Is there anything wrong with enjoying the spirit of the season that’s fast approaching? Of course not. We wouldn’t want people to think we are misers who are only concerned with the glint of money.
There is nothing wrong with enjoying what we earn. But therein is the key—the words “what we have already earned.” We should be enjoying in moderation past income with some set aside for the future. But Filipinos have to stop enjoying future income, future bonuses, future salary increases. After all, what if these don’t come in? Then we have to live with the reality of bounced checks in January or missed credit card payments when the new year rolls in.
Break the cycle by refusing to mindlessly spend. The psychology of spending is a topic that I have been studying for quite some time. Unless we face the deeper reasons why we get into debt come Christmas season—and even after—we cannot really get rid of these urges to splurge.
The psychology of spending
Drazen Prelec (associate professor of marketing at the Sloan School of Management) says that “people’s complex attitudes towards money defy economic theory.” For example, some buy lotto tickets and insurance at the same time. Buying lotto is risky behavior while insurance shows risk-averse behavior. I also find Prelec’s findings to be “fascinating glimpses into our own complex relationships with money.”
He says we all have personal rules when it comes to money, rules that we think will keep us out of money trouble. For example “I never take a taxi unless in an emergency.” When we don’t live by the rules, we feel guilty. That’s what he calls a moral tax on consumption that interferes with the pleasures that we get from doing what we do.
Marketers take advantage of these findings by offering freebies or bundled pricing, for example. At a cosmetic shop, for example, you get a free item if your purchases reach, say 5,000. So if your total purchase so far is 4,500, and the next item you like is 700, you add to your basket so you can get the free item. Makes you feel good about adding that extra item.
Credit cards, he says, are “insidious” because they remove the pain of that moral tax, or make it appear that the pain is not there. That’s why when you pay with plastic, you tend to spend more than you budgeted for.
Money and happiness
In one study, a psychologist named
Miriam Tatzel, PhD, of Empire State College, State University of New York, compared peoples' spending habits with their sense of well-being.
Her study of 329 students examined what types of spenders are the happiest. She observed that there are generally four groups of people with different combinations of the trait frugality and materialistic.
- First group: frugal and materialistic. They look for sales on high-price items.
- Second group: not frugal and materialistic. Big spenders who rack up credit card debt to buy, buy, buy, and are the least happy.
- Third group: frugal and not materialistic. Financial planner Melvin Esteban of Motivating Minds would most likely call people in this group “Ilokanong Intsik”, which is what he calls himself proudly ☺
- Fourth group: Not frugal and not materialistic. People who pay little attention to prices and don’t care what others have. They are the happiest.
Any violent reactions?
How “successful” are you?
The psychology of spending can also revolve on how we define success. Jennifer Cuddy
in this article makes a very important point:
From the mid 80's to the 21st century, consumers have fallen prey to cues created by socioeconomic standards of living by measuring what is deemed 'normal' against those whose incomes are far beyond their socioeconomic statuses. We measure ourselves by what we own, what we wear, where we live, how we spend our vacations, our choice of automobiles, and other material measures of success. And yet, the majority of us are still unsatisfied with what we have. When our income increases, we inevitably spend more money in order to match those whose income brackets are yet again, one, if not two, levels higher than our own. This creates a society consumed with materialism, and sets the stage for dangerous vulnerabilities associated with consumer debt. Constant, mounting debt forces the consumer to work longer hours, sacrificing their freedoms to a sort of enslavement to money. Meanwhile, corporations merge, monopolies are created, and profit margins that drive capitalists determine what is culture, simply by measuring what sells.
This is further complicated if you are a parent, because not only does your self esteem rely on where you fit in the social strata, but your children measure their self esteems in similar ways. " If my friend, Johnny, has a cell phone, a computer, and attends private schools, why can't I?" Middle class parents send their children to unaffordable private schools out of fear that their children will not succeed. What results is enormous debt and related stressors due to debt. And it is debt that enslaves society to the mercy of their employers.
Understanding how or why we spend also means we have to look into how we react to advertisements and whether we fall prey to the contrived psychological triggers that marketers cook up to remove the rationality in our spending. These triggers don’t even have to be “materialistic” in nature. They may include such noble desires as wanting to please our children, our spouse, our relatives and friends.
At the end of the day, there’s always a reason to spend if you want to find that reason. Taking control of your money will not happen by magic; it will require conscious choice, and an understanding of the complex relationships we have with money.
very nice article. thanks for sharing
this definitely makes me understand better my constant battle w/ shopping splurges. it's so hard to forgive myself when i give in! but spending in cash/debit card really helps me control & manage my finances well. hehe, i'm still trying to find a balance between frugality & enjoying a few luxuries. thanks for this interesting post :)
ninetails and kuripotshopper, thank you for dropping by. that guilt, the "moral tax on consumption" is there for a purpose. consider yourself lucky for still feeling guilty hehehe.
Great article, thanks for sharing it. I think (hope?) that we'll be seeing a lot more people spending more wisely over the next few months, but we'll see. I know I've been spending a lot more time thinking about where the money goes, which in itself is an illuminating step. :-)
M, the whole idea of stewardship requires that we understand and appreciate what we have. Before, I used to hate "counting" and having to account for every little peso. But when I started to understand this concept, I realize that its not at all that I was caring too much about money, but that I was trying to use it properly. And really, knowing how much you earn and where it goes is part of appreciating what we have and makes us more careful with how we spend it! Thanks for that insight!
Very nice article! Accounting for each peso is most important. Anyway, the peso makes the million. I have a more rigid phrase or motto: you can only appreciate the value of your money and learn to save if you can appreciate the value of the centavo.
nice article. i'm torn between the 3rd and 4th group while my husband is in the second group ("there can never be enough toys!")
I think, I belong to all four types at some point :) hehehehehehe...
Nice article as usual Salve. I really enjoy reading them. I think I'm in the first group but only up to a certain point. I can be materialistic if I want to but sometimes I just use something till it breaks down. Then at that time will I change it. :) I look for both quality and price in what I buy.
nice article!
I am on the third group... and I always look for the 1st and 2nd Group. as I take the opportunity to sell them items :D
onemore, dr. ravalo has an article about saving loose change which says it is one's attitude about such things that really shows one's attitude about money as a whole :-)
http://business.inquirer.net/money/advice/view/20080723-150245/Loose-change-and-your-saving-habits
leela, haha I know what you mean. our husbands sound like brothers hehe. so, how do you handle him when he is in the buying mood?
nina, no fair! hehe. you have to choose which group you belong :-)
claudine, thanks for the compliment. i guess, like nina, sometimes we can relate with one group and then at other times with the other groups. but hmm...there should be one particular group that you really belong to?
sherwin, haha. now that my friend is being money-smart!
hi, salve. your hubby is also a toy collector? i swear men's hobbies are sooooo expensive! =D
rule of thumb when he gets his salary is to, first and foremost, set aside money for savings and pay all the bills. whatever toys he wants, dapat he pays for it out of his daily allowance. pag naubos allowance niya, wala na. =D
and of course, his credit card is with me. =D
you can still look good even if you wear "ukay-ukay" finds. you can match expensive jeans with 'ukay-ukay' blouse/tops.. invest on leather bags, belts and shoes.. they look elegant and will last long too.
I used to be a big spender during collage when I was still not spending my own money. I became a penny pincher once I starting working and earning my own money.