There I was, standing at in line at the grocery store with my cart spilling over with all sorts of things I didn’t exactly need. There were five bag of frozen shrimp, two dozen bags of grated cheese, frozen pizza dough, and enough pasta and pasta sauce to feed my family through a long nuclear winter. And while just about all of it was on sale, I couldn’t help but think, “Why am I buying this?” as I watched the checker ring up my purchases.
The Psychology of My Purchases
My spending habits tend to fall into one of two categories:

  1. Completely planned. These purchases are plotted out hours – sometimes days, weekend, or even months – ahead of time. I go into a store with a list, head straight for the items I need, and immediately head for the check out line.
  2. Completely unplanned. Sometimes, for a variety of reasons, I simply feel the need to spend money. It can be anything from unneeded groceries to new school shoes for my daughter – stuff I could argue that I need, if I was trying to get off on a technicality.

Each of those two modes of purchases also come with their own set of complex emotions. When I make a planned purchase, I’m usually feeling in control. I’m confident of my family’s financial situation – both before and after the purchase – and my actions show it. When I make an unplanned purchase, however (as you can see, I live in a largely black and white world – there’s little gray area when it comes to my shopping habits), I’m usually feeling reckless. I start to feel like my financial situation is control of me instead of the other way around, and I make purchases that don’t always make sense simply because I can. I call this the affect of “being too frugal for too long” – in other words, all work and no play makes Libby a very dangerous shopper.
Short-Term Emotions & Long-Term Decisions
There’s a relatively new field that addresses a lot of these emotions that surround shopping called behavioral economics. George Loewenstein, a professor at Carnegie Mellon, is a pioneer in this field. Last year, Loewenstein told CNN Money‘s David Futrelle how dangerous it can be to make decisions that will affect us not just now but down the road based on what we feel today – or, as Loewenstein says, what we don’t feel:

Often the problem isn’t that we’re too emotional. It can also be that we’re unemotional now and don’t appreciate how emotional we’re going to be in the future. I call this an empathy gap — we don’t fully empathize with our future selves.

-George Loewenstein, CNN Money, September 6, 2011

I understand where Loewenstein is going with this “empathy gap.” In the past, I’ve made money decisions due to a lack of emotion. In some cases, they’ve been frugal decision – like the choice not to hire a videographer for our wedding or not to have maternity portraits taken when I was pregnant with my first child. In both cases, I made the unemotional choice to save money, not realizing how much my later-self would have appreciated those mementos, despite the added costs.

How To Leave Your Emotions At The Door

Here are some of the things that I ask myself before making a purchase:

  • Why am I making this purchase? What will I gain from it? What will I lose? Do the negatives outweigh the positives?
  • Do I have the money to pay for this purchase? If I don’t (which is rare – I’m a budgeter from way back), how will I get the money?
  • Does this purchase fall in line with my financial priorities? In other words, will splurging on a new outfit keep me from being able to pay down a debt or from saving up for something more important?
  • How do I feel right now? If the answer is “reckless” or “out of control,” I do my best to step away from the cash register and run like hell to my car; the item will be there tomorrow to purchase if I change my mind.
  • Will I have recourse if I change my mind? On most things, the answer is yes – but it’s not as easy to return a car or a new home.
  • How will I feel about this purchase down the road? Will it be something I enjoy for five minutes, but regret in five months? This may be the single most-important question, as its answer tends to highlight whether I’m using the right motives when it comes to my spending habits.

We talk a lot about how to “go be rich” on this blog, and part of that is knowing when to keep your emotions in check, and when to let them guide your financial decisions.

Reader, how do you feel when you spend money? How about when you save it?