Do any of these scenarios sound familiar? The rush of excitement when you finally purchase that item you’ve had your eye on. The mood uplift when you buy something on impulse. The initial pangs of guilt when you first see your credit card balance.
The way we use our money can bring about a wide range of emotions. We can understand these feelings better when we turn to science – the psychology of shopping or saving – to explain the way our money makes us feel.
The Psychology of Shopping
The term ‘retail therapy’ is no joke. Researchers from the University of Michigan showed that shopping helped to restore a sense of control in people who were feeling sadness. Shopping was 40 times more effective in providing a sense of control and individuals were 3 times less sad, when compared to individuals who were only browsing.
But that euphoric feeling can lead to a pattern of overspending. To avoid overspending, it’s suggested that you take the following steps before you buy.
First, you should shop with a plan. Having a plan, even a simple written shopping list, takes the emotions out of your shopping trip and makes it more logical. If you didn’t come prepared with a list, then make a list of everything you purchased afterwards. Knowing you’ll have to track each purchase can override the impulse to make additional purchases.
Second, be mindful of purchasing with credit cards. Research has found that we’re willing to pay more with credit cards than when we pay with cash. This is possibly due to the fact that with a credit card purchase, we don’t immediately feel the impact of the cost. No money has left our wallet or our account, almost giving the illusion that the purchase was of no cost to us.
The Psychology of Saving
In a Gallup Poll from 2014, results showed that 62% of respondents more enjoyed saving money versus 34% who more enjoyed spending money. But while many people reported enjoyment from saving money, there is a definite gap in the number of people who are actually building their savings.
We are, however, far more successful at saving money when we have a savings goal. Whether it’s your first home, the vacation of a lifetime or a college education, have a goal in place and a vision of yourself reaching that goal.
Creating Happiness with Your Financial Decisions
Dr. Ryan T Howell, Assistant Professor of Psychology at San Francisco Stat University and cofounder of Beyond the Purchase website, outlines three financial decisions you can make to bring you greater happiness.
1. Pay Down Credit Card Debt
As we mentioned above, paying with credit cards can enable people to spend more for the things they want. And while making a purchase brings with it an uplifted mood and feelings of being in control, those feelings can be fleeting, especially when your credit card bill arrives. The stress that comes with managing credit card debt can be far more overwhelming and lasts a lot longer.
2. Follow the Habits of Happy People
It’s been determined that people who are identified as “happy” have a pattern of how they handle a surplus of money, once they have paid for all necessities. They put 25% into savings, 12% is spent on gifts or donations for others, and 40% is spent on meaningful life experiences.
3. Spend on Experiences, Not Things
Because objects will be in your possession for longer, it’s seems incorrect to think you’d get more happiness from a once and done experience. However, the longer an object stays with you, you begin to adapt to it and it just becomes a matter of fact in your everyday life. In contrast, experiences allow you to share connections and form relationships with people through shared experiences or stories.
What steps do you take to ensure healthy and happy emotions when spending and saving your money?
