Author Topic: Psychology of Spending  (Read 3505 times)

Mtngrl

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Psychology of Spending
« on: November 25, 2016, 01:08:02 PM »
I've always been interested in the reasons people make the financial decisions they do. I know there have probably been many studies on this kind of thing, but a couple of examples I have seen come to mind: When my FIL retired, my in-laws purchased a big fifth-wheel trailer and truck. They had long talked about hitting the road in retirement. They made exactly three trips and hated it. But they were stuck with the big expensive trailer and truck. I asked why they didn't rent or borrow a trailer to try out first and their reply was that "this was our dream -- we saw ourselves as the kind of people who hit the road in an RV when they retired."

Example two -- I had a good friend who suddenly, with no previous history of extravagant spending, went on a spree, buying very expensive shoes -- Louboutins, etc. She accumulated thousands of dollars of these very pricey, fancy heels. And then she had a nervous breakdown. Turns out she was having an affair with a female co-worker, had been conflicted for years about coming out as gay, didn't want to hurt her husband, who she loved. Years later, she and the ex-husband are both happily re-married (she to another woman -- not the one she was having an affair with.) She sold all the shoes on eBay at a loss. She said those shoes were her attempts to 'play the part' of the successful straight woman.

Now when I face a big spending decision, I stop to ask myself if this is something I really want to do, or am I trying to fill some expectation that someone else has for me, or live up to some image of myself I have. (I'm the type of person who drives X brand of car.) It's an interesting exercise.

SeaEhm

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Re: Psychology of Spending
« Reply #1 on: November 25, 2016, 01:54:23 PM »
Impulse
Lack of planning
poor judgement
not taking time to reflect on what truly makes them happy

Buying shoes to be a successful straight woman?  Seems like the husband was the real cover up and not the shoes. 

I don't do well with change. I am not a motivated purchaser and when combined with indecision, I hardly make purchases.  However, when I do make purchases, they are typically very drawn out and something that I do not regret.  These are typically very "face punch" worthy, but they do not offset my retirement plans nor do they leave me in the poor house, so...

ptgearguy

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Re: Psychology of Spending
« Reply #2 on: November 26, 2016, 06:48:36 PM »
One thing I have found with my own spending and also with other peoples spending is that spending begets more spending.

Once the flood gates open, often people go crazy. A great example is Black Friday. Once you get people to open their wallets, the money just keeps on flowing.

Metric Mouse

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Re: Psychology of Spending
« Reply #3 on: November 28, 2016, 06:07:54 AM »
One thing I have found with my own spending and also with other peoples spending is that spending begets more spending.

Once the flood gates open, often people go crazy. A great example is Black Friday. Once you get people to open their wallets, the money just keeps on flowing.

http://www.becomingminimalist.com/diderot/ - the Diderot effect is indeed powerful sometimes.

Some thoughts on reasons why people spend: http://www.becomingminimalist.com/fooled/

Papa Mustache

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Re: Psychology of Spending
« Reply #4 on: November 30, 2016, 01:31:54 PM »
Impulse purchases that more or less bankrupt the spender is a curious one to me. Buy the fifth wheel and RV and it represents the majority of your budget for everything. Heard of that situation this week through third or fourth person gossip i.e. I don't know the people in the story. Trailer is so big that the huge truck these people bought won't tow it through the mtns happily - AND they don't really have the cash flow to make use of it. So there it sits...

Libertea

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Re: Psychology of Spending
« Reply #5 on: November 30, 2016, 03:24:29 PM »
One of the best pieces of advice I've seen is to procrastinate on a new purchase whenever possible.  Most purchases don't need to be made in a rush; you can think about them for a while.  Kind of a cooling off period, if you will.  And then you might find in a day or a week that you don't want or need the item any more after all.  Or if you do decide to buy it, at least it will (hopefully) be a well-considered purchase.