When Feelings Take Over
No matter how sensible with money you usually are, there are times when your budget is at risk of getting hijacked. “Emotionally charged circumstances make us prone to overspending,” says financial psychologist Brad Klontz, managing partner at Occidental Asset Management. “If we’re rationally challenged, we’re financially challenged.”
Here’s how it works: The prefrontal cortex is the part of our brain that deals with logical thought, including planning, impulse control…and budgeting. But when we’re in a heated situation, the amygdala (the brain’s emotional center), kicks into gear and overrides the prefrontal cortex. As a result, reason flies out the window, our feelings take over and we can end up making poor monetary decisions. Here’s how to protect yourself against the nine biggest overspending danger zones.
The Trigger: You’re in a Bad Mood
There’s a good reason why 62 percent of people get spend-happy when they need a boost: It works. A new study from the University of Michigan found that participants who made a purchase after viewing a movie clip portraying a bullying incident felt significantly happier than those who abstained. Researchers suggest that making buying decisions helps shoppers restore a mood-improving sense of self-control. “Handling money has also been shown to increase endorphins,” adds Klontz. The problem? Even if you get a rush of satisfaction immediately afterward, that high will wear off. “You’ll start crashing, and shame and guilt for having blown your budget will make you feel even worse,” explains Klontz.
Shut It Down: Replace shopping with another joy-inducing activity: going for a jog, doing yoga, listening to music — whatever helps you feel more upbeat. “You need some kind of outlet,” says Maggie Baker, a psychologist specializing in money issues and author of “Crazy About Money.” “Also, try writing in a journal or talking to a friend. Verbalizing your feelings can help you figure out what you’re sad about and how to get yourself in better shape.”
The Trigger: You’re on Vacation
When you’re on a trip, you feel like you’re on a holiday from real life, so you aren’t as practical about finances as usual. Add to that the fact that you’re surrounded by overpriced tourist traps, and you have the makings of the perfect, budget-sabotaging storm. “Being on vacation gives you a license to relax — physically, mentally and financially,” says Baker. “It’s easy to get carried away with that feeling.”
Shut It Down: You should be able to indulge a bit more than usual on a holiday…while keeping some restraints in place. “Budget an extra 10 percent or so to spend,” suggests Baker. (That may mean cutting back in the weeks leading up to the trip or funneling a portion of your savings into a dedicated vacation fund.) Once you’ve figured out a reasonable amount of “mad money” to use each day, you can splurge on that $19 glass of super Tuscan without giving yourself a guilt trip — yet you’re not going to go off the rails whipping out your credit card like a Kardashian all week. If you still find yourself overdoing it, “consider an all-expenses paid trip to protect yourself from bad financial decisions,” says Baker.
The Trigger: You Found an Amazing Sale
It’s such a thrill to score a $100 pair of strappy sandals on markdown for just $15. “When you get a good deal, you feel like you’ve won the game,” says Baker. Knowing that other people paid full price for something you could score for a fraction of the cost makes it hard to resist.
Shut It Down: Before heading to the register, pause for a moment and put things in perspective. Focus on what you’re spending, not what you’re saving. “Even if an item is 80 percent off, you’re still pouring money into it, so ask yourself whether you actually need it,” suggests Baker. Try this strategy: Pretend those shoes cost full price. Would you still want them as badly as you do now? If the answer is no, step away from the rack.
The Trigger: You’re Bored
You know that old saying, “Idle hands are the devil’s workshop?” It’s true when it comes to shopping — boredom is definitely bad for your budget. “One of the most dangerous things is unscheduled leisure time, and some people fill the void by shopping,” says Klontz. “And it’s easier to do than ever since you can buy things right from your phone.” When you’re just pressing a couple of buttons on a touchscreen, it somehow doesn’t feel like real money the way actually opening your wallet and taking out cash or a credit card would.
Shut It Down: Fill that time with a smarter activity. If you have an hour to spare and tend to get click-happy, go to a yoga class instead, meet a friend for coffee or get started on a new project.
The Trigger: You’re Out With Friends
Even though you’re no longer in high school, it can still be hard to resist peer pressure. “Keeping up with the Joneses is literally in our DNA,” says Klontz. “Back in the caveman era, being marginalized by your social group was one of the biggest threats to survival.” The fear of being kicked out of the herd is still part of our instinct today. When your friends are ordering $14 cocktails and tons of apps, it’s natural to want in on that to be part of the gang.
Shut It Down: Prior to going out, decide on a set amount to spend so you’ll be less likely to get carried away. Then, avoid the awkward scenario of requesting a separate check by explaining the situation to people upfront, before you’ve even ordered. “When you’re on the spot at the end of the meal, you’ll start to feel anxious,” explains Klontz. “Stress hormones can flood your prefrontal cortex, preventing you from making a smart decision.” Right off the bat, say that you’re saving up for a down payment on a house (or something else) so you’ll be to sticking to budget-friendly menu items.
The Trigger: You Have to Buy a Wedding Gift
People tend to open their wallets wider than usual when purchasing a present for an important event like a wedding, bar mitzvah or baby shower. “There are external pressures to go all out, because you’re thinking about how you’ll look to others,” explains Baker. “You don’t want to show up with a $10 gift when everyone else spent $100.”
Shut It Down: To make an amazing impression while keeping your budget intact, tap into your creativity instead of your checking account. “You can create something yourself or get an inexpensive gift that is uniquely characteristic of the recipient,” says Baker. Think: A photo album with pictures of the happy couple’s courtship over time, or a framed poem you wrote about the person.
For example, at my wedding, the friend who introduced my husband and me framed our initial email exchange setting up the date. It was an easy, thoughtful idea that probably only set him back $50 max. And for my baby shower, my artistic godmother repainted the rocking chair that my mother used to lull me to sleep as an infant. Needless to say, it was by far the most meaningful item I received. (And it got the biggest wows at the party.)
The Trigger: You’re on a Diet
Reining in your appetite can make it difficult to stick to a budget. “You need self-control in order to be a master of your money,” says Baker. “But discipline is a limited resource.” We each have a set amount of willpower every day, and the more of it you extend — whether by forcing yourself to go to the gym at 6:30am or turning down the cheese plate at a networking event — the less of it you’ll have left to resist other temptations, such as impulse buys.
Shut It Down: Luckily, it’s possible to replenish your self-control. “Do a low-key activity that you find gratifying, like taking a walk or watching a movie,” says Baker. (Emphasis here is on low-key — avoid anything too intense or ambitious, such as spinning or reading “War and Peace.”) Save your shopping for after this relaxing spell, or for the beginning of the day when your willpower reserves have yet to be depleted.
The Trigger: Your Best Friend’s Birthday is Coming Up
You love her, so you want to get her the greatest gift ever. “In order to manage your money well you have to have a sense of vigilance,” says Baker. “Celebrations are an opportunity to throw that caution aside [and] overspend.” Not to be a buzzkill, but remember that whenever you’re feeling particularly exuberant, you’re also prone to making money mistakes.
Shut It Down: Rein in the urge to splurge by putting yourself in your friend’s shoes. “Would she truly want you to spend so much that you’d jeopardize your own financial situation in the process?” asks Baker. You can spend a little more than your budget allows, but don’t go overboard. (Need some ideas? Try one of these uniquely personal gifts.)
The Trigger: A Loved One Asks to Borrow Money
This is a particularly tough situation. You care deeply about her (or him) and may be worried about her wellbeing. If writing that check can help improve her life, it’s hard to say no. “The number one thing that financial planners consult with me about is how to advise older clients who can’t turn down monetary requests from their children,” says Klontz. “But lending money to family often ends up breaking your budget.”
Shut It Down: You have two options: “First, figure out how much support you can offer without destroying your finances,” says Klontz. “Build it into your budget and when the funds are gone, that’s it.” Second, as difficult as it may be, if this is an ongoing thing, there comes a point where you should probably cut this person off. “It’s possible that you might lose the relationship, but you have to put some tough love boundaries in place,” urges Klontz. “Are you really helping her? Giving money to someone who is financially dependent is akin to giving a drink to an alcoholic.”
If she has been using you as a crutch, she can’t heal until she’s on her own. Klontz suggests establishing a three to six month exit plan to gradually wean someone off your loans (or gifts). Then, depending on the situation, enlist a financial planner, career counselor, or therapist to help guide her and provide her with resources.
You Might Also Like:
Awkward! How to Handle Sticky Money Situations
8 Ways Your Upbringing Can Affect Your Money Habits
Are Your Friends Hurting Your Finances?