Sad People Spend More Money

As you may already be aware I am very interested in behavioral finance and how emotions affect our financial decisions. Good money management is for the most part a psychological task rather than a simple mathematical one; hence understanding how emotions affect financial decisions can go a long way in becoming financially successful.

sad more money

An interesting question is: How mood affects your spending patterns? Do people spend more money when happy vs. when they are sad or angry? Take a minute and think about yourself, when do you think you spend the most money? Anecdotal evidence would suggest people spend more money when happy and excited. Chances are you are probably spending more on the weekends than throughout the weekdays; you are also more likely to spend more money when you have just received some exciting news or have alcohol in your system.

Have you noticed any of the above patterns in yourself? Almost certainly you have; however, research shows different results.

The Study
According to Cynthia E. Cryder et al. sad people are bigger spenders. In a paper they published a few years ago “Misery is not Miserly: Sad and Self-Focused Individuals Spend More”, they found that sad and self-focused individuals spend as much as 300% more for the same type of commodity.

The researchers randomly assigned people to either watch a sad video or an emotionally neutral video, after which they were asked to purchase a commodity (i.e. bottle of water). Participants in the sad group offered about 300% more than the neutral group for the same item.

Why Sad People Spend More
The authors point out that being sad and self-focused we tend to devalue our possessions and ourselves and this devaluation makes us willing to pay more for goods which we hope will enhance our self worth. One can of course argue that material possession doesn’t necessary increase our self worth, however it does provide some psychological comfort. The new purchase often takes your thoughts away from what is bothering you and you shift your focus on your new possession that reduces the anxiety and sad mood.

How to Change
Now that you know the effect of sad mood on spending, how can you apply it in real life? Here are some tips:

Make no Purchases When Sad
If being sad leads to more expensive purchases try to not make purchases when you are in this mood – try delaying the purchase until you are back to normal.

Limited Cash
When you are sad try carrying a small amount of cash with you to avoid spending too much money. Also leave credit and debit cards at home, if you do not have access to more money you cannot overspend.

Other Means to Enhance Sense of Self
Try finding another way to increase your sense of self, maybe read a book, talk to someone, go out with a few friends or listen to some upbeat music. Try to shift your attention from what is bothering you to something more pleasant, but not a new purchase.

I realize that it is much easier to say these things than to practice them, but if you are aware of the alternatives you maybe more likely to follow them.

This study only compared sad vs. neutral people, I would be interested in seeing how happy vs. neural would compare and even more interesting and valuable would be sad vs. happy spending patterns, I guess I have a thesis topic.

Share your thoughts; do you have any personal experience that can relate to this? Do you think happy people would spend more than sad people?

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Comments

  1. says

    This is so true. You must control your emotions. When you are upset you do not think you just spent then regret it later.

  2. says

    One problem of limiting your cash is that if your bad mood stems from something that happens outside the house (which is probably does, considering that most people are out for most of their non-sleeping hours), we can’t just leave credit cards lying around. Although the idea of having credit cards everywhere does sound nice…

  3. says

    There is a chapter in the new book “The Secret Language of Money” that compares the brain activity of those addicted to debt with those who have other addictions (alcohol, gambling, etc.). Their brains “light up” when they come in contact with or even just see pictures related to their addiction. The release of mood-enhancing neurotransmitters triggers a sort of Pavlovian response, causing them to associate spending, gambling or whatever with feeling better.

    For myself, I tend to do the opposite. When I feel sad, I usually do nothing. I can’t think about spending or being more productive until I resolve whatever is bugging me.

  4. says

    @Aaron ….hey maybe it will :)

    @ 2 Cents…..Yup….actually I’ll have a review of that book and a giveaway next week probably!

  5. says

    Same correlation with eating, that’s why if you are in better spirits, it can help you out in many ways.

  6. says

    Yup, I was feeling glum this weekend, not comfortable with having a frugal holiday. But since I am NOT using Credit Cards this holiday I am experiencing new and uncomfortable feelings. So, I went out and spend $95 on decorations.

    Well, I do have to say, we still stayed within budget with that expenditure. No stealing from savings or moving money around. We’re okay this week. Okay, enough of my pep talk. I’m back on track with a frugal Christmas.

  7. says

    I was sort of doubting whether I really spent more when sad than when happy, until after work yesterday, I wasn’t in a good mood, and I was about 30 feet from my apartment and made a quick decision to get dinner instead of going inside to make it. As soon as I decided to buy dinner, I thought back that I’m no different than everyone else and that we really do spend more when sad.

  8. says

    This was something I always assumed but it is nice see some evidence supporting it. All the more reason to continue my New Year’s Resolution tradition: Be Happy!

  9. says

    I can definitely relate to this–buying things doesn’t necessarily increase my feelings of self-worth, but being in a bad mood definitely decreases my sensitivity to spending…in other words, “I just don’t care.”

    The best thing to do, as you point out, is just avoid shopping entirely when in a bad mood. Accept the fact that you’re not feeling your best and just deal with that or let it pass, without going out to eat or to the mall.

  10. says

    If some of us look toward spending money in order to improve our mood or self esteem one alternative could be exercise. There are plenty of people that will tell you exercise gives you at least a temporary mental lift.

  11. Karla says

    This is my problem exactly. I tend to buy things when I am stressed or sad! Once I realized what I was doing I try to stop myself so now I try to justify my spending by purchasing something for another person or buying things I “need”

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  1. [...] activity, creepy chemical scares, etc. The skeptic in me would also like to suggest that sad people and scared people spend more money, buy more products, and increase overall consumption. NOTE : I [...]

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