Why we spend money on things we shouldn’t (and how to break the cycle)


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By Jean Chatzky

I can’t really afford this, but I love it … I really shouldn’t have bought that, but I needed a pick me up … Is this what a spending hangover feels like?

Sound familiar? Turns out the majority of us — 64 percent — regret our spending on short-term pleasures, including food, clothing, new cars, tech gadgets and vacations, according to anew study by Schwab.

Specifically, we wish we’d managed our spending better so that we could have put more money away for retirement. In fact, not having enough money for a comfortable retirement was the top source of money stress for those surveyed. With all of that rear-view mirror research, the question is: Why don’t we just stop? The answer, unfortunately, is complicated.

A tight budget seems to bring about more impulse spending.

It comes down to a failure to delay gratification and an inclination towards impulsivity, which occurs in all humans — but particularly (and ironically) among those whose budgets are already stretched thin, says psychiatrist Mark Tobak, MD, and author ofAnyone Can Be Rich! A Psychiatrist Provides the Mental Tools to Build Your Wealth. A recent study by Bankrate showed that the lowest earning Americans (who earn less than $30,000 a year) spend 13 percent of their income on restaurant food, prepared drinks and lottery tickets — a higher percentage than any other income bracket.

People who live on tight budgets are going to “grasp at any pleasure they can find, in the hope of securing something for themselves in an unkind world,” Tobak says. Moreover, although you’d think feeling somewhat desperate financially would make people hoard cash, the reaction is often the opposite. “With greater desperation comes a desire to take greater risk, and a lottery ticket is a greater risk than a savings account,” he says.

Boredom — or the search for excitement — does the same.

Which is not to say that even people with plenty of money don’t play the powerball. “We’re all after that dopamine rush that comes from taking risks and spending money,” Toback says. “Even if you lose, you have all that excitement building up to the moment you win. Not everyone gambling in Vegas is poor. You have high rollers who drop millions.”

And the lottery isn’t the only win we’re after. Social media has also lured many of us down the path of spending money, enticing us to spend for the quick thrill of a “like” that comes when we post vacation pictures or snaps of our latest fashion acquisition. A recent Social Savings Survey from Ally Bank showed that 74 percent of millennials say social media influences their shopping. “This lavish social media lifestyle is influencing our spending and consumption behavior whether we realize it or not. The need to ‘keep up with the Joneses’ is a perpetual battle with one’s finances,” says Diane Morais, president of Consumer & Commercial Banking Products for Ally Bank. From a psychological standpoint, social media has “retrained” our brains to be less inclined to seek long-term accomplishments as pleasure. We’ve grown so accustomed to the quick highs of positive online interactions, that the satisfied feeling we get when we save money may pale in comparison.

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