by South Africans, according to the cold statistics, are poor savers, but big spenders. But, a growing movement of consumers, disillusioned with keeping up with the Jones’, are deciding to break the cycle of over-indebtedness. More and more people are looking into frugal living.
More than 50% of credit-active consumers in South Africa owe over 70% of their salaries to servicing debt every month. With the festive season coming up, the pressure on our wallets will be even higher.
In part one of our ‘Frugal Living’ series, we’re going to identify the emotional and psychological reasons you spend. When you’re aware of why you spend in the first place, you’re better equipped to avoid the pressure to overspend this silly season.
The Psychology of Spending
There’s a reason spending money is called retail therapy. Research on consumer spending has revealed that when we buy stuff, we feel better. But, retail therapy isn’t free. Neither is the ‘free gift’ that you justified your last splurge with (we see you).
When it comes to spending money, we all have our vices. Even men, who are notoriously allergic to shopping malls, actually spend 32% more than women on food and retail. According to data from FNB’s Credit Card Division, the boys also spend 30% more online.
But, regardless of our shopping preferences, the reasons we shop are generally the same. Spending, in general, is not a bad thing, but problems arise when we start spending money excessively.
You Want To Be In Control
The Journal of Consumer Psychology conducted a study that revealed consumers often shop while feeling sad. That’s because feeling sad has a strong correlation to feelings of not being in control. Spending money not only reduces feelings of sadness, it restores a sense of personal control.
The study showed that shoppers who did not make a purchase, didn’t experience a reduction in feelings of sadness or anger. Those who spent money, did.
There are cheaper ways to make yourself feel better. Take a walk, watch a comedy, or visit a friend who’s company you really enjoy.
CLICK BELOW to read about four ways retailers get you to spend.
It’s a Competition
As normal, healthy human beings, we have an innate competitive nature. It’s what drives our need to measure our financial success against the financial success of others. And that’s where the idiom, “Keeping up with the Jones”, actually comes from.
The parents of your child’s friend at play school just drove up in a new Mercedes. Suddenly, you feel compelled to upgrade your VW Polo that’s now making you feel inadequate. This competitiveness can be healthy if kept in check and channeled towards the right areas of your life. But, once your competitive nature takes hold of the purse strings, it can drive you straight into debt. Don’t compare material possessions but, rather, financial situations.
They might have a nice new car, but it’s also probably new debt. Your VW Polo might be close to being paid off, so your net worth could quite possibly be greater than Mr and Mrs Mercedes Benz. When we look at other people’s fancy things, we can set unrealistic expectations for ourselves. It’s unnecessary stress and added financial pressure.
You’re Just In a Bad Mood
A bad mood can be detrimental to your cheque account. We can become indignant and feel we deserve to treat ourselves. Retail therapy, but budget mayhem.
A study published in Psychology and Marketing, showed that a bad mood is also directly linked to impulsivity or a decrease in control over our own behaviour. So, if you go to the mall in a bad mood, you’re more likely to overspend on unplanned purchases. You’re also more likely to spend money on material items rather than experiences.
It’s difficult to reason with yourself when you’re sad, angry, or envious of your peers. But, when we let our emotions overrule our rationale, it can wreak havoc on our budget and on our lives. Before you get caught up in the flashing lights and enticing adverts to spend, set yourself a goal for how you want to feel in January.
Frugal living isn’t about denying yourself. It’s about being mindful of what you spend now, so you don’t have to count the cost later.
CLICK BELOW to read how online retailers get you to overspend.
