by Phil Bradford
Is it our psychology that controls spending and saving?
The pattern of money handling behavior is different in people. Some people are savers and some are compulsive shopaholics. People have a different mindset when it comes to dealing with their own money. People who don’t spend much and often save money feels satisfaction every time they look at their growing account balances. They feel uncomfortable when they have to buy something.
On the other hand, people who are shopaholics feel that life is something to enjoy. They think, why save money? They don’t take their financial future or retirement savings seriously.
What influences our money habits?
Our money dealing habits are controlled by many things. Sometimes, our psychology controls our spending habits. Our family background can also instill spending values in us.
- Money spending habits are planned in our brain
According to some studies, our brains control our money spending habits. Our brain decides when to spend or save. There is an area in our brain called “insula” that controls such activity. Insula stimulation increases when you experience something bad.
People who have more insula activity in their brains are savers because when it comes to handling money, the insula stops them from spending much. People who experience very little insula stimulation are spenders or shopaholics.
- Money spending habits can be strongly influenced by our psychology
Another thing that controls our spending is our psychology or mindset.
Savers feel pleasure when they look at their total savings. They constantly want to feel financially secure. They always feel good when they get some items or services at a bargain price. These types of people feel that food is tastier when it comes at a low cost.
On the other hand, shopaholics want to enjoy their life by fulfilling their materialistic desires. They don’t want to deprive themselves. They don’t count the price tag as a barrier. They love to enjoy life to the fullest.
According to some researchers, money spending psychology develops from our childhood. It is influenced by parents or persons who nurture a child. A child also learns money habits from his/her childhood environment.
On the other hand, there are some research that suggests otherwise. Some studies find that money habits are not based on conditioning. For example, a child who brought up in a poor family can grow up to be a shopaholic, or a child who grew up in a wealthy family can be a saver. By the same token, a child from a poor family can create great wealth in the future, while a child from a rich family can blow the whole family fortune in the future.
Money psychology vs financial literacy
According to some financial experts, education can’t change people’s financial behavior wholly. Money behavior is controlled by people’s natural biases and beliefs. It takes a lot of mental energy to go against money psychology. Sometimes going against money psychology creates significant stress in people. Financial literacy doesn’t usually work when the person has a certain strong opinion about his/her money behavior.
But that doesn’t mean financial education is not necessary. Financial literacy is very important because people can’t get better with their finances if they don’t understand the mechanics behind how money works.
People can change their money psychology only when they get motivated by some kind of emotional consequences or emotional triggers.
Why is it important to balance spending and saving?
People who can’t balance saving and spending fail to manage finances.
For example, people who are extreme spenders fail to save money for their financial future. They often end up in financial trouble. They fail to live a financially peaceful life when they retire or age.
On the other hand, extreme savers often end up with regrets. They feel remorse when they are not able to enjoy what life has to offer because their priority is only to save money.
Thus, you should find a happy compromise in spending or saving your hard-earned money.
How can you do this?
How to balance saving and spending money habit
Those who have a compulsive shopping problem have to try to calm their impulsive shopping tendencies. Also, those who are extreme spendthrift need to enjoy what money buys and stop depriving themselves.
What should you do to control excessive spending mentality?
Are you an extreme spender? Here are some tricks:
- Try to keep fewer credit cards.
- Keep a certain amount of money when you are going shopping
- Buy things with a credit card that you can afford in cash only
- Keep your eyes on your savings goals
- Avoid credit card debt
- learn how to budget
- Have a financial goal and work to achieve it.
- Automate your savings
- If you can’t stop your shopping desires, then consult with a psychologist
- Reward yourself when you achieve your savings or financial goals
What should you do to control excessive saving mentality?
Are you extreme savers? Try these tricks:
- Calculate how much money you need to secure your financial future
- Keep some enjoyment goals
- Plan small vacations
- Treat your purchases as trophies
- Be surrounded by fun-loving people
- If spending even a dollar saddens you, then talk to a psychologist
- Keep a savings account dedicated for enjoyment and entertainment purposes
Lastly, you are the one who can take charge of your own hard-earned money. Always find a balance with your psychology towards money.
If you realize you can’t balance it, you don’t have control over planning destructive financial activities, compulsive shopping, and gambling, then seek professional counseling before making it worse.
If you think that you are unable to plan your money goals, then you can consider hiring a financial planner to get comprehensive guidance. A financial planner can help you to plan your short-term or long-term financial goals like tax planning, retirement savings, estate planning, investing, etc.
For extreme spenders, see a list of frugal living tips to help you have a saving mindset.