The psychology of why we overspend boggles even the experts.
Financial trainer and relationship counsellor Veronica Banks, says, “There is a deep connection between our finances and how we view ourselves.”
Some of you probably think this doesn’t apply to you. That’s denial talking. Before the voices in your head lead you to bankruptcy, read on and learn how to identify your spending patterns.
Excuse 1: I deserve it
This is probably the most common reason to spend cash, and it comes in many shapes and forms, from believing you deserve to spend money because you’ve worked hard to wanting to indulge yourself because you’ve been through a tough time.
There’s nothing wrong with spending a bit on yourself every so often, but nobody “deserves” a pair of Christian Louboutin heels every month.
Senior manager for deposits and retail banking at Standard Bank Nolene Pardoo says we often spend in an effort to have fun or live in the moment. Because we work so hard, it’s normal for people to feel justified in spending more on luxury items.
“Choose one item. You can’t be a payday millionaire and broke the day after,” says Nolene.
Veronica says a person’s relationship with money isn’t always practical but often emotional. If you’ve worked hard and feel you need to justify the way you spend your money, shopping is often a form of retail therapy.
“Most people engage in retail therapy just to cheer themselves up as it makes them feel more in control and less anxious. This explains why sometimes the amount of shopping outweighs the actual need.”
Take action: Banks says that in moderation, shopping can be therapeutic, but it often disguises deeper problems you may have.
“A real therapist would be a much better solution,” she says.
READ MORE | How to beat the sale trap plus 4 tips to avoid overspending
Excuse 2: I grew up poor
Sibongile Msomi grew up without money.
“We’d often go to sleep hungry, so when I started working I vowed that I’d never be that poor again,” she says.
Because of this, Sibongile didn’t want any remnants of poverty to be evident in her life.
“Everything I wore was branded, and I’d never set foot outside without wearing make-up on and a spritz of expensive perfume,” she adds.
Her lifestyle was so expensive because she always wanted to keep up with the latest trends. This inevitably led to overspending. Nolene says this approach is dangerous as it encompasses only a short-term view of finances.
“You must enjoy life in the short term, but you must also plan while being cognisant of medium- and long-term goals,” she says.
Realising you have a problem is always the first step to healing. “Admit that you have a problem.
Take action: Compile a list of all your debt and start paying it off, starting with the smallest balance. Next, pay off your accounts with the highest interest rates. A budget is your spending plan to success.
“Draw one up every month. Take all your slips for a month and analyse your spending habits. When you save, the rands will look after themselves. Forget about instant gratification – delay it by saving some money to buy items using cash,” advises Veronica.
Excuse 3: Why should I save?
For many people, a first job means more money to buy clothes and the visit places you’ve always wanted to see.
“When they start getting an income, they think they can start worrying later on,” says Nolene.
Although there’s nothing wrong with spoiling yourself now and again, using your income for partying and buying the most extravagant handbags isn’t advisable.
YOLO (you only live once) and FOMO (fear of missing out) are some of the most common excuses. Yes, scientifically you do live only once, but the longevity of that life is deeply influenced by the way you treat your finances.
“Having a good credit record and good habits is key.”
Take action: “Plan for long-term goals such as retirement, and be consistent in your habits,” explains Nolene.
“Make sure you’re not left in the dust with your finances. Enjoy life, but do so within the confines of a well-planned budget so that you can make sure you can still have a comfortable life in the future,” she says.
It’s also important to remember that although you may be living a carefree lifestyle, blissfully ignorant of your finances, you have to consider your family. Strive to have enough money after you retire to take care of yourself, as well as pay your debts and instalments so you don’t become a burden on your children who may have young families to look after.
Excuse 4: No one can be better than me
Social status is paramount to many South Africans. People define themselves by the cars they drive, the houses they live in and the holidays they take, among many other things.
Nolene says “the social architecture of where you are definitely influences the way you spend, and sometimes it’s above and beyond what you can afford”.
Wanting to keep up with the Khumalos is not healthy for your finances. “People spend money to boost their self-image and for self-justification as they believe that they deserve it, even if it means spending recklessly.
“People often spend more than their income and live off their credit cards, personal loans, microloans and so on. Money is used to satisfy wants and not needs,” explains Veronica.
Take action: Living beyond your means at the expense of a good credit record really isn’t smart. The next time you hear that voice telling you that you can one-up Mrs Khumalo’s shoes with a pair from Steve Madden, think twice.
“If you can’t afford it, stay without it. If you have to apply for a loan, make sure your budget allows for this additional monthly repayment,” advises Veronica.
READ MORE | Get money savvy – 5 expert tips to start saving in your youth
Excuse 5: But it’s a sale
We have all been there. You’re walking past a shop and there’s a massive red sign. Your heart skips a beat, your pulse quickens and your body starts to tingle.
You walk in and start grabbing marked down items at random; without even trying some of them on, you make a bold purchase. Pleased with yourself, you saunter out into the parking lot satisfied that you’ve made a great saving, right? Wrong.
Strategist at Ogilvy & Mather Cathleen Makhetha says, “Red has always been a statement colour, which catches the eye and turns heads. Many songs and references are made about the colour red. Those who gravitate towards it seem to have something in common – the inclination toward passion, courage, a surge of boldness, and a spark of genius.
“Similarly, in advertising, red is symbolic of a radiant life source, and that’s what brands are for consumers. They are the daily bread in which consumers are able to find meaning and align their beliefs and values. Consumers love the feeling of spirit and heart being displayed in their brands, and because they are such emotional beings, the colour red and its associations electrify and enliven them,” she says.
Take action: It’s not too late to change things.
Nolene advises to “build on a habit by starting small. People often feel that the idea of starting to save is daunting.
“You have the ability to set up a debit order that runs on your account. It’s a great way to instil a good habit. There are a range of accounts that allow and prevent access to your money, so choose a savings account that will help you save.”
Now go dust the cobwebs off your financial statements and tell those voices in your head to take a back seat. With a little discipline, you can find financial freedom sooner than you think.
