Finances and emotions don’t mix. You’ve probably heard that before, but do you know why these two shouldn’t go together? The more emotional you get about your spending, the more irrational you are likely to act and put yourself at risk of making poor financial decisions. But what if you could turn that emotional energy into sound investment decisions? Here are 7 tips to help you identify your emotional spending habits and turn them into smarter financial moves to improve your financial standing.
First, what is emotional spending?
Have you ever walked into a store not looking to buy anything and then walk out carrying an expensive purchase? This is a case of emotional spending. It’s when you buy something you didn’t intend to due to your current emotional state. Shopping is an easy way to relieve stress, boredom, or unhappiness for many people. And it’s not even limited to relieving unhappy feelings, as you can also emotionally spend when you are happy.
This problem is highly prevalent in America, where half of all people admitted to emotional spending to make them happier in a time of need.
How to identify emotional spending
Here are a few questions you can ask yourself to spot emotional spending before it happens:
- How do I feel right now?
- Do I want to be shopping right now?
- Is this purchase in my budget?
- What am I expecting to feel after this purchase?
- Why am I making this purchase?
By answering these questions and being honest with yourself, you can recognize when you’re buying something just based on your emotional state.
Overcoming emotional spending
If you identify that you are about to make an emotional purchase, do your best to stop immediately. It doesn’t matter if you are already in a store, waiting in-line at the checkout counter, or even have your credit card in hand—you still have a chance to put down the item and walk away. Even after you make an emotional purchase, you can likely return your item for a full refund with no harm done.
Here are 3 key ways you can overcome emotional spending:
- Know your triggers – Everyone has emotional triggers that can be hard to overcome. Knowing what these triggers will help you identify when you are triggered and about to make an emotional decision.
- Reduce your stress – When we are stressed, we are more likely to make bad decisions. By eating a healthy diet and getting enough sleep, you can reduce your overall stress level, and as a result, reduce your chances of emotional spending.
- Only take what you’re willing to spend – If you don’t take all your credit cards with you on a shopping trip, you won’t have access to spending more money than you’d like. If you need to be even stricter, you can withdraw cash or change the limits on your cards.
How to replace emotional spending with healthy habits:
Instead of spending money trying to make yourself feel better, try one of these more productive and positive habits instead.
Move your body
A tried and tested method of overcoming emotional spending is exercise. Through vigorous workouts, you can increase your endorphins and reduce your stress and anxiety levels, thereby reducing the chances of making emotional purchases. So, the next time you are feeling emotional and want to spend money unnecessarily, put on your running shoes and go outside—it will help you in the long run.
Get a hobby (And no, shopping does not count 😉)
Many people turn to hobbies when they are feeling stressed or overwhelmed. Hobbies like listening to music, cooking, fishing, photography, or anything else, are a great way to turn negative energy around and replace an emotional spending habit with a positive habit. As you turn toward your hobby more often, you will likely see your skill grow in that area and receive even more emotional rewards as a result.
Invest your money
Instead of making an emotional purchase, you can invest your money to grow your wealth. Imagine catching yourself in a vulnerable moment when you are about to make an emotional purchase, and instead, take the money you were about to spend and put it in an investment account, like Bondora’s Go & Grow. You just turned a potentially harmful financial decision into something that will pay benefits in the future!
Spend on yourself, consciously
It’s OK to spend money on yourself in a way that makes you happy. But what we are trying to avoid are the scenarios where you are spending unconsciously. Putting aside money to spend on a self-indulgent purchase can help take the urge to spend money emotionally at other times. Knowing that you have a set amount of money to spend on yourself makes it easier to resist the urge to spend emotionally.
Don’t let your emotions get the best of you
At some point, you will find yourself in a stressful or anxious state of mind. But during these times, you don’t have to take out your wallet and soothe yourself through emotional spending. Instead, you can identify your feelings and channel that energy into better financial and lifestyle habits that not only make you feel better today but also pay dividends in the future.