Why Do People Overspend?

Do you ever feel like your spending sometimes gets ahead of you? You’re not alone—and you can regain control. Understanding debt, credit, and savings matters, but the real power comes from spotting the habits and thoughts that drive overspending.

Once you recognize those psychological patterns, you can start living within your means, avoid more debt, and make a debt relief plan that‌ works for you. Every step you take toward awareness is a step toward financial freedom.

So, let’s take a look at why we overspend—and how you can make sure it doesn’t get the better of you. Here’s what to know. 

Understanding Money Disorders and Overspending Psychology

If you sometimes find yourself spending more money than you can afford, don’t beat yourself up. You’re not the only one. And avoiding overspending isn't just a simple matter of willpower. Many people struggle with less-than-perfect money habits. In other words, financial behaviors and beliefs about money that can push them to overspend. 

If your money habits aren’t helping you manage your finances to your advantage, you might have an unhealthy relationship with money. Your brain might be tempting and tricking you into spending too much, even if you don’t actively want to. 

Here are three common money disorders. 

Money avoidance 

Find out if you recognize yourself in any of these patterns and behaviors. You may have money avoidance if you:

• Are reluctant to talk about money 

• Don’t want to check your bank account balance 

• Put off opening your credit card statements

• Are afraid to trust other people with your money 

People who avoid money often do so out of fear. They might think money is bad, something they don’t deserve, or aren’t meant to understand. Avoiding money doesn’t always mean you’re good at saving it, though. Having a fear-driven relationship with money could cause overspending. If you don't know where your money comes from, or if you're afraid of running out of money, you might spend too much of it. Even when you’re afraid to run out of money, you might wind up overspending.   

Relational money disorders

Sometimes your feelings about money are connected to your relationships with other people. Here’s how that could look:

• Financial enabling. If someone in your life takes advantage of you financially—letting you pay all their bills while they spend freely—that’s called financial enabling, or in serious cases, financial abuse. 

• Financial dependence. If you rely on someone else to handle your money without learning to manage it yourself, that’s financial dependence. 

• Financial infidelity. If you hide your spending from your partner, that’s financial infidelity. 

All these patterns can contribute to overspending and to an unhealthy relationship with money. 

Money worship 

Perhaps you think about money too much. People with money worship disorder believe in the power of money to change their lives. They believe that if they just make more money, save more money, or spend more money, they’ll be happier and more fulfilled. In reality, people who think obsessively about money usually have some deeper emotional issue that money can’t fix. 

If you believe money brings happiness or love, you might become an overshopper, a hoarder, a workaholic who’s obsessed with making money 24/7, or an impulsive risk-taker and gambler.   

Money disorders don’t have to run your life and your finances. Unhelpful patterns can be treated and fixed. Changing this pattern starts with spotting why you overspend—and how you can avoid falling into these psychological traps. 

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Why People Overspend 

Pursuing temporary happiness is a key reason you might find yourself spending too much. People who overspend often have a tendency to believe purchases that put them into debt will make them happy. Sometimes this is true, and sometimes it isn’t. 

A new outfit may give you a confidence boost but for how long? A good practice to start is asking yourself if you really need the things you're buying, or is it simply a want. 

Unrealistic expectations

People with overspending and debt problems have a costly trait: Unrealistic expectations of how material things will improve their lives. People who wind up deep in debt often expect a purchase to create an unrealistic amount of change, according to a study by University of Missouri researchers. In other words, the desire for a positive change can be a powerful spending motivator. 

The reality is that spending big money doesn’t usually lead to more happiness or success.  

The psychological reasons for overspending

A lot of the reasons for overspending come back to psychology. There are many mental issues around money that could prompt you to spend too much.

You may want to spend to meet your emotional needs or to make friends. One study found that people often experience greater happiness from the anticipation of a purchase than from the purchase itself. For example, a woman in the study wanted to buy a house to improve her social life by hosting parties and making more friends. Buying a house is an enormously expensive way to boost social connections, not to mention the decades-long financial commitment. Plenty of lower-cost, simpler ways exist to meet people, such as joining groups based on your interests, like a book club, fitness class, or nature activity.  And real friends will be happy to meet you for a low-cost picnic in the park. 

Instead of using money to meet emotional needs, try to look deeper. Ask yourself what feeling you’re trying to attain with this purchase. It’s likely there’s a less expensive version, or that you can feel better in other ways. 

Maybe you don’t need a top-of-the-line mountain bike. It might be just as satisfying to rent a city bike and pedal around the park with a friend. Instead of a new dream house for elaborate parties, try more frequent lunch or after-work plans with friends. These emotional fixes are almost always cheaper than taking on more debt. 

Emotional spending 

Overspending doesn’t always mean big-ticket items like homes or cars. It can happen with smaller, more frequent everyday purchases like clothes or hobbies. Research shows that people who overspend in an unhealthy way are often buying because of negative emotions or life events. 

To put it simply, if you feel bad about yourself or your life, you might be more vulnerable to overspending. Overspending can be a form of self-soothing or self-medicating, trying to make yourself feel happier with retail therapy. 

And it makes sense that many people might get a mood lift from shopping. That’s because on a primal, biological level, shopping– feels good. Your brain releases chemicals during a shopping trip such as dopamine, serotonin, and endorphins—the so-called happy hormones. Retail therapy can make people feel better in some psychologically powerful ways: 

• Control. Shopping can give people a sense of control and autonomy. 

• Visualization. Shopping helps people visualize a happier future. This could mean envisioning a beautiful living room after buying a new sofa or a softer complexion after using a new skincare product. 

• Stimulation. Going to the mall, boutique, or other favorite retail space can deliver powerful sensory stimulation. It immerses you in colors, sounds, and scents that take you out of your everyday routine. 

‌The desire for these pleasant feelings and feel-good hormones can sometimes outweigh the risk of overspending. It can be challenging to control your impulses when spending money feels satisfying. This is what happened to one couple who found themselves $70,000 in debt. They were having so much fun enjoying life, until they discovered they couldn't pay what they owed and needed credit card counseling. 

Some occasional retail therapy is perfectly okay as long as it fits your budget. Many people enjoy shopping as a social activity, to buy gifts for loved ones, and an everyday occasion of exploring the wider world. But too much impulse buying can become an addiction: about 5% of Americans suffer from shopping addiction or compulsive shopping disorder. Knowing how to watch for your emotional spending triggers could help you avoid excessive credit card debt. 

Societal pressures

Some people associate a person’s material possessions with financial success. If you care about what other people think and want to impress them, it's natural that you'd reach for your credit card. 

People with lower incomes may feel more pressure to spend money on status symbols, such as cars, clothes, and jewelry. Global research finds that impoverished people around the world are likely to spend a higher percentage of their income on visible expenditures. One theory says that by spending on conspicuous consumption, people at an economic disadvantage are trying to raise their social status, improve their self-esteem, and be treated with more respect.

It’s understandable that people want to enjoy their money, look good when they’re out in public, and get treated respectfully in their communities. If status competition and conspicuous consumption are pushing you to take on credit card debt, you might want to take a fresh look at your spending habits. Another way to  build self-esteem and self-confidence is by paying off debt faster. 

Desire for approval

The urge to keep up with the Joneses often has less to do with believing you need what others have. Sometimes it’s about wanting to be accepted in the tribe. Acceptance provides a fundamental sense of belonging, safety, and security, and you may find yourself buying more stuff to speed up the acceptance process.

There’s nothing wrong with some friendly comparisons with the neighbors. If your neighbor has a nice new car or patio furniture set, you might want one too. But aspiring to your neighbors’ standard living can have a stiff price. A Federal Reserve study found that people who live in the same neighborhood as lottery winners are much more likely to file bankruptcy. Living near a lottery winner seems to spur people to take on more credit card debt, get bigger mortgages, and invest in riskier assets. 

Instead of eyeing your neighbors’ acquisitions, run your own race. Your neighbors who seem rich might not be as rich as you think. After all the expensive things they’ve bought, they might be struggling with unpaid bills. Satisfaction with the home, car, and possessions you already have can offer priceless stability for your bank account and credit score, not to mention your own mental health. 

People will like me more

For some overspenders, part of being accepted is making sure people like them. Some people may believe having a perfect house, driving an impressive car, or taking world-class vacations will make them more likable. 

Psychological research suggests that people with psychological disorders, like narcissistic personality disorder or borderline personality disorder, are more likely to overspend. If you’re overspending to keep up appearances for a grandiose self-image, if you think you’re an important person who deserves to spend big money so people will pay attention to you, or if you feel empty inside and are spending money to fill an emotional void, these could all be warning signs that your relationship with money is unhealthy. 

I will become more fun

You may think spending more will make you a more fun person. Also called “hedonic transformation,” this mindset is common among overspenders. For example, one man in a University of Missouri study wanted a mountain bike because he thought it would make him more adventurous and interesting. 

The truth is: buying new stuff doesn’t change you as a person. Unless you’re strongly committed to a hobby or sport, expensive new equipment may not make you get out of the house more often. Your usual lifestyle habits and patterns of activity are unlikely to change just because you spent a lot of money—but now you’ll have more credit card debt.  

This will make me better

Overspenders often believe that purchases will make them better or more effective in some way. Several participants in the University of Missouri study said a new car would make them more independent and self-reliant. If you think you can improve something about yourself by spending more money, it may almost seem wrong not to make that purchase. After all, you want to be the best version of yourself possible. 

The idea that buying expensive things can automatically make you more effective in life is  false. It’s true that a safe, reliable car is often a necessity in the United States. But overspending on cars can mean expensive auto payments, which can leave you feeling the opposite of financially independent. 

I will become a better person

You may be tempted to overspend because you think it will make you a better person. One woman in the University of Missouri study wanted to spend a lot of money on cosmetic dental surgery because she believed it would improve her looks, increase her confidence, and help her become more successful.

If you’re spending money because you hope it will change how people think of you, or change the sort of person that you are, this could put you at risk for overspending. It’s fine to take care of your appearance, but overspending on cosmetic procedures or other changes to your surface appearance can cause more financial stress than it’s worth.  

How to Take Back Financial Control

Now that we’ve gone through some of the psychological roots behind overspending, it’s time to find out how you can stop overspending. 

You can retrain your brain for a healthier relationship with money. It's possible to get the same happiness from saving money that you once got from spending. Reclaiming control of your bank account is possible when you do the following. 

Recognize your triggers

Overspending often occurs during powerful emotions, which can be triggers. People experiencing an emotional trigger can feel the urge to spend more than they otherwise would. Every day, many people spend for emotional reasons. 

A recent survey found that 69% of Americans said that emotions influence their spending. Emotional triggers aren't always bad. Some of the most common emotional triggers survey participants mentioned included: 

• Stress (mentioned by 50% of people as a top emotional trigger)

• Excitement (44%)

• Happiness (38%)

• Boredom (37%)

• Sadness (32%)

• Anxiety (25%)

Think carefully about your own feelings around money. May you go shopping when you’re in a good mood, when you want to treat yourself to something nice, or to celebrate good news. Or  you might shop online  when you feel down 

Perhaps you overspend when you're out with friends. Some people overspend when they drink—that pleasant buzz of lowered inhibitions could also lead to higher spending. Others overspend when they're with family: they might be trying to impress family members, buy too many gifts that they can’t afford, or they’re in a financially enabling relationship. 

Start to reclaim control by identifying what's keeping you in debt and when you're most likely to overspend. 

Set a budget 

If you want to break the habit of overspending, start by understanding exactly how much money you have in the bank, where your money goes, and how much you want to spend or save. First, set a budget. You can use a few easy budget strategies, such as: 

• Simple spreadsheet. Make a spreadsheet that lists your monthly expenses. Some banks will let you download a list of your monthly transactions. You can also do it yourself. Track your expenses by category and by store to figure out how much you spend on groceries, restaurants, gas, utilities, entertainment, shopping, and more.  

• Budgeting apps. Some budgeting apps easily connect with your bank account to automatically download and track your spending. You can get a quick detailed overview of where your money goes and make confident decisions about saving, spending, and getting rid of debt. Some banks offer free budgeting trackers and other helpful tools within their apps.  

• Zero-based budgeting. This practical, detail-oriented budgeting strategy assigns every dollar a specific job: monthly expenses, savings, debt payment, and so on. Zero-based budgeting sets a goal of having your budget (income minus spending and savings) reach zero each month. If you struggle with money avoidance or you and your partner need to come together about budgeting, zero-based budgeting could give you clarity on how your money is spent—and how you might put that money to work in some other way.

Once you have your budget strategy, you can get a clearer picture of your money. This could empower you to make healthier choices about how to save more, pay off debt faster, and reach your most important financial goals. Start small and keep your goals focused. For example, your budgeting app might show you you’re spending $150 a month on subscriptions and streaming services you no longer use. If you put that money into savings, after one year you’d have $1,800. 

Practice mindful spending

Mindful spending is about being aware of every dollar that comes out of your bank account. 

One technique is to look at a purchase you're tempted to make—say, a luxurious $150 throw blanket—and figure out how many hours or days you’d have to work to cover that $150.

Once you've done the math, decide if the item is worth that much of your life. For example, if you earn $25 an hour, consider whether the throw is worth six hours of your time. 

Seek support

You don't have to go it alone. If you've developed a habit of overspending and are concerned that you’ve taken on too much credit card debt, a certified debt consultant could partner with you and help you learn more about your options.

Building a Healthier Relationship with Money

If you have experienced some unhealthy money beliefs and behaviors, you might benefit from financial therapy. You can meet with a licensed professional counselor to talk about—and learn how to overcome your anxiety, unhealthy habits, financial trauma, and limiting beliefs about money. 

Financial therapy combines financial planning and cognitive behavioral therapy, which can help people identify and change unhealthy money patterns and behaviors. Talking to a regular therapist about your financial problems could also be a good first step. Many other mental health conditions and emotional issues, like anxiety, depression, and ADHD, could also lead to overspending. 

Depression can make people feel like their finances are hopeless or that it’s not worth trying to stick to a budget. People suffering from anxiety might overspend out of a sense that the future is so uncertain they might as well spend all their money now. And people with ADHD sometimes have impulse control problems with money: they love the exciting rush of shopping.  

No matter where you are in your mental health or financial journey, here are a few key questions, tips, and ideas to help understand your money mindset. Ask yourself: 

• How you feel when you spend money. You might feel satisfaction, shame, guilt, anxiety, or exhilaration. If spending money makes you feel bad, if you’re not being deliberate and mindful about each purchase, you might be overspending. 

• Where and how your overspending happens. Are you at a brick-and-mortar store, out with friends, or online late at night, on your phone? Pay attention to the occasions for overspending. Shopping with friends can be a healthy social activity, but if you’re buying impulsively while doomscrolling, this could be a sign of unhealthy overspending.

• What causes the most anxiety or fear. You may hate looking at your credit card bill or bank account balance. Perhaps you feel like you’re not in control of your spending. Maybe you’re afraid to make a monthly budget. Try to get to the root of why you feel uncomfortable about money.

• What negative emotions you’re trying to fix by spending money. This is a hard topic, but people often overspend because they’re trying to use money to feel better about some bad feelings. If you feel lonely, you might try calling a friend or family member. If you lack self-confidence, consider focusing on your strengths and surround yourself with supportive people. If you feel anxious about the future, consider talking to a therapist or career counselor.  

If you want to stop overspending and change your relationship with money, there's help available. Budgeting apps could help you account for every dollar in your bank account. An accountability buddy could help you reach your goals. And if you want to get rid of debt faster and make a fresh start in life, check out the various strategies for credit card debt relief.  

3 Ways to Start Building New Money Habits Today

• Check your budget before leaving home. Make a list of the things you need to buy before leaving home or going online—and stick to that list. Give yourself a pat on the back when you return home without making any additional purchases.

• Adopt an all-cash habit for a while. As you build new money habits, consider paying cash for all non-necessities. Bringing just the money you plan to spend is a simple strategy for sticking with your budget. 

• Enlist an accountability partner. There's nothing like a friend who will call you out if you're getting off track. Ask a friend who will share the challenge, be non-judgemental, and will help you stay the course. 

When Overspending Becomes a Serious Problem

If you're worried about overspending, first take a deep breath and give yourself some grace. In the United States, it’s easy to fall into a pattern of spending too much. Our country is full of fun shopping opportunities, online and in real life—and lots of advertising that encourages you to spend. Our brains are wired for the joy, pleasure, and excitement of exploring shopping areas and finding great deals on e-commerce sites. Many people take on some credit card debt now and then, and still have successful careers and happy lives. 

But sometimes, overspending can become serious. Here are a few warning signs that overspending is endangering your financial health. You find that you’re: 

• Maxing out your credit cards (or getting close) 

• Losing sleep from worrying about credit card debts 

• Juggling multiple credit card bills and only paying the minimums

• Falling behind on credit card bills or other debts 

• Getting calls from debt collectors 

If you are struggling to pay your credit card bills, if you feel exhausted and worried about your debts, or if you just want a fresh perspective on how to get rid of debt faster, it might be time to seek professional help. Take heart. You have several options for professional help to move forward in your financial life, whether it’s credit counseling, a debt settlement program, or filing bankruptcy. 

Overspending can cause serious challenges, but these problems can be solved. Many people discover that a healthy, happy financial life is attainable once they tackle their overspending and get to the root of the problem. Freedom Debt Relief is here to help. We'll go beyond helping you answer the question, “Why do people overspend,” and work with you to explore your options for dealing with your debt, including our debt relief program.

Our Certified Debt Consultants can help you find a solution that can put you on the path to a better financial future.