Practically Speaking: Emotional Spending

Too many purchases are made using our hearts instead of our heads.  It sounds like an easy concept - to take the emotion out of buying, but it's far from it.  We buy lots of stuff from the heart.  And not just the little purchases like the "perfect" pair of shoes, either.  Start listening, really hearing the word choices people make when talking about their latest partings with their hard earned cash.  Eavesdrop on a few conversations near the water cooler and you're bound to hear things like "I fell in love with the house as soon as I saw the master bedroom", "I love my new car; I named her Candy", "She's gonna love me when she sees this!".  And then, we encourage the behavior in others, too.  Most people have said, "Good for you, you deserved it!"

Emotionally based purchases get us into trouble because we're spending too much on things we just don't need.  Now, that's all well and good for Donald Trump and the like.  But if you're J. Doe and don't have loads of green bills to spare, then this bad habit can hurt in a big way.  I'm not talking about the occasional small ticket items that get snagged on a whim.  I'm referring to things like electronics, cars, houses, boats, Prada, and the charm bracelet from Tiffany's. I'm really talking about purchases that use credit!  Because if there is enough extra cash lying around to cover such things, who cares what kind of spending is going on.

I started talking about this topic with several people recently after watching a friend buy some pretty pricey items on credit because "she deserves the best".  What I found was that while lots of people are aware of a thing called "emotional spending", they didn't see it in themselves right away.  It's kind of like Bruce Willis in Sixth Sense when he has no idea he's one of the dead guys.

Someone with a Cavalier budget out shopping for a car to get through the daily commute that heads home with an M series BMW just made an emotional purchase.  Someone paying more than the "top price" they set ahead of time using any explanation other than "I underestimated what these go for.  I couldn't find one for that price anywhere", made an emotional purchase.  The person who bought something because " I just had to have it" or "everyone else has one" made an emotional purchase.  Notice that I haven't even mentioned the most typical type of emotional spending - Retail Therapy - that pick me up thing some do when feeling down.

So, what do you do to stop buying this way?  First, you have to see the habit in your own life and view it as unhealthy.  If you don't see smoking as bad, you aren't going to successfully quit, right?  Take an honest look around at the things you already have.  Did you really need it, or need the bells and whistles that model came with?  How long did it take you to decide to buy it?  Did you buy it on credit?  Did you need it right then or could you have waited until you saved the cash to get it?  How much do you think it really cost after paying the credit card fees?  What were you feeling when you bought it?  Do you still think it was worth what you spent?  Were you with someone who makes opening your wallet a little too easy?

Once you see some of the spending habits you have, make some changes that keep your spending more deliberate and less reactionary:

• Talk about the issue with a close pal - the one that's always honest with you even when you didn't ask for their two cents
• Set a few rules that work for you.  For instance, don't buy it if you can't pay cash
• If you've decided to use credit take 48 hours to mull over this "must have".  In more cases than not, whatever looked so appealing 2 days ago will have lost some of its luster
• Write down the reasons you think this is the best purchase to make.  Then ask yourself if these are reasons worth that amount of money...plus interest!
• Look in at least 2 other places to see if you can get a better deal
• If the brand name is singing its irresistible mermaid tune, consider what value that really brings to you.  Is the Tempur-Pedic actually any different from the Bob-O-Pedic? Research it and find out the answer.  Will anyone know that the purse is a knock-off?  More importantly, why does it matter if they do notice?
• Is what you are about to buy worth not having other things you truly need?

It's hard to escape the purchases your heart is leading you to make.  But if you take a page out of Loral Langemeier's book, The Millionaire Maker, and run your personal finances more like a business, perhaps you'll think differently about those expenses before making them.

Please look for my next article, a review of The Millionaire Maker by Loral Langemeier.

Heather Montanaro: Money Correspondent:

Heather's column, Practically Speaking, published 3 times a month to Gather Essentials: Money presents practical advice for everyday living and provides insight on how to pair lifestyle choices with financial realities.

Heather Montanaro holds an Executive MBA from Northeastern University and has held senior positions with local technology and service companies.  Now she enjoys staying at home with her 2 young children.  She's made the adjustment from 2 to 1 incomes and enjoys helping others reach their personal goals as a Budget Coach.

You can find all of Heather's Practically Speaking columns at tag: budget coach

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