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Emotional Spending: What It Is and How to Overcome It

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If the lamp on your desk, the mirror above your daughter’s changing table and those trinkets in your kitchen were all purchases made after a particularly stressful situation, you might be an emotional spender.

And you’re not alone. In a 2017 survey by CompareCards.com, a fellow LendingTree company, about a third of shoppers pulled out their credit cards in an effort to make themselves feel better. The instinct was even more prevalent for millennials — a whopping 48% reported buying something recently because they were feeling down, upset or angry.

What is emotional spending?

Emotional spending is, as you might have devised, the act of buying things with the motivation to make you feel better. Colloquially, it’s often referred to as retail therapy. “I think emotional spending is very common,” said Megan McCoy, an adjunct faculty member for Kansas State’s Financial Therapy Certificate Program and secretary on the Financial Therapy Association’s board of directors. “Anecdotally speaking, I think we saw a marked increase in this type of spending with the rise of online retailers — especially when free shipping and free returns became a thing. Emotional spending increased then because it became so easy.”

When it comes to emotional spending, it’s important to keep in mind that there’s a difference between compulsive spending and spending money every now and then because it gives you a burst of happiness. As opposed to emotional spending, compulsive spending is a disorder where spending has become a customary way of achieving self-esteem or is done to escape reality, and it often interferes with a person’s responsibilities or relationships. It’s best to consult an expert for help if you think your spending has escalated from being prompted by emotional triggers to compulsive behavior.

The root cause of emotional spending

Since emotional spending is the act of buying things to make you feel better, the spending itself is often triggered by something personal that charged you up. Of course, these triggers can range dramatically based on your personality and individual circumstances, but Dr. McCoy said that common triggers for women include relational disturbances (aka fights with a partner or other loved ones) or feelings of loneliness (aka feelings of being unloved or undesirable). Those emotions in turn cause feelings that make us want to spend since we could be thinking that once we buy those jeans or that new makeup, we’ll look different or be loved, she said.

While Dr. McCoy said that a man’s emotional spending is more likely to be fueled by reasons having to do with success (or feelings of inadequacy when it comes to success), for both men and women, emotional spending may not necessarily be something that they are even aware they are doing. “Emotional spending can be an unconscious power trip,” she said. It’s often fueled by a desire to do something that proves a person can make their own decisions and do what they want.

How to break the emotional spending cycle

A habit is, by definition, something that is hard to give up, and if you’re an emotional spender, moving away from the tendency to spend money when you’re feeling emotional can be a difficult thing. On the other hand, emotional spending is often a consequence of impulse rather than thought, Dr. McCoy added, and “by recognizing that this has been a pattern of coping in oneself, you can find other ways of coping and stop emotionally spending quite easily.”

If you recognize yourself in the above description, there are a few things you can do to help break the emotional spending cycle.

1. Come up with a list of other coping techniques. Spending money might make you feel better in the moment, but chances are after you receive your credit card bill or realize your wallet is empty when you need to buy lunch, the feelings of guilt will set in. Instead, Dr. McCoy suggested putting a little thought into some other ways to blow off steam when you feel upset. “Find out what else makes you feel regulated,” she said. For example, maybe going for a run, listening to your favorite playlist or having a cup of coffee will provide you with the same rush that spending does. At the very least, it might cause you to pause long enough to realize that you don’t actually need to spend money to feel better.

2. Do the math. Something that works with spending in general is to take a moment to consider just what that new throw pillow will cost you, even outside of its monetary value. “My favorite trick is to always do this simple math when shopping,” Dr. McCoy said. “Whatever you want to buy, just figure out how many hours you will need to work to buy it. You want to emotionally spend on a cardigan that costs $75. You make $20/hour. Is that cardigan really worth almost four hours at your job?”

3. Have a budget. With a proper budget in place, retail therapy isn’t completely forbidden, which some people might find helpful. Create a budget that provides for some level of emotional spending within those constraints. That way, if you do find yourself feeling like you need to buy that cashmere scarf after the huge blowout you had with your sister, at least you will have factored that spending into your monthly budget.

If you need a little help putting a budget together, get started with our ultimate guide to budgeting, and learn about some of the best apps to help you maintain that budget.

4. Start a journal. Studies have shown that journaling has all kinds of amazing side effects, and helping you combat your emotional spending could be one of them. Dr. McCoy suggested creating a thought journal where you record the events that led up to a shopping spree, along with the actual shopping. “Thought journals are basically the cornerstone of cognitive behavioral therapy,” she said. “According to CBT, thoughts and behaviors are so intertwined that sometimes we can’t remember what came first.”

By using a thought journal to record your spending habits, you’ll be able to identify the anecdotes that caused your emotional spending so you can recognize what’s actually bothering you and work on fixing the root cause. “In other words, it allows you to identify the underlying problem and fix that, instead of just dealing with the symptom — shopping,” McCoy added.

5. Create barriers to spending. Emotional spending (and overspending in general) will be harder to do if you create barriers that make it physically harder to spend. For example, remove your credit card information from being cached in the websites where you frequently spend. Unsubscribe to emails from stores you love. Set a five-minute waiting period before you spend on any nonessential items.

The bottom line

At the end of the day, emotional spending can break the bank, and it doesn’t necessarily help you deal with your actual problem — whatever it was that triggered your spending in the first place. If your emotional spending has already put you into debt, you can learn more about the emotional toll of debt and how to tackle it.

These days, online shopping makes it easier than ever to spend, and social media makes it easier than ever to identify the Joneses we want to keep up with. Luckily, with just a few small steps, emotional spending doesn’t have to be a hindrance on your finances anymore.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at [email protected]

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How to Save on Back-to-School Shopping

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Parents often revel in the calm and quiet that comes when kids head back to school, but they aren’t likely to enjoy the excess spending that also accompanies the back-to-school season. According to the National Retail Federation, parents will set a record in 2019, spending an average of $696.70 per household on children in elementary school through high school.

 

“It was interesting to see the across-the-board increases in spending levels,” said Mark Mathews, vice president for research development and industry analysis with the NRF. “Elevated levels of consumer sentiment, healthy household balance sheets, low inflation and recent wage gains all seem to be contributing to a confident consumer who is willing to spend money on back-to-school supplies.”

If you’re planning a trip to the store before classes start, there are a few ways to curb the spending and save some bucks.

Plan ahead

No parent should set foot out the door for back-to-school shopping without first taking stock of what they already have. Plenty of old supplies from previous years might still be usable, especially arts and crafts items like crayons, pencils and pens, as well as more expensive things like backpacks, lunch boxes and calculators.

Crossing a few items off your list is a good first step when it comes to saving, but learning how to budget is also important. It’s tempting to run down the back-to-school aisle and grab every colorful notebook and snazzy pencil case in sight, but it doesn’t make a lot of financial sense. Create a realistic budget based on the items you actually need, and try your best to stick to it. If possible, do most of your shopping online, since it’s easier to keep a running tally of how much you’re spending as you shop.

Be smart about sales

Although you’re bound to run into many back-to-school sales this time of year, you don’t need to buy 12 notebooks just because they’re cheaper right now. In fact, you shouldn’t assume the sales price is the best price at all, said consumer savings expert Andrea Woroch. Instead, always comparison shop.

“Run a quick Google search online or on your phone to see if another store is selling the same or a similar item for less,” she said. “Most big box stores will price match, so you won’t even have to drive to another store to get the better deal.” For example, Target,Staples and Walmart all have price matching policies.

Clip coupons and shop discount stores

Coupons have definitely made a digital comeback, with countless apps and websites dedicated to listing all your options in one place. “Spending a few minutes looking for coupons can help you get a better discount,” Woroch said. “Use apps like CouponSherpa, for instance. Or, use the Honey browser tool, which automatically searches and applies relevant coupons to your online order.”

Many stores also offer discounts to valued customers who sign up for their rewards program, like Walgreens and CVS, while craft stores like Michaels regularly offer discounts. Don’t knock purchasing basics like paper and writing supplies from the Dollar Tree, either — you might be surprised by what you find, and those types of items are often the same quality wherever you buy them.

Tax advantage of tax-free holidays

On select dates throughout the year, different states offer state sales tax holidays, or days where you can purchase items without having to pay sales tax on them. You can find a full list of the 2019 state sales tax holidays here, but some upcoming ones include:

  • August 18-24: Connecticut, clothing and footwear
  • August 17-18: Massachusetts, specific items costing less than $2,500 per item

Split bulk purchases

You can usually save money by buying certain items — like construction paper, pens, pencils and folders — in bulk, but you can save even more by splitting those bulk items with other families. Not only is this a great way to share savings, Woroch said, but you can earn rewards faster by charging everything on your card and then having the families pay you back.

Redeem your rewards

If you have a cash back credit card, now’s the time to use it. “Most credit cards give you the best redemption value when you opt for statement credit or have the cash rewards deposited into your bank,” Woroch said. “You can set this money aside for back-to-school shopping.”

Alternatively, Woroch suggested checking to see if your particular card allows you to redeem points for gift cards to retailers where you plan to shop.

Use discounted gift cards

Besides redeeming credit card points for retailer gift cards, you can also scour the web for cheap gift cards online. Planning a trip to Target? Scan websites like Raise,Cardpool and CardCash first. These sites buy and sell unused gift cards at a discount, meaning you can save on purchases you were planning to make anyway.

Consider having your kids contribute

Depending on your child’s age, back-to-school shopping might be the perfect time to start having them contribute to their own goods, especially if they earn an allowance or have a job. Talking to your kids about money at a young age — whether about budgeting, saving or spending — will help them develop solid money habits that will pay off in the future.

Parents already seem to be catching on to this idea. “It was surprising to see how much of their own money kids are contributing towards the back-to-school bills,” Mathews said. “Teens and pre-teens will be spending $63 of their own money, which works out to $1.5 billion overall. This is significantly higher than the levels we saw a decade ago.”

Although the news about increased spending on back-to-school supplies may be alarming, these days there are more ways than ever to save. A little ingenuity, resourcefulness and research can go a long way.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at [email protected]

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Survey: Most Americans Have Raided Their Retirement Savings

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Successfully saving for retirement requires dedication and self-restraint, but more than half the country admits to robbing their future selves in order to satisfy today’s spending needs, according to a new survey by MagnifyMoney. While the economic pressures bearing down on workers today make their actions understandable, the hard truth is that many Americans are turning an already-difficult task that much harder by tapping into their retirement savings early.

Key Findings

  • Approximately 52% of respondents admit to tapping their retirement savings account early for a purpose other than retiring: 23% have done so to pay off debt, 17% for a down payment on a home, 11% for college tuition, 9% for medical expenses, and 3% for some other reason.
  • About 29% say there are some scenarios where it is a good idea to withdraw money early from a retirement savings account.
  • Around 60% of respondents do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea, and 15% have no clue.
  • Almost 25% are unhappy with their retirement savings. 47% are happy with the amount saved, and about 28% are neither happy nor unhappy.
  • Finally, 27% have never thought about how much money they’ll need in retirement.

Why are Americans tapping their retirement savings early?

The two main reasons respondents cited for withdrawing money from their retirement savings are as American as apple pie: home ownership and personal debt. According to the survey, 23% of those making an early withdrawal did so to help pay down non-medical debt, while 17% needed the money for a down payment on a home.

Although the housing market appears to be cooling off compared to just a few years ago, a down payment on a home still requires a significant chunk of change — experts recommend a down payment equaling 20% of the total mortgage to optimize your mortgage payments.

Personal debt, from credit cards to student loans, remains a fixture of everyday economic reality for millions of Americans. In other words, the stressors that cause workers to raid their retirement funds don’t look like they will decrease appreciably in the foreseeable future.

Which Americans are withdrawing money the most?

Breaking down the demographics, older savers are less likely to withdraw money from their retirement fund than younger savers. 54% of millennial savers say they’ve taken an early withdrawal from a retirement savings account, compared with 50% of Gen Xers and 43% of baby boomers. This stands to reason considering that many millennials have now entered the stage of life where they are getting mortgages, starting families and taking on bigger financial obligations while also being decades away from the traditional retirement age. Millennials are also more likely to say that raiding your retirement fund is justified under certain circumstances, as seen in the chart below:

Just one of many bad retirement savings habits

Tapping into retirement funds — whether an employer-sponsored 401(k) or a traditional IRA — before the appropriate age almost always comes with a financial penalty in the form of additional taxes and fees. What is more, you’re diminishing the principle that fuels the compound interest you need to meet your retirement savings goals.

Unfortunately the survey reveals early withdrawals are just one of the many bad habits Americans engage in when it comes to retirement savings. This list of less-than-ideal practices includes:

  • 35% of Americans are not currently saving for retirement. Of those who are, 37% started saving at age 30 or above, and 12% started saving when they were older than 40.
  • 60% of Americans do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea and 15% have no clue.
  • Nearly 1 in 5 Americans don’t contribute enough to their employer-sponsored retirement account to get the maximum company match. Maximizing a company match is one of  your best ways to maximize your retirement savings. Among those with an employer-sponsored retirement savings plan, just 17% of respondents contribute 10% or more of their take-home pay. Almost 5% contribute nothing at all, and nearly 6% are unclear about how much they contribute.

  • Approximately 42% of respondents have made the mistake of withdrawing their entire balance from an employer-sponsored retirement plan when changing jobs without rolling it over – and nearly 15% have done so more than once. A little more than 47% of millennials admit to this faux pas.

The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement. And while “ignorance is bliss” may hold true when it comes to some things in life, this expression should not apply to your retirement plans.

Methodology

MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the general population. The survey was fielded June 24-27, 2019.

Generations are defined as:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby boomers are ages 54-72

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here