Finances FYI Presented by JPMorgan Chase
Some people use retail therapy to cope with feeling sad, anxious, and stressed and to boost their mood. In fact, in a Lending Tree survey, 69% of Americans reported emotions drive their spending. So, if you’ve done it, you’re not alone.
However, uncontrolled emotional spending can take a negative toll on your wallet. It can also keep you from reaching important financial goals like saving money to buy a house or building a robust emergency fund.
So, how can you avoid emotional spending? First, learn to recognize it and then follow these tips.
What Is Emotional Spending?
Emotional spending is “spending money in response to emotional triggers instead of rational needs,” according to Psychology Today.
Various feelings like anger, fear, panic, anxiety, and stress drive buying decisions in this type of spending.
Making an occasional emotional purchase is okay. Left unchecked, excessive emotional buying can lead to overspending and debt. Plus, amassing debt can quickly amplify anxiety and stress, and you should avoid this negative cycle.
Compulsive Buying Disorder and Emotional Barriers to Seeking Help
When someone experiences constant urges to buy unnecessary items with no regard for the emotional, social, or financial consequences, they may have compulsive buying disorder or shopping addiction, Psychology Today explains.
Stigma and shame associated with financial struggles and other behavioral health issues can keep people from reaching out to get professional help. As with many addictions, compulsive spenders are often in denial and need help to overcome their behavior.
Tips to Prevent Emotional Spending
Certain actions can help you refrain from or curb emotional spending. Here are some tips for avoiding emotional purchases.
Recognize Emotional Spending and Triggers
Becoming aware of emotional purchases can help you curb spending impulses. To recognize emotional buys, examine credit and debit transactions on your bank and credit card statements.
When reviewing the transactions, consider your mood when you bought the items and ask yourself:
- Was I stressed, bored, or sad when I bought these things?
- Why did I shop for these items? Was I trying to cope with an unpleasant situation? Was it a spur-of-the-moment trip?
- Did I feel guilty or have buyer’s remorse after shopping?
Recognizing compulsive spending patterns helps prevent future emotional spending. Also, learn to identify triggers — like if you bought items to soothe yourself or cope with a difficult situation.
Also, think about whether sales tactics like BOGO and other promotions prompted you to buy for fear of missing “a great deal.” Then, consider if spending an extra $40, for example, to save $25, was a smart decision or falling for a sales ploy.
Keep an Expense Log
It’s easy to get carried away on a shopping spree without thinking about how much you are spending. Logging your expenses on an electronic spreadsheet, in a budgeting app, or in a spiral notebook can help you see exactly where your money is going.
Recording every single daily purchase — even that morning latte — is essential. Itemizing daily purchases and tallying spending totals identifies unnecessary expenses and keeps you financially accountable. It also uncovers hidden financial savings that you can potentially grow.
Stick to a Shopping List of Essential Items
Going to the grocery store without a shopping list can lead to overspending, April Lewis-Parks, director of financial education at Consolidated Credit, tells AARP.
Plus, going to the grocery store on an empty stomach can cost you an extra $26 per trip on average, a 2024 Dole Food Company survey found.
So, eat before buying groceries. Also, make a shopping list of essential items and stick to it at any store you visit. Doing so prevents an emotional purchase when you spot an item that’s not on your list.
Wait Before You Buy
Restraining spending takes willpower. But you can curb buying impulses by leaving that must-have item on the shelf or out of your online shopping cart. If you still really want that item later — either days, weeks, or months later — consider buying it at that future time. Often, you’ll find that by waiting, you realize you don’t need or really want that new sweater or pair of shoes.
Do Something Else Besides Shopping
If you’re having a bad day and feel a spontaneous urge to shop, do something else. Go jogging, read a book, listen to your favorite album, binge-watch a TV show, call your BFF, or make a list of savings goals. Do anything else but shop, and the urge will eventually pass.
Stick to a Budget
Creating and sticking to a budget organizes your finances and tracks your income, monthly bills, and extra expenses. NerdWallet has a free app that tracks your budget and credit score. Or, do a Google search for the best budgeting software or apps to find suggestions.
Save What You Don’t Spend
Saving the money you do not impulsively spend is a wonderful way to reward yourself for your financial diligence. You can also consult a financial adviser to find ways to invest and grow your savings, like a high-yield savings account, CD, or other savings and investment vehicles.
Every dollar you don’t spend is a dollar you can save, and following these tips can help you get started.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.
