Do you often spend more than you’d like? Here’s everything you need to know about impulsive vs. compulsive spending.
We all make unplanned purchases from time to time. It can be as simple as doing groceries while you’re hungry and picking up something extra you didn’t plan on buying. That is what we call impulsive spending.
However, many use impulsive and compulsive spending interchangeably, while there is a clear difference. An unplanned expense can be classified as impulsive spending, while compulsive spending often has a deeper psychological cause.
What is Impulsive Spending?
If you spend hours browsing shopping sites or buy stuff that you know you want and do not need, chances are, you’re an impulsive spender. But, what does that term mean?
According to Forbes, impulsive spending means when you buy something you weren’t planning on getting. Imagine walking into a shop, and you get free perfume samples; you weren’t planning on making that stop but ended up buying a new fragrance. That’s impulsive spending.
To simplify it, what do you take from the term impulsive spending when you first hear it?
Acting out on impulse to splurge money on something you didn’t know you needed until you saw it.
You can often easily justify it, ‘But, it was on sale!’, ‘I needed it.’, ‘It’ll come handy later.’ But that is often an impulse buy. So, what causes it?
Causes of Impulsive Spending
You’ve probably wondered why you do this. Impulsive spending happens for many different reasons. Some are entirely harmless, and others can be more serious.
90% of people make an occasional impulsive spending decision when they are shopping, so it’s normal to do this occasionally.
It’s essential to identify the causes of your impulsive spending and try to adjust your behavior. Especially if you’re working toward big financial goals like financial freedom or reaching a Grant Cardone net worth, it would be best if you could let go of these habits.
Let’s look at some of the most common reasons behind impulsive spending.
We Experience Emotions
Emotions and money are closely linked. When you’re bored or have not had a great day, it can be easy to walk into the store and do some retail therapy.
It’s probably not that bad. You only buy a new video game or a new phone case. And you only do it now and then.
You buy something because you want to make yourself feel better.
We Love Material Stuff
Human beings are generally pleasure-seekers; we love instant gratification and material stuff. We dream about money and the things money can buy.
It is one of the most common reasons behind impulsive buying. We go shopping for a particular thing, and another product catches our eye, we love it, and we buy it.
More often than not, our purchases don’t have anything to do with their practicality but rather how it makes us feel owning that specific thing. Pleasure and happiness are two of the biggest stimuli for impulsive shopping.
We Love Deals
Who doesn’t love a good deal? If you can get a discount, why would you pay full price? Or why would you pay to ship when you can get shipping for free?
According to SlickDeals, 74% of Americans will be more inclined to buy a product that offers free shipping. And 52% of Americans are more likely to buy a product when there’s a deal.
There are situations where it seems like you’ve just seen a fantastic deal, and you want to get it. Plus, if you had $5 more on your online chart, you get free shipping. That’s how they get you to spend more than you initially wanted.
What is Compulsive Spending?
Compulsive spending is often confused with impulsive spending; however, it is a lot more severe. Many people consider compulsive spending to be an actual compulsion rather than something you do on impulse.
Impulsive spending is usually harmless. Compulsive spending is more of an uncontrollable urge to buy things you don’t need and spend money on them without considering the budget. It leans more in the direction of a shopping addition, where your brains get a dopamine hit when you buy something.
Compulsive spending is considered a lot more severe than impulsive spending, and according to Harvard’s Medical School, almost 5% of the population suffers from compulsive spending.
Causes of Compulsive Spending
Seeking happiness and peace in material items is one of the biggest reasons people show compulsive behavior. Compulsive buying is often used as an outlet to sate these urges and feelings. And before you know it, this shopping behavior becomes an addiction.
Now, you may be wondering, can shopping be addictive? Well, just like gambling, shopping activates the rewarding system of your brain, which in turn releases a dose of dopamine.
Dopamine is the same neurotransmitter that gives a sense of pleasure and euphoria during drug abuse. So yes, shopping can be addictive if not done in moderation.
Here are some of the causes of compulsive spending to help find out what causes compulsive shopping behavior.
At times, compulsive spending behavior has something to do with attracting a particular person or a group of people.
Maybe you spend your savings on the new iPhone just so you can sit at the cool-kids table in the cafeteria, or perhaps you need that Prada purse because everyone else at work had a branded bag.
These feelings and emotions often give rise to compulsive behaviors as you constantly try to fit in. It happens when a person suffers from low self-esteem or has a fleeting sense of individuality. That is why they seek validation from others. And the time you take to find yourself through this method is more than enough for you to get addicted!
Filling Up a Void Inside
Sometimes people lose sight of their purpose in life and seek things that may grant them some excitement or change.
The most commonly chosen way to deal with this emptiness is to spend compulsively. As buying random things that may seem purposeful at the moment, fills us with euphoria, compulsive buying behavior has become an outlet for us without realizing that we are practicing it at the expense of our future and rationality.
Trying to Take Back Control
When you think of taking control of your life, what would be the easiest way to do it? The finances!
We believe that if we spend our money in a way “we” want to, then we may be able to take back control of our lives. Although this is merely a misconception, someone who believes that they have lost control of their own lives would be willing to try absolutely anything to get it back.
Consumer culture may also have more influence on people’s shopping behavior than we realize.
Consumer culture is a market culture defined by what marketers tell you that you ‘need’ to make your life more convenient or better. The goal behind that is to make you buy more.
Do you remember the last thing you bought, which you knew if you hadn’t come across, it would have never occurred to you to buy it? That is what consumer culture does. It dictates your needs to you.
Impulsive vs. Compulsive Spending: How to Tackle Them?
Now that we have figured out what impulsive and compulsive spending is and what causes the two, let’s look at some of the ways you can avoid this.
These are some of the methods you can use to avoid acting on impulse, and if you believe that your problem is a lot more serious, please, we advise you to get professional help.
1. Realizing You Have a Problem
The first step toward overcoming your spending habits is to realize that you have a problem and that you need to work on it.
To manage this, you need to keep track of your spending habits. Do you make rational buying decisions? Do you know what you want vs. what you need? Can you stick to the budget that you set for yourself?
Ask yourself these questions, and you’ll soon have an answer to you being an impulsive spender or not.
2. Take Back Control of Your Finances
Suppose you are having a hard time keeping track of your finances and cannot keep your impulses under control. That means that you haven’t gotten to the actual problem.
Are you shopping because of your emotions? Do you get excited when you see a deal? Or do you have the urge to go with the latest trends to belong?
Ask yourself what the valid reason for your behavior is and take back control.
3. Set Yourself up for Success
If you want to stop your impulsive or compulsive shopping habits, it’s essential to set yourself up for success. It’s easier to avoid getting in the temptation to buy than resisting the temptation.
What helped me resisting the temptation is:
- Unfollowing people on social media who make me feel bad about myself.
- Unsubscribing to newsletters of my favorite stores.
- Don’t autofill my credit card or debit card information.
- Not going to my favorite stores just because you can, but only go because you need something.
4. Avoid Credit Cards When Possible
Credit cards can be great, and there are many benefits to using them, but not for everyone. Credit cards are a compulsive buyer’s best friend and worst enemy. They allow you to shop for whatever you want, whenever you want, without thinking about overspending or budgeting, and leading you to acquire a card debt.
If you believe you have an impulsive or compulsive spending problem, try to avoid using credit cards. When you pay with your debit card, you are limited by the money in your bank account, and it gets harder to overspend.
5. Set up a Waiting Period
As impulsive shopping is a very spur-of-the-moment thing, one of the best ways to avoid it is to set up a waiting period for yourself before every purchase. For example, if you go out to shop for something and something else caught your eye, tell yourself that you will come again after three days, and if you still want it, you will purchase it.
It will give you just enough time to properly weigh out the value you would be able to receive from the product and rationally think about whether you want it or not. If you don’t think about it ever again, you have done yourself a favor by thinking about it first.
6. Don’t Be Overly Restrictive
We all know we should have a budget, and many people talk about having one. Some love it, and others hate it.
Whether you love or hate budgeting, try to budget fun money. It doesn’t matter if it’s $20 or $200/month. Make it fit into your monthly spending. You can buy whatever you want, without any guilt, as long as it’s within this budget.
I often find that being overly restrictive doesn’t work for me, so finding a balance like this is much more likely to work in the long term.
7. Seek Professional Help
There are many ways you can use to avoid impulsive or compulsive buying. Still, compulsive buying behavior can do a lot of damage to your finances and your life. If you aren’t getting a handle on your compulsive spending, it may be time to call in the professionals.
If your spending habits start impacting your life, never shy away from seeking professional help or behavioral therapy. This can help you identify the root of your problems and develop a coping mechanism to defend yourself with.
Impulsive vs. Compulsive Spending – All in All
Spending money is exciting and fun in the short term, but the excitement quickly fades. Nearly everybody has made an impulsive purchase at some point. If you’re getting into the habit of impulse shopping, the above tips can help you prevent it altogether.
If your shopping behavior gravitates more to compulsive spending, chances are there’s an underlying problem that needs to be addressed.
Marjolein is the founder of Radical FIRE. She has a finance and economics background with a master’s in Finance. Radical FIRE is a personal finance blog that helps you live your dream life through making more money and investing. We want you to reach your financial goals and have fun while doing it!