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Do you consistently overspend? You can use gratitude as a tool to rethink where your money goes
"Finance for the People" author Paco de Leon explains why gratitude is an antidote for overspending.
Money is being recognized more and more as a highly emotional experience. There are many feelings that may influence our decision to make a purchase and sometimes those items wind up being the greatest thing we ever bought. Most of the time, though, we're thrilled with it at first but then the excitement wears off a few days or weeks later.
There's nothing wrong with buying something you see and want. However, it's important to keep in mind that this habit can be detrimental when you begin overspending. Overspending can cause you to take away from your other financial goals — like saving for a house, getting out of debt, or investing more money.
It's tough (and quite frankly, miserable) to quit overspending cold turkey, but there are other less rigid solutions out there that'll actually make you feel good about what you're doing. Paco de Leon, a former financial planner and author of Finance for the People: Getting A Grip On Your Finances, suggests using gratitude as a tool to change your spending habits.
Why we spend
"I think often times when we want to buy something, we approach it with a scarcity mentality where we say to ourselves, I don't have this thing I want so I must acquire it," de Leon explains. "For sure, scarcity is a way to get you to buy things. When items go on sale, for example, we feel that we should buy them now because they won't be around later."
Furthermore, de Leon also explains that humans, by nature, have a tendency to compare themselves to one another. It's a habit that's rooted in our evolution since comparison was often necessary for survival: early humans needed to fit in with other, larger groups for safety; the best way to be accepted by others was to show that you were similar to them and had the tools they needed. So it makes sense that humans still latched onto this instinct as we evolved.
As de Leon puts it, today's technology makes it even easier to exploit those innate emotions and needs. Seeing people post online about a luxury car easily evokes feelings of desire and status. You might like the idea of owning that same car because of the image it's associated with — and because it sends a message to other people that you are someone of high status because you own this type of car.
"Back in the day, you bought a tractor because of its features. Sellers didn't need to appeal to your emotions or appeal to who you are, which is how it works today," de Leon explains.
Feeling like we need to buy something because it would make us happier or make us seem more like we fit an "ideal" or appealing image creates a lot of room for us to overspend. We aren't using logic to think through a purchase and find reasons why we don't actually need it, so it's easy to impulsively hit the "checkout" button.
Using gratitude to overcome emotional spending
There are lots of ways to prevent yourself from making purchases aimlessly. Some popular methods involve waiting 24 hours (or even sometimes a few days) before buying the item to see if you really, really want it. If you still want the item, it's usually suggested that it's fine to buy it. But most of the time, people end up forgetting about the item altogether.
According to de Leon, practicing gratitude can play an instrumental role in preventing unnecessary spending.
"Gratitude is the antidote because it allows you to appreciate what you have right now, and it helps you eliminate those feelings of lack," she says.
Appreciating what you currently have can help you avoid lifestyle creep, which is the tendency to buy bigger, nicer, newer and often times more expensive items as your income increases — kind of like buying that fancy new car after you get a raise even though the car you currently have still runs perfectly fine.
In this case, you might practice gratitude by thinking back to how you felt when you purchased your current car. Maybe you remember pulling extra shifts and working holidays to save enough to buy it — and when you finally made the purchase you were extremely proud of your accomplishment. Thinking back to these positive feelings can help you appreciate your current car more so you feel less like you need a newer, more expensive one.
There are many ways to practice gratitude and there's no right or wrong way to do so. An article from Positive Psychology suggests journaling, creating a gratitude box, letter writing and more.
"Having a gratitude practice only costs you the time it takes to do it," de Leon says. "The only way you'll know the impact is to try it for yourself."
That's not to say that you should stop buying new things altogether. Just make sure you're thoughtfully making purchases you'll genuinely love rather than just making a purchase because everyone else is doing it.
And to make sure you're creating space for spending on "wants" while also being committed to your "needs" and other goals, you might consider opening a second checking account just for your fun money. This way, you can spend whatever is in that account without imposing rigid, miserable rules on yourself around how much you're "allowed" to spend. Betterment is a robo-advisor investment platform but it also has an option for a Betterment Checking account where you can store some money for your wants. The Ally Interest Checking account also serves the same function and you can earn interest on your balance.
Our emotions play a big role in the way we spend our money. While it's nice to buy something you really want, overspending can get in the way of our other financial goals. Plus, often times we may buy an attractive product and be excited about it at first but then the thrill quickly wears off and we no longer need it.
Practicing gratitude is one of many strategies for overcoming the urge to spend frivolously. Gratitude practices are not one size fits all and it may take some time for you to find the practice that works best for you. However, according to Finance for the People author Paco de Leon, having a practice only costs you the time it takes to do it.