One of the fundamental building blocks of wealth creation is the ability to spend less than you earn. People who are not able to do this are, by definition, not able to save and are likely to be in debt. Some people on low incomes are just not able to save as their incomes are only sufficient to buy the bare necessities in life. However, there is a large group of people who are not able to save despite having good incomes.
Overspending has its roots in behavioural patterns ranging from habits to addictions all of which make it difficult for people to curb their spending. These behaviours could be as simple as a habit of buying a coffee every morning on the way to work, to problem gambling that leads people to bankruptcy. Impulse buying is another behavioural pattern that causes overspending.
Addictions can take many forms but they nearly always result in overspending. Whether it is an addiction to gambling, food, alcohol or exercise there is usually a financial consequence. There is a group of people who have an addiction to shopping, commonly referred to as ‘shopaholics’.
Severe overspending through shopping is a problem for around ten percent of the population. Like any other addiction, it is usually triggered by an emotional or behavioural issue and followed by feelings of remorse and guilt. The overspender may make promises and attempts to change but after a period of time, the cycle starts all over again. Often the biggest hurdle to changing this behaviour is for the overspender to acknowledge they have a problem. Denial is an easy way to avoid having to confront the issue. The signs of chronic overspending are:
• Spending over your budget even when you are already in debt or unable to pay your bills
• Overspending on a regular basis (every week, not just a couple of times a year)
• Compulsive spending; that is, buying things you don’t really need
• Spending to make yourself feel better when you are under stress or feeling low
• Hiding purchases out of shame or to avoid an argument with a family member
• Physical or emotional reactions to spending such as an increased heart rate, sweating and headaches from anxiety; emotional effects such as elation, followed by guilt or depression
• Frequent arguments with family members and friends about your spending
Brain chemistry plays a big role in overspending through shopping. Overspending is a form of addiction, and behind most addictions is the chemical dopamine, which drives our most sinful behaviours and secret cravings. Whether it is gambling, drugs, alcohol, food, sex or shopping, for a certain segment of the population these activities and substances lead to an increase in dopamine which controls the brain’s reward and pleasure centres. The feeling of intense pleasure or being on a ‘high’ comes from a dopamine spike. Unfortunately, such feelings are only temporary and are often quickly followed by remorse, guilt or sadness. People with low levels of dopamine activity, such as those suffering from depression, may be more prone to addiction. There is a growing body of research on the links between brain chemistry and addiction to shopping, and along with that, there are now psychologists who specialize in providing therapy for people wanting to control their desire to spend.
Chronic overspending can affect men as well as women and affects people at all levels of income. However, a study done in 2009 by Professor Karen Pine of the University of Hertfordshire (www.sheconomics.com) found that money is a more emotionally loaded topic for women than it is for men. In a survey of around seven hundred women, shopping emerged as the means by which many women managed and regulated their emotions. Women shopped more when their emotions, either positive or negative, were running high. Six out of ten women surveyed confessed to buying goods on impulse, one in four had regretted buying something and a third had spent more than they could afford, in the week prior to the survey. The survey also showed a close link between relationships and spending patterns, with women admitting to spending money on others or on trying to impress other people. When relationships are not going well, shopping is a way of boosting mood.
Not everyone is an extreme overshopper, but many of us have small habits of spending money that are underpinned by the same psychological factors that drive addiction. By addressing the emotional needs that are being met by these behaviour patterns, you may find you are better able to control your spending.
Most of us are guilty of having episodes of overspending, for example on holidays or at Christmas time, and that is nothing to be concerned about. The time to confront overspending is when it begins to cause financial distress or relationship difficulties. The remedy starts with the overspender acknowledging the problem they have and being willing to change. Usually some form of counselling is needed to deal with the underlying emotional causes of the overspending. Lack of self esteem, depression, stress and jealousy of the life styles of others are often root causes.