What is emotional spending?
We’ve all heard and said phrases such as “treat yourself” and “life is short” but can we ever control that emotional connection to ‘treating’ ourselves?
The Wolfpack Project, a charity tackling youth loneliness in the East Midlands, found that 100% of their Youth Advisory Board of 26 made up of 16-35-year-olds said that treating themselves by buying something they didn’t need only made them feel better for a few minutes.
In a study by YoungMinds it was found that 67% of young people believe that the pandemic will have a long-term negative effect on their mental health* which Damien Reynolds, founder of The Wolfpack Project commented, ‘...could lead to clouded personal finance decisions or habits driven by their emotions’.
‘Emotional spending’ is as it sounds, making a purchase or a financial decision which is purely based on how you’re feeling. When we’re happy it can be just as easy to overspend as it is when we might be down – of course it’s fine to treat yourself when you’re feeling excited about something if you can afford it. Examples could be congratulating yourself for getting a new job with a new item to add to your work wardrobe or going overboard whilst treating a loved one for an anniversary. We can all probably pinpoint a purchase that was bought when we were excited.
But even these positive emotions can lead to buying things you don’t need, spending too much and of course negative emotions such as boredom, stress, jealousy, loneliness, and insecurity can also drive us to make purchases for the wrong reasons and in the hope that we are going to improve our mood through buying things that make us feel better.
The emotional spending cycle
Social media based shopping has been especially heightened by the pandemic-induced shift to online shopping and a third lockdown to contend with brought increased frustration and boredom for everybody, feelings that are going to affect the way that we think about spending. MasterCard found that 43% of Brits have shopped more through social media in the past year due to the pandemic.
Damien Reynolds continued, “Spending to self-medicate whilst we’re feeling down or lonely is incredibly common. It can result in a temporary high, but this feeling doesn’t last. Emotional spending such as this can develop into a cycle of a negative emotion followed by a spending-induced high which eventually can escalate into money related anxiety and worry if the cycle gets out of hand.”
What can I do to build better spending habits?
Feeling in control of your finances can last much longer than the fleeting thrill of ‘add to basket’.
We’re all for treats and buying ourselves nice things when we deserve them, but we don’t believe that shopping should get in the way of your future financial goals that can really enhance your life such as house deposits, clearing outstanding debt or saving for your future.
Reynolds asks, “If you feel like you’ve recently overspent, think back and see if you can identify a trigger for this. Was it an online shopping spree one evening because you fancied the thrill of receiving a parcel?”
You won't be the only one. According to Barclaycard, Brits have spent £40.6 billion** on dispensable items during lockdown, in an effort to have more fun while at home.
Here are some tips from The Nottingham to reign in excess spending.
There we have an explanation of what emotional spending is, do you think you could be guilty of this sometimes? If you’re planning to overhaul your budget, look at our nine steps to spring clean your finances article or our essential guide on how to save money fast.
- Set a budget which includes a spending allowance
A budget doesn’t have to mean no fun. Using negative language like ‘sticking’ to a budget can make you feel trapped and even more likely to gain a thrill from doing something rebellious and straying away from it - much like how a restricting diet makes you want that chocolate bar even more!
Changing the language around your budget to a more positive vibe could help how you look at it – if your budget is helping you reach a goal of a holiday or a first home then it’s really your friend, not your enemy. Plus, you can still spend but perhaps having a budget will make you consider each purchase more carefully?
Check out our downloadable budget planner, or take a look at three visual ways to budget instead.
- Work towards a goal
Setting a savings goal can help you to divvy up your money properly into the set budget from the first point. Shift the focus from saving what’s left to saving first and spending what’s left. Work out what’s left after you’ve saved £X into your house deposit, paid all your bills and set aside a small amount for your emergency fund. This can be your disposable income budget and you know that it’s helping you manage your money on the way to a goal that you really want to reach. This is when emotions towards a certain goal can really help with saving, not just spending.
- Take time when you do spend
When you are going to spend with the money in your disposable income budget, give yourself time to decide whether you really need it or even want it that badly – is it just a fleeting moment? Whatever you’re going to buy will probably be there again tomorrow or the next day and taking 24 hours to think about the purchasing decision could make you get over the emotion that was driving you to spend.
- Challenge yourself to a ‘My No Spend Week’
Taking a whole week to not spend on anything ‘non-essential’ could really kick start a savings habit and help you to break down emotional spending habits. Why not try it if you feel like a challenge could help you create a more mindful relationship with money?
Reynolds also added, “It's important to organise your finances, avoid overspending and to resist emotional purchases that lift your mood briefly. Shift focus on to your health, wellbeing, and happiness, and reach out to charities like The Wolfpack Project that can help support you."
If you find yourself worrying about your finances or are concerned that money worries are significantly affecting your mental health, reach out to your GP or visit resources such as Mind.co.uk to read about managing your stress. Visit the Mental Health & Money Toolkit for some additional advice.
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