September 22, 2006, Newsletter Issue #33: Understanding Your Spending Habits

Tip of the Week

If you think you have a problem with overspending, you're not alone. In our more, bigger, better society, consumer spending is reaching mammoth proportions. As much as 70 percent of the U.S. economy is driven by consumer spending. Most of us know we should be saving for a rainy day, our kids' college, and our own retirement, but thanks to the lure of easy credit at low rates—at least low introductory rates—we just can't say, "No." Psychologists have identified a handful of rationalizations we use to justify our spending habits:

• Stress relief
• Pleasure
• Entitlement
• Overcoming feelings of inadequacy
• Demonstrating our own importance

If you notice, none of these has anything to do with basic necessity. All have more to do with our emotions. Retailers understand the psychology of overspending all too well and exploit our emotions to encourage us to buy, buy, buy. Pay attention to the commercial you see on TV and the ads you read in magazines and the newspaper. All make an appeal to your emotions.

If you want to keep your spending in check, trying first keeping your emotions in check. The best thing you can do toward this end is to avoid purchasing anything—from air fresheners to airfare—on impulse. Give yourself a cooling down period when considering a purchase. Also, keep your receipts and leave the packaging in tact for at least 24 hours. That way, when buyer's remorse kicks in the next day, you can return the item.

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