push them:
Create a discontent with the status quo (limp hair? Not enough closet space?).
Promise progress and improvement (still using the same old detergent? Have more sex appeal).
Appeal to values (kind to the earth, because you’re worth it).
Minimize apparent sacrifice (nothing to pay till….)
Make the purchase seem skillful (order now and get the steak knives free!)
Understanding the psychology of spending doesn’t just help the sellers. The cleverest spenders are the ones who know that certain buttons can be pushed and keep a watchful eye on their own.