Your money is where your mind is.
How people think about their finances can have a substantial impact - for good or bad - on spending, debt, investing and budgeting. Doing the work to develop a more positive approach to money isn’t easy as mindsets run deep, said financial therapist Michele Paiva.
“Mindset is both genetic and environmental, meaning you are born with certain characteristics that are flexible or that emerge; and those variables are mostly molded by your family, then your friends, teachers [and] then society,” Paiva told The Independent by email. “We also develop our own internal experiences, which are the ongoing cultivation of mindset.”
Spending to soothe
For some people, buying things helps calm stress and anxiety. This is known as emotional spending or “retail therapy,” said Kiki Jacobson, a licensed mental health counselor and financial educator at Nour Counseling & Consulting.
“I often find that this behavior in clients was modeled and/or experienced in childhood or adolescence,” Jacobson told The Independent in an email. “At some point growing up, it was learned that spending money or buying something changes how they feel.”
While this may give short-term relief, the long-term impact can eat away at spending limits and savings balances.
“The more those ‘treat yourself’ or impulse purchases add up the more they erode your savings and increase your debt, reducing your ability to build wealth,” Jacobson said.
Three habits can help curb and possibly end the emotional spending mindset. The first step: Identify the emotional triggers that cause spending, Jacobson said. To do this, ask and answer the following questions when you feel the need to spend:
- How am I feeling right now?
- What has my day been like?
- Have I eaten lately?
- Did I sleep okay last night?
From there, regulate non-essential spending by requiring a 24-hour pause before making the purchase.
“It essentially puts reactionary space between the urge to spend and the immediate response, giving you time to reflect on whether the purchase aligns with your values, goals, or genuine needs,” she said.
Finally, make it hard to make an emotional purchase. Delete shopping apps from devices, unsubscribe from marketing emails from favorite stores and remove payment methods from shopping websites, Jacobson recommended.
Ignorance isn’t bliss
Many consumers believe that acquiring financial expertise is simply out of reach for them, said Karen Holland, an economist and founder of financial education platform Gifting Sense. And retailers have made it easier than ever to make purchases, snaring consumers into buying first and thinking later.
“We aren’t encouraged to pause, gather information, and reflect before spending,” Holland said. “On the contrary, we’re living in a world that’s been engineered to eliminate exactly the kind of reflection consumers would benefit from; retail and payment platforms are designed to maximize engagement and accelerate commitment.”
Building financial expertise makes space to think critically about a purchase. But if a consumer doesn’t believe expertise is achievable, they miss out on important benefits, Holland said.
“Not getting and using financial information to plan spending costs consumers plenty,” she said. “It exacerbates every cause of buyer’s remorse: overestimating use, underestimating cost, mistaking short-term excitement for long-term value, and a lack of friction.”
Expertise is accessible to most consumers by asking key questions about their upcoming purchase, Holland said.
“Consumers can practice mindful spending, the quick but powerful habit of pausing, gathering information, and reflecting before spending to escape this mindset,” she said. “Quickly, but not arbitrarily, assessing a purchase before committing to it is the easiest way to deflate the false narrative that financial know-how is for ‘someone else.’”
Tackling the “I’ll never be a financial expert” mindset can have powerful benefits.
“When a person discovers through first-hand experience that the information they need to avoid buyer’s remorse is available … there’s a shift in how they approach future financial decisions,” Holland said. “Success feels good. Once you understand that you can get and use … financial information to help shape your future, why would you ever stop?”
Self-sabotage
Similar to the belief that financial smarts are out of reach is the “I’m just bad with money” mindset.
“Writing ourselves off as incapable is a way of deflecting the uncomfortable feelings of fear, confusion or challenge that money brings up,” said Dr. Sarah Newcomb, senior behavioral scientist at accounting firm Edward Jones.
Believing you’re not good with money originates in the absence of friends and family talking about the financial mistakes they’ve made, she said.
“Since we are often highly aware of our own mistakes, and others usually only talk about their financial successes, it's easy to conclude that we are just not as good with money as they are,” Newcomb told The Independent in an email. “In reality, we've been comparing our 'blooper reel' with their 'highlights reel', which sets us up to feel inadequate.”
The mindset’s impact can be really detrimental and hinder financial progress.
“This is a dangerous mindset because it leads many people to stop trying,” Newcomb said. “By interpreting confusion or difficulty in this way, you give yourself permission NOT to push through the discomfort and think more clearly about the decision you are trying to make.”
The impact of this mindset tends to grow as consumers get older.
“We may be able to shrug this off when we are young, but it becomes increasingly impactful as we age,” Newcomb said. “When we don't learn about personal money management - really learn about it - we overspend, take on too much debt, and find ourselves living on the edge of catastrophe all the time.”
What’s the remedy? It starts with self-talk - and thinking of yourself as someone who will eventually be good with money.
“Reframe it,” Newcomb said. “You can start with, ‘I'm not good with money YET,’ or even more helpful might be, ‘I'm uncomfortable with money because…,’ and then fill in that blank.”
If you feel the “I’m not good with money” mindset is too big to tackle on your own, hiring a financial professional to walk with you through your finances can help.
“Do not accept a narrative that you are just 'bad with money,’” Newcomb said. “Small mistakes, if not learned from, compound and become massive problems over time.”
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