Emotional Spending – Why We Buy What We Don’t Need?

Have you ever walked into a store or scrolled through an online shopping site intending to “just look around” and ended up buying something you didn’t need? Maybe it was a trendy gadget, a fancy outfit, another pair of sneakers, or an airfryer you barely use.
This behaviour is not merely impulsive; it is influenced by a combination of emotions, psychology, and societal factors. The key is not only trying to manage the money but also the emotions tied to it. Emotional spending is a significant factor affecting financial decisions and this occurs when purchases are driven by feelings rather than careful reasoning. The intimate connection between our emotions and our financial decisions is a complex phenomenon. This type of spending can greatly influence a person’s long-term financial stability.

Understanding the emotional triggers behind unnecessary spending and how to gain better control over it needs to be explored.

The Psychology Behind Impulsive Spending

The Dopamine Effect

Every purchase, especially an impulsive one, triggers a dopamine release in our brains. This “feel-good” hormone creates a fleeting sense of happiness and gratification, making shopping addictive. However, this joy is temporary, often leaving us with buyer’s remorse.

Social Validation and Status

In the age of social media, where likes and shares validate lifestyles, spending often becomes a means of fitting in or showcasing success. From the latest smartphone to luxury vacations, purchases are influenced by the need for social approval.

Retail Therapy: Buying to Cope

Many people shop as a way to deal with stress, sadness, or boredom. Studies have shown that “retail therapy” can offer short-term comfort, but it doesn’t address the root emotional issues.

Fear of Missing Out (FOMO)

Fear of Missing Out (FOMO) is real, especially in today’s social media-driven world. When you see friends flaunting the latest phone or vacation photos, it creates a subtle pressure to keep up. Retailers and marketers capitalize on this fear, often promoting “limited-time offers” or exclusive sales.

Cultural and Family Conditioning

In India, spending habits are deeply rooted in cultural norms. Weddings, festivals, and gifting are prime examples where societal expectations drive people to overspend. Additionally, financial behaviours are often inherited, with habits exhibited on how our parents handled money.

The Financial Impact of Emotional Spending

Although occasional spending on non-essentials is normal, consistent impulsive purchases can have detrimental effects on financial health:

• Missed Savings Goals: Every ₹10,000 spent unnecessarily not only depletes the amount but also eliminates its potential compounded growth. For instance, investing ₹10,000 monthly in a mutual fund for 10 years at 12% annual returns could grow to over ₹22 lakh.

• Increased Debt: Credit cards, Buy Now Pay Later schemes, and easy EMIs facilitate spending. However, failing to pay dues on time or exceeding credit limits can result in high-interest rates and lead to debt spirals.

• Stress and Regret: Over time, unplanned spending contributes to financial stress and dissatisfaction with financial progress.

Steps to Curb Emotional Spending

1. Create a Budget and Stick to It
   A clear budget acts as a spending guide. Specific amounts should be allocated for discretionary expenses, and exceeding these limits should be avoided.

2. Wait Before Buying
   The 24-hour rule can be followed: A day should be waited before making impulsive purchases. Often, the desire to buy fades with time.

3. Identify Triggers
   Situations that lead to emotional spending should be reflected upon. Whether it is stress or social pressure, identifying these triggers can assist in adopting healthier coping mechanisms.

4. Set Financial Goals
   Clear financial goals, such as saving for a house or building a retirement corpus, help focus on the bigger picture and reduce impulsive spending.

5. Track Spending
   Expenses should be reviewed regularly. Patterns and areas of overspending can be identified using apps and tools.

6. Practice Gratitude
   Sometimes, dissatisfaction fuels the desire to buy. Practicing gratitude for what is already possessed can reduce the urge to spend on unnecessary items.

Spending Wisely for a Happier Life

Although spending is an inevitable part of life, distinguishing between wants and needs ensures financial freedom. Emotional spending may bring temporary joy, but mindful spending offers lasting peace of mind.

Conclusion

Before the temptation to purchase something unnecessary, the financial future and the implications of the decision should be considered. In today’s rapid-paced world, where instant gratification is only a click away, falling into emotional spending becomes all too easy. Spending wisely is not about deprivation but about aligning purchases with long-term goals. One can achieve Financial freedom when emotions aren’t the reason for purchases.