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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Can’t break the cycle of debt?

Jul 292008

If you’ve been trying to shake off your debt for a while now but with limited success then it is possible that more radical action is needed. Once you are caught in the debt cycle it can be incredibly difficult to get out of it.

I have been caught in a debt cycle for a number of years now. I’ve come to a few conclusions based on my experiences and these are backed up by the experiences of my friends and from what I’ve read on the internet.

The desire to consume ‘Stuff’ never really goes away. You may tame the urge to spend for a while – maybe even a couple of years but deep down the urge to spend is still lurking and waiting for its chance to get you back into the debt cycle.

Strangely as you approach your goal of getting rid of your debt the pressure and hate of debt seems to take a back seat. You have slain the dragon that is your debt. It no longer holds any fear for you so maybe just maybe it would be okay if you charged just one small item on to your credit card. It’s okay because you have your debt under control right? Nothing to worry about you will pay it off next month.

This situation is a lot more common than you would think. Once you have got your existing debt down to an acceptable level you grow in confidence about your ability to manage further debt. Before long you are back in serious debt. I’ve seen this happen over and over again. No one ever seems to get off the debt treadmill 100% and stay off it forever.

Luckily there are a few key changes to your lifestyle that you can make to break this cycle for good. The bad news is that these changes are hard to do.

The idea behind these changes is that you are no longer in harms way so to speak. The aim of making these changes is to reduce the influences that were causing you to overspend and consume in the first place. By making these changes you are in effect trying to shut out consumer life.

Change one – Change who your friends are

I did say this was hard. The logic behind this is that if your current set of friends have been enabling you to indulge in spending then simply cut them out. You want a set of friends that will support you and understand what you are going through. You don’t want to be around people who are constantly spending or talking about spending as it will put you under pressure to spend. This is not where you want to be.

Change two – Go on a media diet

I have discussed this at length in the following post, Media diet – useful in slimming down your debt? In this post I discuss the merits of reducing your exposure to the influences of advertisers by cutting down on your media exposure. One thing I learnt having tried to do this myself is just how difficult it can be to achieve.

Change three – Pick something big you really want and save hard for it

As you approach the point of debt freedom you are approaching the hardest part of your journey. The end is in sight but your fear of your debt will most likely have diminished and the temptation to shop and spend will be huge. It is at this point that you need to give yourself a new, hard to achieve financial goal.

The goal could be something like saving for a big holiday or saving for a new car. The thing is the goal has to motivate you and no matter what you have to commit yourself to SAVING for that goal. Buying that goal on credit will be considered cheating. You must save for it.

By having a big savings goal you are taking the focus off your fast approaching debt freedom. It gives purpose to the money that you were using to pay down your debt and in turn it should limit your desire to take on more debt.

How easy are these changes to make?

Not easy at all. But don’t let that put you off. Paying down your debt is not easy but you’re on your way to doing that. The changes outlined above are necessary if you want to make it out of debt and stay out of debt and ultimately break the cycle of debt.

Even just making one of the changes outlined above should give you enough momentum to stay out of debt but if you could combine all three together then you can break the debt cycle for good.

In Debt? Don’t try to cut everything all at once.

Jun 262008

When faced with a person with a debt problem one of the first standard pieces of advice thrown out there is “Cut back on your spending completely”. Sound advice I might add but not always the most appropriate advice. I find that it’s a very easy piece of advice to give “Cut way back on your expenses and everything will be ok” but you already know that this isn’t the case. If it was that easy to do you wouldn’t be reading this article because you would have had no problem cutting back in the first place.

I accept that if someone is in debt then radical action is needed. However telling someone to cut back on expenses is a bit too general. It’s not so much what to cut back on – a simple tally of your monthly bills will tell you that – rather the key thing that I feel is missing is the ‘how’ to cut back element.

From your experience, what happens if you try to cut back everything at once? You go into a state of cold turkey. Your mind gets overwhelmed by this new behavior. Spending danger lurks around every corner and you get exhausted from trying to keep your mind focused on not spending. But no matter how hard you try and no matter how much you focus on ‘not spending’ your money just seems to run away from you – sometimes at an even faster rate than before.

What causes this? Well there are a couple of things at play in this. The first is that you are focusing on ‘not spending’. When confronted with a spending opportunity the natural response is to say to yourself is something like ‘I must not spend, I must not spend, I must not spend’. However all your brain will process is the doing part of the sentence which is the verb – spend. So all your brain will hear is “Spend, Spend, Spend”.

Ironic I know but studies have shown that how you phrase something is key to changing your behavior. So what you need to do is to rephrase what you say in relation to your spending. Don’t talk in terms of spending and buying or expenses, talk more using terms like saving, investing, reducing. For example instead of saying “I must not spend” you could rephrase it to something like “I must save more”. The difference is small in terms of the words used but in the long term the difference it makes to you mentally will be very significant.

The second and most important aspect of changing your spending behaviour is the speed at which you do it. This is a tough nut to crack as there are a number of variables at play. How much debt you have will be a factor in intensity of your desire to get a move on and start making cuts. What your current level of spending is now is likely to also have a huge bearing on your ability to make cuts. The more spending you are currently engaged in on a day to day basis the harder it will be for you to make drastic changes.

Slow and steady

The average time needed to change a habit is estimated to be anywhere between 21 and 30 days of repeat behavior. What this means is that if you want to change a habit you need to spend at least 21 days repeating the new more positive habit – consistently – day after day.

A lot of the time people assume that the habit they need to change is their ‘spending’ habit. This way of thinking is not 100% accurate. A much better way to think about it is that your spending is just the umbrella for a whole host of different habits. If you want to make real progress in your spending then break your spending down into its component habits.

Your spending pattern is probably made up of dozens of habits, each habit feeding into the next while all the time your money is disappearing.

So if your spending is made up of dozens of spending habits then you need to identify them. To help you do this it is simplest to think of your average week and how you incur your spending. For example do you buy a paper with your morning coffee? Do you buy that coffee on the way to work as you stop off for gas? When grocery shopping, do you shop when you are hungry? At the weekends do you simple amble into the local shopping mall just to kill time but have no clear plan about what you need to buy?

Each bad spending habit that you can identify needs to be put down on a list. You then should write down what a positive spending habit would be that would counter the bad spending habits. This will take time and some imagination but it is well worth it. Finally you need to identify the one habit that is doing the most damage to your finances.

Remember slow and steady.

Having identified the one habit that is doing the most damage to your finances you need to resolve to change that habit and that habit alone. Do not try to change more than one habit at a time!!! Focus all your energy on changing that habit. Stick with it for at least 21 consecutive days. Once you are happy that you have changed that habit then move on to the next most expensive habit.

You may have the urge to change a lot of habits at once. This is understandable, once you have made a firm decision to tackle your debt you will want to get moving as fast as possible. Don’t – take your time. The problem with trying to make a raft of changes in one go is that you cannot allocate enough energy to each of them to make them permanent. There is a saying that goes ‘the more hurry the less speed’. I believe this is true for debt management also. If you rush into making a lot of changes you are likely to lose motivation as you don’t see the changes you would have hoped for.

By tackling your biggest spending habit and focusing on it for at least 21 days you will make a lot more progress than if you simply tried to tackle five smaller spending habits at the one time. Don’t try to cut everything all at once. Doing so is simply a recipe for frustration. Don’t be tempted. Focus on one spending habit at a time.

It’s not how much you earn - It’s how you spend it.

Jun 112008

Each month you face the same problem. You get paid and your salary only just about covers your overdraft. Within a few short days you will be back using your overdraft facility and supplementing your spending with your credit card. It feels like you are just threading water. Each month the same little routine plays out. Each month you kid yourself that next month will be better.

It’s a depressingly similar situation for your average salaried employee. We somehow managed to get ourselves into this ‘running to standstill’ situation whereby all our energy and focus is on being a good employee and trying not to rock the boat. We may not like our jobs, in fact we may even hate our jobs, but we need our jobs. By painting ourselves into a corner from a cash flow point of view we have no choice but to stay in our current job. No dreaming of a better future for you.

I know you don’t want to hear this and be reminded of what has happened or is currently still happening but I’m afraid its time for a few home truths. The reality of the situation is that if you are currently struggling financially then you need to look long and hard at how you spend your money. Somewhere I read that you spend in proportion to your salary. Now what this means is that if you get a salary increase then your spending should logically increase. But what seems to have happened is that the easy credit has allowed people to bypass this rule of thumb and now even someone on a modest salary can live like they are earning maybe three or four times what they really earn.

It’s not simply a case of living beyond your means. It’s a case of not even know what your means are. To me my means is simply my net take-home pay each month. To others ‘means’ is mistaken for ‘available credit’. Now in previous articles I have mentioned how it is this access to credit can help you ride out the tough times. However to help you avoid those tough times you need to look at your means as your net take-home pay.

Net take-home pay provides the parameters within which we must limit ourselves if we are ever to stop this cycle of living from paycheck to paycheck. The idea is simple. If you have a take-home pay of $3000 per month, then your target is to fit all your monthly expenses within that $3000. This way you can be sure that you are not incurring any excess debt.

Now most people will be starting from a point where their monthly expenses are way above their monthly net pay. This is where the problem lies. The treadmill just starts to speed up and go faster and faster and you can’t get off. At this point it’s where the necessities come into play.

Necessities?

There are some basic things in life that you just can’t do without. Ironically two people’s necessities are not the same and this is where the trouble starts. Between men and women there will be differences. So you need to be honest and determine what the necessities are. When I look around my life I could probably list the necessities on one hand – accommodation, transport, food, debt repayments and phone. I said these were the necessities not my current reality. I know that if I need to reduce my spending habits and free up some cash that I would simply reduce my life back to zero i.e. I would simply cut out the excess spending in my life. I call this living on life support.

Living on life support – financial life support

Not a particularly pleasant thought because it makes you think about death but I think it nicely defines how someone in debt should view their financial life. To recover from a bad case of debt you need to put your financial life on life support. By life support I mean reducing your spending down to the basics that you need to function. That way you can slowly but sure gain your financial strength again.

If your net pay is $3000 per month and your necessities only cost $2400 per month then straightaway that is $600 that you can use towards eliminating your debt. The maths is simple. After six months on life support you have freed up cash of $3600.

This $3600 can make the difference between you coming off financial life support or someone else making the decision to turn off your life support machine.

It will take a serious amount of discipline and focus to cut your life back to the bare minimum. It won’t be easy. There will be sacrifices that will need to be made, maybe for six months – maybe even longer. As always the choice is yours. If you do decide to take this route and cut your life down to the bare necessities then you can be assured that you will make a huge difference in your financial situation. It’s as simple as that. The hard part is knowing the difference between a ‘need to have’ item and a ‘nice to have’ item. Only you can decide that.

I have to admit that this article was a little darker than the usual. I don’t know why but sometimes I guess you have to be cruel to be kind. I’m all for tough love if the person it is directed at can understand that there is well meaning behind it. So don’t take offence and realize that the actions you required to change your situation aren’t that hard to take. I just hope that I can provide the spark to get you going.

Possessions – the weight of the world on your shoulders

Jun 062008

No, before you ask I haven’t joined the local communist party. I’m probably one of the most pro capitalism guys you can meet. All property is not theft. However I do believe in order and organization and in not having too many possessions. As always my reasoning behind these beliefs is practicality. If something in my life has become so bloated and impractical then it needs to go. Period.

I have in the past been accused of hoarding stuff. I had a habit of buying nice new shiny things, using them once or twice and then putting them away. It got to the stage that my apartment was overflowing with clutter and ‘stuff’. It wasn’t that it was a messy apartment but it just didn’t feel comfortable and if I was in it for too long I would start to get a little claustrophobic. Every inch of storage space was used up and the apartment was getting seriously cramped.

I lived like this for a couple of years until it finally dawned on me that the possessions I was clinging on to so desperately were adding no value whatsoever to my life. In fact they were taking value from my life. Every time I went home and looked around at the clutter my life force would drain away. Little by little the energy would sap away from me. It got so bad that I didn’t want to go home. Finally one Saturday morning after stubbing my toe on a crate of books I lost it.

I hadn’t much planned for that Saturday so I just went mad. I decided that if something is no longer adding value to my life, be it a book, a CD, DVD, clothes or whatever then it was gone. By the time I was finished going through my stuff I had a pile about two feet high.

Now I had two choices. I could sell this stuff on ebay (which I highly recommend – click here) or I could give it to charity. I decided to give it all to charity – no it wasn’t because I was looking for some good karma. It was because I was sick to death of having an apartment that I could hardly move around in. I wanted that stuff out and I wanted it out as soon as possible. I loaded it all into my car and headed to the nearest charity shop. The look of amazement on the woman’s face was worth it. I had that much stuff to donate.

What’s the point?

So what has this got to do with me? I hear you ask. Quite a lot actually. When I came back to my apartment after dropping off my stuff to the charity shop the sense of relief was enormous. I mean I can hardly describe it. I felt like a huge weight had been lifted off my shoulders. I hadn’t realized it at the time but up to that point subconsciously I think I felt my possessions me holding me back. Not just in my living space but in my life in general.

Look around your home. Is there any stuff that you don’t need that is just sitting there gathering dust? Do you feel that you can’t get rid of it because you might need it someday? Ask yourself “What value is this item adding to my life?” if it is adding little or no value then get rid of it. Now.

Don’t define yourself by your possessions

I know that it feels good to have nice things. A brand new high powered car will make anyone feel good – but at what cost? I’m sure if you were to do a poll of the people you know that are in debt then I imagine that the vast majority of them are in debt because they spent so much money acquiring ‘stuff’. They used this ‘stuff’ to define who they were instead of being authentic they simply bought into the latest trend.

Possessions can blur the lines between who you are and who people think you are. People use possessions to project an image of themselves out into the world. In a quest for self identity they just end up looking the same as everyone else. Possessions are just things that some marketing guru said that you needed. Do you really need all those things that are in the bottom of your closet? Do you use them every day?

If you are uncomfortable with talk of self identity then simply bring it down to a practical point of view. Clearing out the clutter and selling it will help you raise cash to pay off your debt. For this reason alone it is worth doing. Possessions are only things and at the end of the day there are a lot more important things like your health and wealth that you need to be concerned about. You won’t get wealthy by spending your cash on ‘things’ and your health won’t improve if you hardly have room to breathe in your home.

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.

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