Money Personalities: Why You May Be Overspending
By Mark Yatros
I have a client who once celebrated every good thing in his life by buying something.
Promotion = New car
New house = All new furniture
Sealed business deal = Expensive dinner out
Now, my client is a smart guy and generally isn’t bad with money. But his money personality puts him squarely in the “Overspending by Celebrating” category.
We all have a money personality, which may cause us to overspend or, perhaps, hoard money by spending little beyond the most basic needs. All money personalities, at the extreme, can lead to problems, but for now, I’m going to look at why people overspend and make suggestions on how to tame your overspending.
Before I get started, there are a few basics to cover.
I suggest reviewing your priority planning and spending (aka, budget) every six months. For more information on this, please read my blog, “Why You Should Review Your Priority Spending Every 6 Months.”
While reviewing your spending, confirm that at most 30% of your take-home pay goes toward debt reduction and spending. If you can’t keep it to 30%, you could increase it slightly, but be sure you aren’t going any higher than 40%.
At least 20% of your take-home pay should go toward savings. If you can’t save this much right now, increase the amount you save every six months when you review your budget. Even if you save a little bit more, it adds up.
Put your savings on autopilot by having a certain amount withdrawn from each paycheck and sent directly to your savings account. Also, don’t forget to max out your 401(k) or 403(b).
Now, let’s look at the different money personalities and how to control overspending tendencies.
‘Retail Therapy’ Money Personality
If you spend money to help you deal with something bad happening to you, you may be trying to fill an emotional void in your life. Turning to retail therapy to help you feel better is logical. Often, shopping produces a spike of dopamine in the brain, which leads to feeling good.
The downside of retail therapy is that the good feelings it produces don’t last long and are often replaced by guilt. And you’ve purchased something that you probably don’t even need.
How to tame “retail therapy” overspending: First, look for healthier ways to feel better. Instead of shopping, go for a long walk or meet a friend to discuss whatever is making you want to shop.
‘Celebratory’ Money Personality
Like my client, who I referenced above, you may have a “celebratory” money personality if you overspend when good things happen. While it’s natural to want to celebrate, going overboard on your spending can lead to a depleted bank account or large credit card bills.
How to tame “celebratory” overspending: Start thinking of new ways to celebrate that don’t involve large purchases. Because they know you best, get insights from family and friends of different things you can do to observe big moments in your life that don’t involve spending much money.
‘Money is Power’ Money Personality
Do you equate money with power? If you don’t feel in control of your relationships, you may use money to feel equal (or better than) to someone else. If you feel helpless in your relationship, you may spend money to help you feel more in control. Those with this money personality sometimes hide their purchases from their partner or, at other times, flaunt what they’ve bought to them.
How to tame “money is power” overspending: This is a complicated money personality that often requires a deep dive into your past and current relationship. Talking honestly and openly with your partner is an excellent start to taming this money personality. However, speaking with a therapist may be most helpful if it runs deep.
‘Money is Love’ Money Personality
Do you shower family and friends with gifts? It’s ok to be generous and show your love with gifts, but going too far is possible. If your gift-giving exceeds your budget, you should scale it back.
How to tame “money is love” overspending: Step back and think of other ways to show your love for your family and friends. Ask them how you can best show your love for them. You may be surprised that they really want time with you, not what you can buy them.
‘Keeping up with the Joneses’ Money Personality
This money personality is all about public perception. If you find yourself envying what others have and feeling that you must match it or even one-up them, you may be falling into a spending trap.
How to tame “keeping up with the Joneses” overspending: If you’re spending money to keep or increase your social standing, please take a close look at who you’re surrounding yourself with. Try to spend time with friends who don’t spend lavishly or feel the need to show off their purchases. If you’re around people who spend extravagantly, remind yourself that they may be fueling their lifestyle via debt and that you don’t want to be in their shoes.
‘It’s a Thrill’ Money Personality
If you’re a frequent gambler or a never-ending bargain hunter, you could be in the “It’s a Thrill” money personality category. Both groups tend to be after a dopamine rush. Gamblers get a rush from possibly winning more money, while bargain hunters are always after a good deal. Both situations can lead to terrible debt and family friction.
How to tame “it’s a thrill” overspending: Helping you with this money personality is challenging. I suggest that if you see yourself in the above, you seek out a therapist or a support group. Two groups to consider are www.gamblersanonymous.org and www.debtorsanonyous.org.
Final thoughts
You should not feel trapped by your money personality. Digging into why you’re overspending can be difficult but ultimately freeing. If you need help figuring out why you overspend, please consult a therapist.
However, if you understand why you’re overspending and are ready to create a budget, my associates and I would like to help. We offer free, no-strings-attached consultations and would be happy to assist you. Please contact us here or call (269) 218-2100.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Allegiant Wealth Strategies offers securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Allegiant Wealth Strategies has offices in Battle Creek and Portage, Michigan, from which we serve Calhoun County, Kalamazoo County, and Kent County (Grand Rapids). The Allegiant Wealth Strategies team offers no-obligation financial planning consultations; call 269-218-2100 or contact us here.