Is Buying Good for You? The Psychology of Spending

How strategic spending could keep you sane

If you need an excuse to buy that new yoga mat for yourself or to splurge on a gift for your significant other this holiday season, then here it is: Spending a little money might just make you feel better.

Sure, it makes sense to save during these tenuous economic times, but pocketing every penny can take a toll on your mental health, and that might just ratchet up the stress many of us feel during our daily lives.

One study, co-authored by Columbia University marketing professor Ran Kivetz, Ph.D., in 2006, shows that in the long run, those who routinely forgo life’s pleasures to save money (“I’ll take a vacation after I retire”), or to study harder, work longer, or otherwise prepare only for the future, are more likely to feel sadness and regret over all the missed fun and opportunity in the present.

That doesn't mean we won’t ever experience some buyer’s remorse when we splurge. According to Kivetz’s findings, which were published in the Journal of Consumer Research, people who bought luxury items or things they deemed as unnecessary did initially feel stressed, but those feelings quickly faded and were replaced by positive emotions.

Manage money and stress

To maximize those good feelings and ward off the stress that comes from overspending and debt, first figure out how much money you make and spend each month. That information gives you the freedom to occasionally do something special — go to a play, take a trip, treat a friend to lunch and even buy holiday gifts — without becoming buried in bills, says thrifty-living expert Leah Ingram, author of Suddenly Frugal.

A few years ago, Ingram and her husband decided to cut costs and make changes to their lifestyle in an effort to eliminate debt. They sold their house to buy another that fit their budget better and found scores of other ways to save money. 

“I am just much more conscious about money,” she says. “It was hard, at first, to give up on our lifestyle, but there are just so many benefits.”

Though changing her spending habits did mean limiting some of the things she loved — the family doesn’t eat at restaurants as often as they used to — Ingram says that frugal living has fostered a greater appreciation for the things they do choose to spend money on, as well as the occasional indulgence. Now, because they don’t eat out as often, they enjoy the experience more when they do go. Ingram does have her hair done, just not as frequently. And even shopping is more fun.

“It’s because I’m not numb to the experience,” Ingram says. “Now, when I spend frugally, I have much more pleasure and less buyer’s remorse.”

Frugal living doesn’t mean burying your bucks in the backyard and never spending a dime; it simply means consciously managing your budget and saving money to live within your means, which makes for a better life.

People who live frugally tend to be happier than misers who hate to spend anything and spendthrifts who often spend too much, according to research by marketing professor Scott Rick, Ph.D.

How to give without regret

Giving away some of that money can also contribute to those happy feelings and good memories, according to data published in 2007 in the journal Science. In that study, University of Oregon researchers used MRI technology to look at the neural responses of those who donated money to a local food bank. The study showed participants had increased activity in the reward center of their brains — the part that contributes to good feelings — after making a donation.

So how can we maximize those good feelings and enjoy the act of treating ourselves or giving to family, friends and the charities we care about even during tough economic times?

First, budget for those donations and gifts by cutting the fat from your monthly expenses, Ingram says. Do you really need two phone lines, or can one cell phone do the trick? Is a cable package with 140 billion channels for $150 the way to go, or can you get by with 50 channels for $29.95 or cut cable altogether? Look at what you’re spending, cut down to the bare essentials and then track what you have left over for the extras. This way, you can enjoy giving without compounding your stress with money worries.

3 strategies for conscious spending:

Ingram offers a few other frugal-living strategies to help you save while still enjoying life’s pleasures:

  • Look for the best value, not always the best price. Buy from companies that support your green philosophy or give to causes you care about. Be willing to spend more on durable, quality products with long-term guarantees so that you can return worn-out coats for replacements instead of tossing the old and buying new. Veer away from disposable living.
  • Buy backwards, and keep count. While shopping at the grocery store or mall, use a calculator to keep track of the costs of the items you pick up. But instead of adding up your purchases, deduct them from the total amount you have to spend. When the calculator shows a zero balance, the shopping is done. This will keep you from overspending and help you evaluate the value of everything you buy.
  • Shop outside the normal retail channels. Ingram peruses thrift shops, picking up old cookie tins and other items which can then be filled with homemade treats and given to the children’s teachers or friends during the holidays. Instead of buying new books, she swaps them through online sites. She also buys notecards, bath soaps and other hostess gifts, and art and craft supplies (and other items that could serve as children’s birthday presents) during sales throughout the year. And Ingram has no problem re-gifting if she has a new item someone else might enjoy.

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