How mood affects spending habits

Oct 032008

I’ve always wondered at what time/on what day I spent the most money. What caused me to reach into my wallet and splash the cash for items I could do without?

As part of my plan to get my finances under control I started to write down and record exactly how much money I spent and on what I spent it on. I didn’t make any attempt to curb my spending as I wanted to get a true understanding of where all my money was disappearing.

So each day I would write down exactly what I spent, where I spent it and who I was with when I spent it.

As I mentioned in a previous article this was an eye opening exercise. I was provided with a wealth of very useful information. To begin with I was spending way too much in local convenience stores close to my home. I then switched to larger discount stores on the edge of town for my shopping. I have saved a small fortune since.

One thing that stood out like a sore thumb to me was that I seemed to spend more on a Friday and a Saturday than on any other day of the week. Also I noticed that I seemed to spend a lot more on the Friday and Saturday after I got paid.

This got me thinking.

Why the heck was I spending more on these days? Ok you might think that I was doing more ‘stuff’ on these days, for example going out on a Friday night. This was true to a certain extent – I was spending more as a result of different activities. However even when I stripped out these different activities I was still spending a lot more than I would on an average day.

Mood enhancers = more shopping

A light bulb went off in my head eventually when I looked at what is different about these two days – Friday and Saturday – from the other days in the week.

As a member of a cubicle farm (i.e. an under appreciated office worker) I put extra significance on these two days. Simply put these are my favorite days of the week. I love Fridays because I am in anticipation of the weekend and the freedom to come and I love Saturdays because I am free and I still have half my weekend left to enjoy.

Since I love these days so much I am much happier on these days and my mood soars.

Now conventional wisdom has it that people tend to spend more when they are down and in a bad mood. The term ‘retail therapy’ is one that I would associate with someone who is in a bad mood and determined to shop their way out of it. But surprizingly I somehow managed to operate in reverse.

The happier I am the more I spend

The changes were only subtle – for example on a Friday I would buy a large coffee instead of a medium. I would be more inclined to eat out for lunch instead of either using the staff canteen or brown bagging my lunch. On Saturdays I would have both the means and motivation to spend more. I might eat breakfast in a nice café and lounge around reading the newspapers drinking a nice expensive coffee.

The thing about mood and spending money for me was that I always felt more confident in my ability to manage my money and earn more when I was in a good mood. I always thought that I was ‘allowed’ to spend more on Fridays and Saturdays since I had put in a week’s work and I deserved a treat.

Oh how we are the masters of our own downfall.

Time for a change

I realized that my logic was flawed and that I needed to correct this behavior if I was ever to get on top of my debt.

Once I made the connection between my good mood and my increased spending I tried to increase my alertness on the days in question. On both Fridays and Saturdays I would try to be extra vigilant for overspending.

If I’m honest I found it tough. The fact that my nice comforting weekend spending routines were stopped did actually dampen my mood.

Was it too extreme?

I personally don’t think it was. Sure I didn’t enjoy my weekends as much since I wasn’t spending anywhere near the amount of money that I had been. But on the flip side the stress of worrying about my finances was in time greatly reduced. I began to feel a little better on a Monday morning and not feel like I was trapped in a job I didn’t like just to pay my debt.

Sure some of you will probably argue that I did deserve a little treat as it was the weekend and I would agree. However I was spending way too much on these ‘treats’. I did continue to treat myself at the weekend but I did in ways that didn’t cost much.

How does your mood affect your spending habits?

I’m interested in getting feedback from readers about how their mood affects their spending habits. Does it have any affect on your spending? Do you spend more when you are in a bad mood or like me when you are in a good mood? How do you manage your moods and in turn control your finances?

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Delayed gratification versus Instant gratification - A debtor's choice

Sep 102008

Many financial commentators make the point that one of the root causes of the debt epidemic we are now facing is the concept of ‘Instant gratification’. To me instant gratification is simply the ‘I want it and I want it right now!” attitude that seems so common today. The ‘it’ in the statement could be anything from an ice-cream to a nice new car.

If you think about it, the instant gratification culture which we have become so accustomed to has had an obvious negative impact on our financial health. Personal debt is at an all time high and savings is at an all time low as people seek that instant reassuring buzz of buying something new.

In my parent’s generation of the post war years they were thought to save hard for anything that they wanted. Credit was a dirty word and if they truly had their heart set on something they put their heads down and worked towards it – no matter how long it took. They were well versed in the practice of delayed gratification.

Now compare that to the attitude of my generation whose first exposure to the world of work and commerce was during the dotcom boom. We were bombarded with offers of easy credit and advertising that told us if we had an itch then we should scratch it, all for the low monthly payment of $99.

Sure it took two to tango i.e. me and my bank but in my defence (or should I say our defence) – ‘things were different this time’. There was plenty of employment opportunities, interest rates were at an all time low, banks were practically giving money away. Times had never been so good financially for all of us. The opportunities to make money were manifold – internet stocks, rental properties (gee didn’t they both turn out well). You name it and you could make money from it.

What changed between the generations?

To be honest I don’t know. I suppose there were numerous contributing factors. Perhaps my parents didn’t experience the same amount of media exposure as I did when they were growing up. How could they? I’m not even sure if they both had TVs when they were children. I always got the feeling that there was less pressure to conform from a materialistic point of view. Fitting in was less about the type of trainers you wore and more about the sports team you supported.

I find it hard to reconcile the stories that my parents told me about their childhoods and how they related to money as they grew up with my experience of money as I grew up. For me there was always a social pressure to conform by having the latest brand. I think a lot of my peers felt the same. This article ‘Budget for school gear soars to £600’ from The Daily Mail newspaper sums up the situation perfectly. I left school twelve years ago and I was shocked to read this article about the pressures that school kids face today as they try to conform.

Easy credit – the enabler of instant gratification

Before I allow the older generation to take the high moral ground on the whole instant gratification debate I want to point out that credit has never been easier to obtain – ever! I think one of the main reasons my parent’s generation didn’t suffer from instant gratification as bad as my generation is that even if they wanted to buy something there and then very often there was simply no credit available to do so.

Today we have both the means and the method of instant gratification at our disposal.

No longer are we forced to save for something that we wish to buy. If we really want something and we want it fast then generally speaking it is a relatively straightforward task to arrange the financing of it.

But isn’t instant gratification a personal issue?

Yes and no. Yes it is a decision that everyone makes for themselves. You and you alone can only decide if you will buy something now or you will save for it. No in that there is now such a collective culture of instant gratification that it is hard to resist the temptation to succumb. How easy is it to refuse to go on that expensive holiday when all of your friends are going? ‘I don’t have the money’ just doesn’t seem to cut it as an excuse anymore.

Delayed gratification – a long forgotten concept

If instant gratification can be thought of as a buying something straightaway regardless of whether or not you have the funds to do so, then delayed gratification can be thought of as setting yourself a financial goal and then working and saving hard to achieve that goal. The goal could be something simple like buying a new TV or it could be something bigger like saving for a deposit on a house.

What the goal is doesn’t really matter as much as the fact that you have made the choice to work hard before you consume. I’m sure you could simply whack the cost of the TV on to your credit card but with delayed gratification you are waiting until you feel you deserve it.

Delayed gratification – benefits

There are many benefits of delayed gratification.

No more buyer’s remorse

By delaying your consumption of an item and working hard to save the money to buy it you are forcing yourself to decide whether or not you really want it in the first place. Delayed gratification eliminates the buyer’s remorse that so often accompanies impulse spending.

Guilt free enjoyment

This is related to buyer’s remorse. By saving and working hard to allow yourself to fully enjoy the fruits of your labor you do not need to worry about making the payments on the item in question. If you buy a nice flat screen TV for $600 with cash that you saved then you own the TV outright and you don’t have to worry about any nasty surprizes waiting for you in the mail. You can kick back and enjoy.

No more debt

When you adopt an attitude of delayed gratification you are saying no to more debt. You have decided that is enough is enough and from here on in you want to earn the good things in life. No more taking the easy route of instant gratification via your credit card because you and I both know that that route is actually the hard way.

Builds discipline that can be rolled into financial security

Developing the discipline required for delayed gratification takes time but once acquired the attitude of delayed gratification it will serve you well for the rest of your life. By embracing an attitude of delayed gratification you are setting yourself up for financial success. The reason why is because in order to achieve anything big it takes time.

To save and invest for retirement takes time, to save a deposit for a house takes time, to save for your kid’s college education takes time but it is the time element that adds the value. In order for you to best capitalize on the time element you need an attitude of delayed gratification.

Where to start?

Small – always start small. Delaying gratification can be as simple as waiting a couple of extra days before you buy the latest edition of your favorite magazine. Wait. Be conscious about the reasons why you are waiting. Clean your home, bring your lunch to work for a day or two, do something that you think will justify you spending money on the magazine.

Take it from there. Tackle something bigger like saving for a new stereo system. Work some overtime or sell some of your stuff. Wait until you have the physical cash in your hand before you purchase the stereo system. The feeling of achievement is immense.

Now aim bigger still. Say you want to redecorate your home but it will cost a lot. Start saving. Cut your expenses where possible, save any money that you can, give yourself a timeline. Be honest about your progress. With any goal there will be set backs on the path to achieving that goal. The bigger the goal the bigger the set backs will be.

Keeping moving in the right direction, the idea here is to train yourself to become more disciplined in your financial habits. Easy? No way. Necessary? Absolutely.

The great thing about delayed gratification (the few times I’ve tried it) is that when you achieve the goal that you have been aiming for it tastes a lot sweeter than had you just gone out and bought it on credit. Not only are you getting the things that you have been working and saving for you are also getting a huge sense of achievement and satisfaction as a bonus. Sometimes the sense of satisfaction is nearly worth the effort on its own.

Affluenza – the credit party is over

Jul 182008

So now that the easy credit party is over and we are all feeling the effects of the debt hangover the question I have is ‘was it worth it?’. Were the few short years of fast living and easy money worth the pain we are feeling now?

I’m as guilty as the next person of over indulgence – if I wasn’t I wouldn’t be writing this article about trying to understand and make sense of debt.

I have often wondered what led to the furious spending and house buying that we have witnessed in the last few years. I think that while easy credit played a huge part in the madness there must have been something else at play. I always got the feeling that there was almost a collective agreement in society that it was good to spend your way to oblivion. Tacit approval to use your credit card was everywhere. Everyone else was doing. It was the case that ‘we are all in this together’ so don’t feel bad.

Then about a year ago I came across the concept of ‘Affluenza’. I thought that it was just the latest buzz word and would soon be consigned to the annals of history but then I dug a little deeper. The concept of affluenza was a perfect fit for that collective urge to spend that I had felt a part of.

Taken from Wikipedia.

affluenza n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by the pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

I couldn’t agree more with the definition above.

In reality we were taking part in a competition that we could never win. There was always going to be someone with a faster car or bigger house than us. It was a giant ponzi scheme and we are the suckers who will have to pay the price.

I’m not bitter and I don’t think you should be either. Ultimately it was through my own decisions that I ended up in debt. Had I don’t things differently I wouldn’t have this debt problem. Being bitter about your situation serves no purpose. Sure you want someone to blame and lash out at but in the end the answer is always the same. It was you who signed up for the good stuff and now you must take the bad stuff that comes with it.

Take the rage and anger you have at your situation and use it as the driving force to get you out of debt and cure you of affluenza. Channel that negative energy and get some positive out of it. Show the banks and financial institutions that while you may have been a little naïve in your spending that they won’t be able to count on your contribution to their bottom line.

The theory and research into affluenza are fascinating. If you want to learn more about what affluenza is and why and how it has such an impact then I recommend you read this book. Get it from the library or buy it second hand on amazon.

Affluenza: The All-Consuming Epidemic (Bk Currents)

As a cure for affluenza I can’t recommend the following book highly enough. This book takes a very different approach to personal finance. You will like it – its far from your average dry and boring personal finance book.

Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence

Impulse spending – it’ll be the debt of me

Jun 052008

Cheesy title I know. I had to think about that for a long time. J Cheesy as it may be it does contain a lot of truth – for me anyway. When I look back at my spending habits since I started working, impulse spending has played a huge part. In my opinion it was one of the primary causes of my debt downfall. For me there was no such thing as impulse spending there was just shopping. Every purchase came under the umbrella of ‘Shopping’.Now before we go on I want to point out that my spending was on the most mundane stuff you could imagine – books, CDs, DVDs, clothes. The thing was that I bought a lot of each. I would simply wander into a music store with the intention of browsing and come out an hour later with three CDs and a couple of DVDs. I can only begin to imagine the damage that impulse spending does on the bank balances of women. I’m not being sexist but there are some women I know that could buy three pairs of shoes in a day.

Women only?

No I think guys are affected by impulse spending as much as women. The difference is that the stuff that guys buy are probably not as expensive and can fulfil them for longer. The latest Xbox game will probably see more mileage than the little black number bought for the Christmas party. You see advertisers want everyone’s money. They will differentiate their advertising campaigns based solely on whether their target market is predominantly female or male. The thing is they go after everyone’s money with equal gusto.

Some of the best and brightest minds are employed with one goal and that goal is to separate you from your money. You shouldn’t feel too bad about it when you impulse spend. The reason why is because “they made me do it” is a very valid excuse. And no we’re no talking about the voices in your head. We’re talking about the hundreds of little tricks that advertisers use to get you to take action. You too can have a body like mine…for $9.99…ok you get the idea.

What can you do?

Hide in a cave somewhere? Erm maybe! But as an alternative solution you just need to take a look at your buying behavior.Have you ever gone into a shop for no reason only to come out with a bag full of ‘stuff’? Then when you get home you realize that you don’t even need any of it? It was almost like you were in a hypnotic trance. The key to defeating this behavior is to gain clarity about what you want and to become strategic about your shopping. You need to become more conscious of your shopping decisions. Sounds very grand doesn’t it?For some shopping is fun, for others it’s a chore. Either way becoming more strategic about your shopping will help eliminate impulse spending. The simplest way to become more strategic about your spending is to write a list and wait for it – stick to that list.

By writing a list of the items that you want you are pre-programming you brain to focus on the items on the list. As a result your mind will help push out the potential impulse items that are not on your list.

To strengthen your focus, make sure that when you write a list of the items to include the stores that need to go to get them. This way you are reducing the number of stores you are ‘allowed’ visit. If it’s not on the list then don’t allow yourself to go to that store.

When you go shopping do you have a list? I’m not just talking about grocery shopping. I’m talking about shopping in general. Ok I know you might like to browse and this is fine but you need to be browsing with intent. So say you want to buy a new pair of jeans, by all means browse until you find the right pair but make sure to browse with the goal of buying a pair of jeans. Not with the goal of just ‘browsing’.

If you see something else you like, resolve to buy it tomorrow and let yourself sleep on it. The decision not the item! Usually the following day you will have either forgotten about it or it will seem less appealing.

Another thing you can do to stem the tide of impulse spending is to set yourself a time limit. If you are under time pressure you are less likely to meander around the stores ‘browsing’ for stuff. If you have a time limit to do your shopping then you will be in and out and won’t have time to browse.

Ideally you should think about your shopping like a military expedition. You have your objectives – the items on your list. You have the targets you have to hit – the stores you can visit. You have a time frame in which you need to reach those objectives. This way you limit your options and reduce exposure to radiation – sorry I mean impulse spending.

Is this way of shopping fun? No not really but it is a very effective way of reducing your impulse spending. Shopping this way tends to be very matter-of-fact with very little room to enjoy the whole shopping experience. That’s the point. The more you enjoy shopping the more you want to do it and the more you shop the more you spend and the more you spend the longer it takes to get out of debt. You get the picture.

Are your vices keeping you in debt?

Jun 042008

Before your eyes glaze over and you go to sleep this is not going to be a rant about the morals of alcohol and smoking. You know the facts or at least you should make it your business to know the facts about alcohol and smoking. You see in this article I’m really only concerned about money and in particular debt. Your debt. There are plenty of other websites out there that will tell you about the ills of alcohol and smoking so I’m not going to waste too much time here. Check this link out if you want to know more. EasyQuit

If you look up the word vice in the dictionary you will get something like this

Vice: Definition: bad habit, weakness; sin

Now I’m not going to sit here and cast the first stone on the sin part so I want to use the word ‘vice’ in the sense of bad habit. I want to go further and I want you to think of your habits and whether they are good or bad in the context of your debt only. For example going for coffee with friends every morning can be considered a good thing from a social point of view but from your debt point of view it is a bad habit or a vice.

Think about your average day or average week. Can you spot any vices that you may have that are costing you money? Do you buy a daily newspaper but only read the sports or fashion section? Do you buy gourmet sandwiches for lunch even though you could make nicer sandwiches yourself for half the price? You see it’s the little daily routines that when combined have the effect of keeping us in debt.

The sandwiches and the daily newspaper are pretty worn out examples and I think a lot of people get annoyed when they hear them. Like c’mon I’ve heard this all before. Ok and I agree but it is a point worth repeating. Those daily expenses will burn you in the long run. Imagine that on average that the daily cost of your habits is $15 (including weekends) so in one year on average you will have spent $5475 on things that you don’t really need or things that you could replace with cheaper alternatives. Think about what that money could do to your debt.

As an experiment calculate the savings that you would make on a daily basis if you cut out your vices. You don’t even have to cut out your vices completely just cut down on them. So if for example you smoke ten cigarettes a day reduce it down to eight – you’re still making a saving of 20%. Once you have at least cut down on your daily vices and have calculated the saving then simply take that amount out of your wallet at the end of the day and place it a jar or money box. So if you save $7.50 a day by cutting down on your vices then place that $7.50 in a jar. At the end of the week you should have $52.5 ($7.5×7) in cash saved in the jar.

The use of the jar is very important. It acts as a psychological reminder of both the progress that you are making and the amount that can actually be achieved if you start small and work it day to day. If you were simply to cut down on your vices but not physically take the money everyday and place it in a jar it is unlikely that you would notice any difference in your debt. I’m not sure why this is because the net result should be the same. The money saved just seems to get lost among all the other details on your financial statements. I think it is probably due to the fact that when you place the money in the jar you set it aside and assign it a purpose. That money now has meaning to you.

Saving money in a jar? Are you crazy? So you’re not an eight year old anymore? No you’re not but can you remember when you were? Did you save your pennies in a money box? It felt good didn’t it? By saving the money that you free up from your vices I’m trying to get you to tap into that same feeling you had as a child. I’ve always saved some of my money this way. Whenever I had loose change in my pocket I would throw it into a jar at the side of my bed. I remember once in college I was so broke that I couldn’t afford my train ticket home. Then I remembered my jar full of change. I didn’t think that there would be a whole lot of money in it but I decided that I needed every cent I could find. When I was through counting it the total was about $170. It was first class all the way home!The simplest things are usually the most effective and I have found this to be true over and over again. The idea of saving money in a jar is nearly too simple. I’m not saying you should be putting your life savings into it. What I am saying is that any money that you can honestly say that you have saved as a result of cutting down on your vices should be put in the jar to help motivate you and keep a record of your progress. Simple but effective – just the way I like it.

Did Self Help books cause your debt and ruin your life?

May 232008

I really enjoy reading self help books. They give me an emotional kick and the powerful words have helped me through some tough times. However the cynic in me has always questioned some of the claims made in them. Is it really that easy to make a million? Someone once said that the people who made the most money during the gold rush were the people who sold the digging tools. I think in a lot of ways this applies to the self help industry. I also think that the self help industry can take some of the blame for the current tsunami of debt.

Let’s cut to the chase. When you read a self help or motivational book you are generally looking to feel good. Sometimes you are looking for answers and other times you are looking for ideas. It was the ideas contained in some of these books that in part caused the debt problems of this generation. I am talking in particular about financial self help books.

As the boom in technology stocks began to fade a number of books appeared on the market. These books claimed to have the key to wealth. The premise of these books was that people who worked in jobs were fools and the only truly successful people were investors who managed to create a passive income. In one book I can think of, which shall remain nameless, the author was relentless in his recommendation of property. He went on at lengths as to how he bought condos left right and center and how his cash flow was positive. This got people thinking – if he can do it then so can I.

I genuinely believe that it was books like this and others that prompted a lot of us to go in search of our fortunes in the property market. The boom in technology stocks simply transferred to property. Combined with a low interest rate environment people now had the means and motivation to pursue their dreams and for a lot of people this has turned into nightmares.

What these books did not tell you about was the hard work and risk that was involved in property or indeed in pursuing your dreams. The books led people to believe that it was simply a case of “build it and they will come” or more like “buy it and they will rent”. In a lot of cases this didn’t happen. I know of people who bought rental property at the height of the boom and are still having difficulty renting them out. They are faced with the situation of paying two mortgages a month. They too were seduced by the talk of easy profits and the supposed fast track to wealth.

Aside from the financial self help books that were glamorizing the property market and the fortunes to be made there were other self help books that persuaded people to be easy with their credit. The key thing about self help books is that they promise you the world and when they didn’t deliver people went out and bought the world they wanted anyway…on credit.

Who is to blame? Is it the authors of the self help books who claimed that they could help you or is it the person who buys the books, tries the techniques, fails and buys their dream on credit? To be honest I think both parties get something out of this relationship. For the author the obvious reward is monetary for the reader the reward is that warm fuzzy feeling that yes some day my dreams will come true.

Unfortunately for most readers of self help books their dreams do not come true. Why? I really don’t know, maybe its lack of commitment or maybe it’s because people knew that if they really wanted a house on the hill they could have gone to their nearest friendly mortgage broker and got a nice big mortgage to buy it.

Self help books sold you the dream. They made you write down in detail all the material goods that you wanted. They made you write wish lists. And you know what? The universe delivered you the things on your wish lists. How? With a little help from your plastic friend of course but that’s not the point is it? The universe still delivered. The live for the moment brigade got what they wanted.

As I said at the start of the article I like self help books, especially the financial ones. There are some really good ones out there. At the same time if you believe all the hype contained in them you are likely to be very disappointed. While self help books can point you in the right direction it is ultimately up to you to travel that road. The thing is it is generally a road that is a lot longer than the books would have you believe. This is something you need to be aware of. There are no short cuts, no get rich quick schemes. You could buy your dream on credit I suppose but you will end up paying for it the rest of your life.

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