Understanding financial concepts like debt, credit, and savings is critical to long-term success with money and finances. Equally important however, is recognizing and controlling the psychology that influences the buying of things you don’t need. We need to do more than simply lay out the nuts and bolts of credit but also ponder our own behavior in this aspect.
People with overspending and debt problems tend to share a common costly trait: they have unrealistic expectations for how material things will make their life better. That is the chief finding of this study, Materialism, Transformation Expectations, and Spending: Implications for Credit Use by Marsha Richens and Myron Watkins, marketing professors at the University of Missouri.
The authors found that people who wind up deep in debt often got there because they expected “unreasonable degrees of change in their lives from their purchases.” The authors also concluded “these beliefs are fallacious for the most part, but nonetheless can be powerful motivators for people to spend.” Studies like this complicate what has become a global quest to raise personal financial literacy through programs in schools, communities, and online.
This study identifies four types of unrealistic expectations common to over spenders. These expectations are much less evident in consumers who do not have debt problems. Here, then, are four lies that over spenders tell themselves when buying things they don’t need:
People will like me more.
Over spenders may believe that purchases will make it easier for them to connect with others. One woman in the study wanted to buy a house so that she could host parties and be more social, resulting in making more friends.
I will become a better person.
Many over spenders believe purchases can help them become better people. One woman in the study was certain that cosmetic dental surgery would improve her looks, increase her confidence, and help her become more successful.
I will become more fun.
Some believe that purchases will make them “fun” and feel more fulfilled. A man in the study wanted a mountain bike because he figured he’d become more adventurous and interesting.
I will become more effective.
The typical over spender believes that purchases will make them better at a certain pursuit. Several in the study said that a new car would make them more independent and self-reliant.
Heavy over spenders have a greater tendency to believe that the product which put them into debt is a necessity for their happiness. Sure, whiter teeth may give you a confidence boost and a new house might attract more visitors, but for how long? This type of purchased happiness won’t last if that’s not who you really are. Understanding the why in your spending habits can help you avoid the problems associated with debt at the source. If you or someone you know might need help with overspending, you can find ways to pay off debt. Happiness is not for sale, and you are more likely to end up with payments you cannot make for a feeling rarely associated with debt.