Emotional spending is the act of spending money on things that you don’t necessarily need, because the items or act of spending makes you feel good. Sometimes, we emotionally spend because something stressful is going on in our lives, like job difficulties, a divorce, etc. Other times, it’s used a way to pass time when we aren’t fulfilled in other aspects of our life.
Regardless of the reason, it can wreak havoc on your personal finances. Here are some steps to prevent finding yourself with no money leftover at the end of the month.
How can I stop emotionally spending?
It can be hard to stop emotionally spending, but it is possible. It takes looking at the reasons why you are spending. Do you get a thrill out of it? Does it fulfill something that seems missing in your life? Determining the why is how you’ll begin to stop the emotional spending.
Even if you don’t stop emotionally spending completely, there are ways to do it so that it doesn’t negatively affect your personal finances. In fact, you can even budget for this type of spending so that it’s included in your overall budget. Here’s how:
Determine what you are capable of spending
The first step to get your spending under control is determining what you are actually capable of spending. This means it’s time to take a hard look at your finances and understand exactly how much is coming in and going out each month. Understand what your non-discretionary purchases are versus your discretionary, and see what you can cut back on. Non-discretionary purchases include fixed expenses, like your rent or mortgage, and other bills, whereas discretionary purchases are non-essential purchases like going out to eat, entertainment, and more.
Once you understand where your money is going every month, you’ll be able to get a good idea on how much extra money you have left over and can use to spend on some non-essential purchases.
Ask yourself why you are buying something
What are your spending triggers? Is it after a long day of work when you are relaxing on the couch and bring up your favorite shopping websites? Or, maybe it’s when you’ve received bad news and you hop in your car to go to your favorite store. It’s important to identify these triggers so that you can be consciously aware of your emotional spending, even if you aren’t necessarily doing anything about it.
Are your buying things to make you happy? Do you feel as though there is something missing in your life that “stuff” can fulfill? Often, we don’t understand why we spend unnecessarily, and need some extra help. Therapists can help you understand the why of emotional spending while a financial advisor can help to keep you on track.
Set and review your budget frequently
The first part in taking control of your finances is by setting a budget and reviewing it frequently. Make a list of what comes in every month and what is spent every month. From there, you can break down your spending into categories-like going out to eat, savings, bills, subscription services, etc. Once you do that, you can allot some extra money, or “ fun money “ as Dave Ramsey has coined, you’ll know that if you do find yourself itching to spend, it’s not breaking the bank. You’ll be able to spend guilt-free knowing that you have set this money aside for yourself.
Fixing the need to emotionally spend isn’t something that will go away overnight. It can often be a mix of personal responsibility, therapy, and financial advisors who can help get you through these urges. But, by setting a budget and sticking with it, you can still spend without putting yourself in unnecessary financial duress.
Originally published at https://www.seniorfinanceadvisor.com.