The Psychology of Spending

1. The Psychology of Spending

2. Spending Choices • Many factors impact consumer behavior • These factors may lead to decisions that are not in our best interest • Understanding why we buy what we buy can help us make smart decisions in the future

3. Self-Evaluation • What types of products and services do you enjoy spending money on? • Why do you think you enjoy spending money on them? • In what ways do you think you are a “good” spender? • What spending habits would you like to change? • How do you think you can change them?

4. The Role of Advertising • The purpose of advertising is to get us to buy • Use emotional appeals and present certain images or lifestyles • Can affect consumer behavior, often unconsciously • You cannot avoid advertising, but you can separate emotional appeals from the true value of the product

5. Keeping Up with the Joneses • Owning makes us feel successful • Do not want to have less than other people • But there will always be people with more • Buying luxuries is not bad, but focus on what you can afford, not what others have

6. Spending Habits • We make certain spending decisions and stick with them out of habit • Coffee • Lunches out • Brand loyalty • Examine if your habits are affordable • Track spending • If spending more than earning, honestly assess what can be cut • Determine if needs are real or perceived

7. Impulse Buying • We do it, even though we know we shouldn’t, because it is exciting and enticing • Stores encourage it • To prevent impulse buying, keep your shopping focused • Create a list • Avoid browsing, taking free samples, trying on clothes just to see how they look, and talking to salespeople unless necessary • Shop alone

8. Bargain Hunting • People love buying things on sale • Smart shoppers look for sales on items they were already planning to buy • But you are not saving money if you buy something just because it is on sale • Focus on cost, not just savings • Best bargain is to not buy

9. Retail Therapy • Many people shop when they are depressed to cheer themselves up • Spending can provide temporary happiness, but you usually feel worse later • Instead of shopping, engage in mood-boosting activities that are free • If needed, seek professional help

10. Money as Love • We often try to show our love by spending money, but you can’t buy love • Address problems head-on instead of shelling out cash to try to fix them • Thoughtful gifts usually preferred over expensive ones • Can do something nice for free • Giving money to friends and family members can do more harm than good

11. Spending vs. Saving • We often put immediate desires instead of important future needs • Instant gratification more appealing than delayed gratification • Saving often delayed • Prioritize saving today • Have some of paycheck directly deposited into savings account • The sooner you start saving, the more money you will have

12. The Role of Credit • People spend more when they use credit • Credit allows you to get something today without having to pay for it • If you charge too much and cannot pay off balance in full, you will have to pay interest • Use a debit card or cash for most purchases • Make- and pay off- a small purchase each month with a credit card

13. Be a Conscious Consumer • Ask yourself • Will I really use the product or service? • What are my motives for making the purchase? • Do I own anything else that provides the same use? • Did I feel a need for this item before I saw it in the store? • What are the financial and emotional costs of the purchase, and can I really afford it? • Can I get the product or service for less elsewhere?