07 Apr What is emotional spending?
Quite a few teens are emotional spenders. Meet Sienna. Sienna had been given a credit card from her parents in high school and she started to spend on things she didn’t really need, but made her temporarily feel good. She bought meals for friends because she felt more popular and liked when she did this. She bought outfits she couldn’t afford because her friends dressed in the latest fashions. She bought the latest phones whenever a new one came out because she just “had to have it.” She was an emotional spender. She bought things to make her feel better, certainly not because she could afford them. Within a couple years, Sienna owed the credit card company over $3,000; money she did not have.
Separating mind from heart when it comes to money is a really important step toward a healthy relationship with finances. So is learning about saving and budgeting. Sienna needed to do all of the above because she ended up in quite a lot of debt. All of these posts were made so that you don’t make the same mistakes as Sienna.
To help avoid emotional spending – one financial advisor (a person who helps you invest your money and plan for your future), when speaking to his clients, makes the distinction between wants and needs. He will ask, “Is this purchase you are considering a want or a need?” Needs are something you can’t really live without, such as a roof over your head, food, water and electricity in your home. Wants are things you desire but can live without. For instance, we all need shoes for our feet, but we don’t really need a second or third or even ninth pair. Those additional pairs would fall into the “want” category.
Often, if we take the time to consider whether a purchase is a want or a need, we will spend our money more carefully. It’s a good question to ask before each purchase as it provides a bit of time to consider your financial reality.
To avoid emotional spending, consider setting goals, developing good habits and planning a budget. Also consider the dangers of credit cards. What are those? Read on….
Do you think you are an emotional spender? Contribute a tip as to how to not be one.