Psychology of Spending - Straight Fire Money (2024)

FAQs

What is the psychology of people spending money? ›

This is known as the “psychology of spending.” Spending money, as opposed to saving, provides an instant feeling of gratification and control. We may spend to fill perceived voids in our lives, to please others, feel “better than” others, or a whole host of other emotionally-driven reasons.

Money dysmorphia is a psychological condition where individuals have distorted perceptions of their financial status, often leading to unhealthy behaviors and attitudes toward money.

Overspending can happen for different reasons, such as: You might spend to make yourself feel better. Some people describe this as feeling like a temporary high. If you experience symptoms like mania or hypomania, you might spend more money or make impulsive financial decisions.

The psychology of money is the study of our behavior with money. Success with money isn't about knowledge, IQ or how good you are at math. It's about behavior, and everyone is prone to certain behaviors over others.

While these signs can manifest differently from person to person, understanding the common indicators can help shed light on their distress. One sign of financial trauma is compulsive or impulsive spending.

For some, overspending becomes buying-shopping disorder, or compulsive shopping disorder (CSD), which is characterized by repetitive, uncontrollable spending that causes serious life difficulties.

Enter "money dysmorphia": a phenomenon that occurs when someone has a distorted or insecure view of their financial standing no matter what it truly is, leading them to make poor monetary decisions.

Dr. Overton: Money disorders are persistent patterns of self-destructive financial behavior. They develop out of distorted beliefs about money, or as a result of psychological issues like anxiety, depression or trauma. They're often caused by painful or distressing life events that are related to money.

Fear of spending money or excessive frugality is sometimes known as Chrometophobia, a Specific Phobia related to money. Fears about spending money may also be involved in obsessive-compulsive disorder (OCD).

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

What's it called when someone can't stop spending money? ›

Compulsive spending - which is also known as oniomania, shopping addiction and pathological buying - is when a person feels an uncontrollable need to shop and spend, either for themselves or others.

It can become a problem when someone equates spending money with a sense of happiness or connection. For example, oftentimes, a person with a compulsive buying disorder has an emotional hole they are trying to fill.

While the causes of money anxiety disorders vary, they are more common during times of economic uncertainty. These occur when there are changes in income and expenses, an increase in financial pressure, relationship issues around finances, or alongside a history of financial trauma or other mental health conditions.

Money dysmorphia is when your perception of your financial situation doesn't represent reality. It's a distorted view of your finances. For example, you might believe you're not doing well financially even though your finances are in great shape.

They can lead to relationship problems, physical health problems and mental health issues, such as depression or anxiety. You can minimise the impact of financial stress by looking after your health and seeking support from loved ones or professionals.

Spender. You enjoy spending money and living in the moment, but you may have trouble saving or planning for the future. You may also struggle with debt or impulse buying.

Many people develop an addiction as a way to cope with their emotions. This is the same for people with a shopping addiction. Compulsive shopping and spending may be a way for you to avoid or mask negative and uncomfortable feelings, such as sadness, boredom, stress and anxiety.

Spending as affective coping is operationalized as a spending behavior used to avoid or decrease negative affect. Spending as social coping is operationalized as a spending behavior employed to mitigate social pain and increase social connection.

Spending behavior is the way you manage your money and make decisions about what to buy, how much to spend, and when to spend. It is influenced by many factors, such as your income, your needs, your wants, your values, your emotions, your habits, your environment, and your social influences.