The psychology of spending
Financial health is an essential component to wellness. To learn more about the thoughts, emotions and strategies that impact our purchases, HealthySteps to Wellness spoke with Amber Danford, chief retail and marketing officer of Stanford Credit Union.
What emotional appeals do advertisers use that impact my spending?
Advertisers know that emotional appeals tend to sell products/services more than features and pricing. Therefore, many ads promote exclusivity; highlight the consumer’s flaws (which the product can fix); or introduce fear, uncertainty and doubt — all of which help to reposition the brand relative to competing products. An example: when Jif™ launched the “Choosy moms choose Jif” campaign, every mom wanted to see herself as a choosy mom. Therefore, the positioning worked.
Why am I driven to “keep up with the Joneses”?
Many people are driven to keep up with the Joneses due to an inability to stop feelings of inadequacy or competitiveness with someone else. Instead of pausing to ask if we need the material object and how the purchase will affect our overall happiness, we tend to impulsively buy to keep up with our image of perfection and happiness.
Furthermore, many consumers are affected by the increasing and exhausting onslaught of messages coming from all angles and devices — such as banner ads when you are using the internet not only for shopping, but even when you just doing web-based research or accessing social media (e.g., Facebook ads). Many consumers do not realize how much this “subliminal” (or not so subliminal) advertising affects their spending habits. Increasingly, it is important to be a “conscious consumer.”
Are stores and online retailers using infrastructure to encourage impulse purchases? If so, how do I resist?
Retailers find ways to encourage all types of purchases. You may notice while waiting in the check-out line that you are surrounded by many small items filling up shelves to entice you. Even though you usually don’t need them, you often pick some up and buy them anyway. Or, when you are buying online, alongside the item you need you may see what other consumers purchased that you didn’t even think you needed — but you decide that you do. Retailers also use fake “sale-of-the-day deals” that may not even represent real savings; nevertheless, you get sucked in because you honestly want to feel that you got a good deal.
Consumers need to be aware of these strategies in order to better take control of spending habits. One tip: Make a list and a budget for each errand. Secondly, use that paper trail to track what you spend. By making yourself more aware of your actual spending, and your spending triggers, the more empowered you will feel and the more savings you will have.
When I’m feeling down, shopping often makes me feel better. Is there an alternative?
Shopping may make a person feel better for a few minutes, but the consequences of debt and living outside your means becomes painful really quickly. Some alternatives to shopping:
- Go to the library and pick out a (free!) book to read.
- Go to a thrift store and donate goods from home you no longer need; while you’re there, buy something for charity.
- Try a new fitness routine instead of trying on a new dress.
- Go on a shopping spree with a $20 bill and make a game out of it.
Does my spending pattern change depending on whether I’m using cash, debit or credit?
The majority of consumers walk around with little or no cash. Most prefer plastic for the sake of convenience and safety. Because it is so quick and safe, “using plastic” makes it easy to overspend. Typically, handing over cash feels more tangible and “hurts” more compared with quickly swiping a card. Making your purchases “cash only” is therefore one strategy for limiting spending, and can help you become more of a conscious consumer.
In addition to using cash, what other tips might help me become a more conscious consumer?
- Know your overspending triggers and use online/mobile tools to help you refrain
- Keep yourself accountable to a realistic budget
- Use account alerts and review spending trends
- Find alternatives to overspending that create lasting impact for you and your family