Why Do We Overspend?

June 6, 2010 by thinkhappy

 Why Do We Overspend?

There was a very good article the other day in the “Financially Fit” section of Yahoo Finance written by Jodi Helmer, that described the top 8 reasons why we overspend. Here is a synopsis:

1. You spend more when paying with plastic. (I think most of us know this.) This is due to the fact that we stop focusing on the price and more on the item we want to buy; we’re willing to pay more with a credit card than if we had to pay cash.
2. When music is playing you’re inclined to spend more. Studies have shown that music makes you exercise better and also increases your motivation to spend.
3. Buying in bulk can cause you to spend more. If you buy a bunch of something (like 50 rolls of toilet paper) it throws your monthly budgeting out of whack and you’re likely to use up the product more quickly knowing there’s lots more available.
4. Dieting can cause you to spend more on other things. If you’re deprived in one area you’re more likely to impulse spend in another.
5. Tracking exact costs. Your eyes might be tracking purchases to the penny but research shows that you might lose sight of the total amount you’re spending. (The old “forest for the trees” problem.)
6. Buying clearance items. They look really cheap but you probably don’t need them; you buy “just in case” and overspend.
7. Shoppiing without a list is one of the most mentioned “no-no”s. The reason is obvious, I think.
8. Falling for price tactics. Everything is relative. If you go to a restaurant where the menu has a $100 burger and a $50 steak, you will think the burger price is crazy but the steak price almost seems reasonable.

Written by Hollis Colquhoun

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