This post is sponsored by Lexington Law.
There is nothing wrong with spending money! But spending money on things that don’t mean anything can be a problem. I don’t mean paying your electric bill or your student loans, l am talking about buying that thing that you immediately regret and cannot return. Or dropping more than you have on a night out with friends.
I’ve had my fair share of impulse purchases and emotional spends and the feeling afterwards and the balance in my account, is not something that I like to relive. This habit can also easily lead to credit card debt and decreased credits scores. So, let’s go over seven steps to curb your emotional spending and keep your credit intact.
Find Out What You’re Spending
Pull out your bills for the last six months, create a spreadsheet and grab some homemade coffee… this is going to take some time. Look at the purchases and bills that are not recurring (with the exception of streaming services, subscription boxes, etc.). Things that are not the roof over your head, student loans, or payment for other debts. Then write down in separate columns (see example below):
- What each purchase was (drinks, jacket, vacation, etc.)
- cost of each purchase
- why you bought it
|Purchase||Cost||Why You Bought It|
|Drinks with friends||$28.95||Celebrate my promotion|
Identify Your Emotions
Now, look at each purchase, add two additional columns, and fill in the following information:
- how it made you feel in the moment
- how it made you feel later on
|Purchase||Cost||Why You Bought It||Immediate Emotion||Emotion Later On|
|Drinks with friends||$28.95||Celebrate my promotion||Excited!||Had a great time but was $115 short on my credit card bill and wish I just got one drink|
Color Code Your Emotional Spending
Once you have all of your purchases for the last six months charted, ask yourself the following questions:
- What purchases did you make that you later regretted (for any reason)?
- What did you spend money on that brought you joy then and later on?
- What purchases do you not remember making or feel “blah” about?
Color code joy with “green,” “yellow” for unsure and regret with “red.” There is no right or wrong emotion, just mark how these things made you feel after the purchase, not in the moment of purchase. The more honest you are with yourself about this part, the easier it will be to make a change. For example:
- Did drinks make you happy at first and later wished you didn’t spend that much?
- Was vacation with friends worth the splurge, then and now?
- Do you not remember buying those shoes and just now found them in your closet?
Identify Your Triggers
Now look through your colored spreadsheet and see how many times red (regret) or yellow (unsure) come up. Note what those things are in bigger categories like:
- Spending time with friends
- Material items (books, clothes, etc.)
You want to be able to identify what triggers a red or yellow emotion after the purchase. These are typically things or experiences that you regret to some capacity or another.
Now look even further at the red and yellow items. Did you spend this money because:
- Something positive happens you want to celebrate
- You’re upset and want something to help
- You’re bored
- You want to get back at someone by showing them on how awesome things are so you buy and then post on Instagram
- You’re already in debt and feel like there’s no hope, so why not
- You see something and your heart skips a beat and you “have to have it”
In a post on Lexington Law’s blog, they share a recent survey that revealed 77% of millennials made purchases for the purpose of posting them on Instagram, and they were willing to spend nearly twice as much ($137) on a perfect post as the general population ($70). In other words, many of us could be triggered to spend money just for the sake of other people seeing what we have!
Understand What Emotional Spending Has Done to Your Credit
Even if you’re spreadsheet is full of joy, if you’re spending money that you don’t have it’s not something that can continue, or your credit score can decline. In your analysis, if you noticed that most of the “green” areas are spending time with friends, maybe it’s time to find alternative activities that don’t break the bank like:
- Game night in with friends
- Potluck dinners
If you’re not sure about your credit score, pull your free credit report to see where you stand. This might be the “aha moment” needed to start curbing emotional spending.
Get Serious About Your Emotional Spending
Now that you know:
- Where you’re spending your money
- Why you’re spending it
- How this spending makes you feel
- Where your credit stands because of emotional spending
It’s time to make some changes. Try:
- Unsubscribing to emails from stores you’re tempted to shop
- Waiting 48 hours before you make the purchase
- Finding an alternative outlet
- Setting and sticking to a budget
- Keeping out your colored spreadsheet to reference
- Sticking to your shopping list
Breaking habits is never easy, especially ones that are attached to emotions. But when it comes to spending money that you don’t have, it’s worth making the extra effort. When credit scores are low, it’s harder to rent an apartment, get approved for loans, or even get credit cards with perks. The professionals at Lexington Law work with you to rebuild and repair your credit. Their individualized approach will not only educate you, but help you take control of your financial future.