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The Psychology of Spending: Why We Buy What We Buy and How to Make Better Financial Decisions




Money is a powerful tool that can bring happiness, stability and a feeling of security. However, for many, it can additionally be a source of stress, anxiety and dissatisfaction. This is generally due to our spending habits, which are often pushed through by emotions, impulses and unconscious biases. Understanding the psychology of spending is the first step towards making better financial decisions, therefore giving you greater control over your money.


Why we buy what we buy


There are many factors that impact our spending habits, such as social pressure, emotional needs, and advertising. As an example, we may feel it is necessary to 'keep up' in this modern era, by purchasing all the latest tech, clothing, and accessories. On the other hand, we may also use shopping to cope with stress, boredom, or sadness. Additionally, advertisers are masters of manipulating our thoughts and desires, through the use of images, music, and slogans in order to create a sense of urgency and want for their products.



For example, does the picture of this burger make you feel any more hungry than you were before seeing this?


I know I'm now in the mood for something to eat!


This effect can be explained if we delve a little deeper into the science of advertising.


Seeing pictures of food or drink can stimulate the release of digestive juices and hormones in our bodies, making us feel hungry. This is in fact a natural response that all of us will feel. However, this is exactly the aim of the advertiser, to make YOU the consumer, hungry and therefore, more likely to order food or go out and eat. This is just one example of numerous tricks used by marketers and advertisers to sell you their products.


Another aspect that affects our spending habits is the way our brains process information and make decisions. Research has proven that we are more likely to spend money using credit cards instead of cash. This is one which I do struggle with badly, as a lot of people (including myself) find money less valuable in the future and therefore, the use of a credit card distances us from the physical act of exchanging money, making it easier to spend without feeling the pain of paying. This thought process makes our brains search for instant gratification, which can make it hard to save or invest money for the future.


How to make better financial decisions


In order to make better financial decisions, we must take a step back and analyse our spending habits.


Here are just a few ways in which you can make a start:

Track Your Spending

Documenting all of your purchases for a month can be eye-opening. You may be surprised by how much you really spend on unnecessary items, such as coffee, snacks, and entertainment.


One app which I found really useful for this is an app called Mint. This allows you to link your bank cards and assign categories to your spending, making it easier to track. Did I mention that it's also free to use!

Identify Your Triggers

Set a Budget

Avoid Impulse Purchases

Practise Delayed Gratification

Surround Yourself with Supportive People


Making better financial situations for yourself is a continuous process that requires self-reflection and a whole lot of discipline. However, with time and effort, you can overcome your spending habits and manage your money.


Overall, the psychology of spending is a complex and multi-faceted subject that has an extensive effect on our financial lives. By grasping why we buy what we buy and making better financial decisions, we can take control of our money, reduce levels of stress, and amplify our happiness and satisfaction. Remember, small changes can have a big impact, so just make a start, whether it be, tracking your spending, setting a budget or identifying your triggers, with time and persistence, you can achieve your financial goals and live the life you want to lead.

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