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Why do people spend too much?

Last post 08-14-2009 11:32 AM by whitney37354. 11 replies.
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  • 07-23-2009 2:29 PM

    • Walt34
    • Top 75 Contributor
    • Joined on 12-17-2007
    • WV eastern panhandle
    • Posts 1,400

    Why do people spend too much?

    I've always been interested in economics, which I think is really about people's hopes, dreams, fears, and desires. Looking at it that way, the study of economics is really about mass psychology, or why people do what they do as a group. I found an interesting article on why people spend too much here http://financialplan.about.com/cs/creditdebt/a/UrgeToSplurge.htm.

    In the article, the author posits that overspending has more to do with feelings of self-worth than money. Sure, everybody feels better after coming home with a new widget; perhaps it does contribute more to self-worth than the intrinsic value of what the widget does for them.

    But why, really, would anyone pay the price for a Lincoln Town Car when a Ford Focus will meet the same transportation needs?

    The answer is, that the buyer of the Town Car is not buying just a car. They're buying a statement about themselves to the world that they're worth something. But do they realize that the world outside their circle of friends and relatives doesn't care? And that the buyers of the Focus may be laughing at them?

    Officially Recognized Stretchpert in Money Management
  • 07-23-2009 2:59 PM In reply to

    Re: Why do people spend too much?

    I think impatience is also a factor. Why would someone spend $500 for an iPhone, knowing that in a year or two, the price will go down considerably? Because they want it right now, not next year.

    When I worked for a bankruptcy attorney, I saw people who looked/appeared wealthy beyond all imagination. People with the top-of-the-line BMWs and Mercedes, designer suits, and fancy watches. But they were declaring bankruptcy, because they didn't know how to live within their means. The appearance of wealth was more important to them than actual wealth. And it got them into trouble.

    My boss, the bankruptcy attorney, drove an older-model Chevy Prism. He didn't wear fancy suits. He didn't have a fancy watch, but he always made it to court on time. It was almost comical to see the rich-looking clients come to my frumpy, rumpled boss for financial help.

    Thanks for the article, Walt. Very interesting to think about!

    Stacie

    http://holdinghandswithmyhoney.blogspot.com/
  • 07-23-2009 3:00 PM In reply to

    Re: Why do people spend too much?

    People don't like to tell themselves "NO" so they go with "Oh Why Not". Sad thing is spending can become a bad habit. Case in point. My nephew bought a new flat screen TV and because he "had a coupon" bought a second TV for my sister. It doesn't matter that they need a simple $30 fix for their toilet could save them hundreds on their water bill (in Southern Calif). It doesn't matter that what they really need was a new refrigerator. It doesn't matter that their clothes dryer has been sending a dangerous signal for months that something is wrong. And the reason they don't address these issues is because they are your "classic hoarders" and are too embarrassed for anyone to see how they really live. But by golly that coupon for a second TV really saved them money. That new TV is still sitting in the box in the garage and will probably be destroyed when they have a dryer fire. I have a terrible time wrapping my mind around this behavior and its better for me and our relationship that we live 3000 miles apart.
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  • 07-23-2009 3:50 PM In reply to

    • Pat
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    • Joined on 03-06-2007
    • Colorado
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    Re: Why do people spend too much?

     I think these are all valid reasons, but maybe another one is that people feel the need to reward themselves somehow. They buy to fill a void caused by bad or no relationships or loneliness, or to celebrate a small or large victory. The "I'm worth it" attitude has probable done a lot to put people into debt for things they don't need. 

    Walt34:
    The answer is, that the buyer of the Town Car is not buying just a car. They're buying a statement about themselves to the world that they're worth something. But do they realize that the world outside their circle of friends and relatives doesn't care? And that the buyers of the Focus may be laughing at them?

    No, I don't think they realize that the buyers of more practical cars are laughing at them. They must think that we all envy them, otherwise they wouldn't buy the huge "success" symbols. 

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  • 07-26-2009 10:27 AM In reply to

    • Walt34
    • Top 75 Contributor
    • Joined on 12-17-2007
    • WV eastern panhandle
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    Re: Why do people spend too much?

    Pat:
    The "I'm worth it" attitude has probable done a lot to put people into debt for things they don't need.

    That seems to be the case with many. It reminds me of an incident with my ex-wife. I was going to subscribe to a series of books - send one every other month - and she was the one who said "get the ones with the leather covers" for an extra $2/book. But I was buying the books for the content and didn't care about the cover. She didn't understand that.

    Officially Recognized Stretchpert in Money Management
  • 07-26-2009 2:01 PM In reply to

    Re: Why do people spend too much?

    I agree that spending is definitely tied to emotions at many levels and for many different reasons.  Some people do buy to make themselves feel better, some people feel they have more worth if they have nicer things.  Some people buy things for their kids to make up for feelings of deprivation they had as children.  Some people just don't think about long term consequences and want to fulfill the "i want it now" desires.  Some people do feel that they are worth the reward-they work hard and want something to show for it.  And of course there are people that feel very much in competition with their peers and feel they have to match up or do better than those around them and do this with purchasing things to inspire envy or approval in their social circle.

    I have to say though, that I was kind of struck by the statements that people making more practical purchases (like a less fancy car) are laughing at those that are making different, more extravagent choices.  I drive a practical car myself but don't look at others driving fancier cars as if they are crazy or wrong or whatever else . . . I don't really think about it but if I did I guess I would just have to say their priorities are different than mine.  My car is older, and sometimes I'd like to replace it for something larger and more convenient but it isn't my priority at the moment.  I have friends with much nicer cars and just like I don't sit in judgement of their purchase, I don't think they sit in judgement of mine.  I'm not laughing at them, they aren't laughing at me.

    My DH loves cars.  If were ever to find ourselves in a really solid financial position, I could see him buying something to drive that is not considered "practical".  But I wouldn't begrudge him that if we had the money to do it.  Does it fill an emotional need?  Probably.  Is that horrible?  Guess it depends on perspective, and what kind of financial position you are in.

    I think that applies to anything, not just cars. 

    I guess I just kind of don't like the notion of judging others based on material purchases, whether you are coming from a frugal perspective or not.  To me, measuring others based on what they have and own just kind of sits funny with me.  I try to be frugal to reach the goals I have with my family but I don't criticize others for making different decisions.

  • 07-26-2009 2:20 PM In reply to

    • Edey
    • Top 25 Contributor
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    • Joined on 09-10-2007
    • Los Angeles County, CA
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    Re: Why do people spend too much?

     I worked with someone whose attitude about books was that only the lower class people read books with softcovers. She was better than that, so all books were purchased hard-cover then passed around thru the family. It wasn't just books that she felt this way, she also bought designer purses, and other items. Yet she and her husband were both middle income people, and her clothes were average middle class from Target, and their everyday mode of behaviour was middle class. Very odd, IMO.  Edey

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  • 07-26-2009 2:50 PM In reply to

    Re: Why do people spend too much?

    jennylyn:
    I guess I just kind of don't like the notion of judging others based on material purchases, whether you are coming from a frugal perspective or not. 
    I'm agree and normally I don't pay attention to what other people buy UNLESS they complain to me about being broke and continue to spend anyway. That's when I start to notice. If someone asks for my advice, I warn them ahead of time they may not like my observations or information. However, those of us who try to be frugal can readily see where others are making mistakes especially if you have inside knowledge about what's really going on.
    Officially Recognized Stretchpert in Stages of Life
  • 07-26-2009 3:23 PM In reply to

    • karen kay
    • Top 150 Contributor
    • Joined on 10-02-2008
    • Easter United States
    • Posts 347

    Re: Why do people spend too much?

    Toni B.:
    what other people buy UNLESS they complain to me about being broke and continue to spend anyway. That's when I start to notice. If someone asks for my advice, I warn them ahead of time they may not like my observations or information. However, those of us who try to be frugal can readily see where others are making mistakes especially if you have inside knowledge about what's really going on.

    i agree .  when you know the people and their situation,  it's really hard to sit back and watch them whine, when you know they could have made better decisions.  I try to listen and give some sound advice [when asked for].   it's hard not to think " i told you so".   LIke i said in another article,  some people just dont get it.   I don't envy  or feel sorrow for someone who drives a high-priced car,  I just think about the payments, which makes me twinge.  I did just purchase a newer car last month,  but i dont feel a bit better driving it and im sure nobody pays any attention to me.   friends or not.
    Starry Night
  • 07-26-2009 9:24 PM In reply to

    Re: Why do people spend too much?

    I think some people are trying to live a certain lifestyle, whether they can afford it or not. My oldest sister is that way. She still doesn't get that if you don't have it, don't spend it. She always thinks the money is going to be there when the time comes, but it never is because she needs it for something else.

    It's not that she buys expensive or designer things, but she definitely tries to keep up with the Joneses so far as possessions. She can't afford the fancy cars and vacations.

    My FIL has a saying that I think is funny: "Why would I want to keep up with the Joneses? I married one and they ain't got s**t either!" (my MIL's maiden name is Jones).

    Jill

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