Silly spending: what causes us to waste money, and how to stop it

Have you ever bought something and immediately regretted it? Millions of Aussies have, and we can train our brains to do better.

Frustrated by your spending? You’re not alone. Picture: iStock

You’re a rare human if you’ve never spent money, quickly thought “that was a dumb decision”, then regretted the wastage for a long time afterwards.

Stupid spending decisions are common, and can damage people’s wealth, but the good news is that money specialists say some silly spending is OK.

Brains can be trained to avoid making bad money decisions.

Australian Shareholders’ Association director Lel Smits says people can overspend because of emotional triggers such as stress or amid societal pressures.

“The brain is wired to seek instant gratification, and spending triggers the release of dopamine, the ‘feel-good’ hormone,” Smits says. “This creates a temporary sense of happiness or accomplishment, making it easy to justify purchases in the moment.”

However, when the instant hit wears off, the bill or debt remains.

Smits says credit cards and digital payments can dull the pain of handing over money.

“As a result, the emotional reward often outweighs the logical assessment, leading to impulsive and sometimes wasteful spending decisions,” she says.

Financial wellbeing advocate and Australian Shareholders' Association director Lel Smits

Some of the silliest spending Smits has seen includes people buying high-end kitchen gadgets they never use, “like expensive juicers or bread-makers”.

“Another instance is impulse buys during sales, where people stock up on unnecessary clothing or gadgets because they’re on sale, only to later realise they don’t need or even like the items.

“Some regret big-ticket splurges, like buying an overpriced desirable car or a gym membership they never use.”

JUST WAIT

Smits says strategies to spend wisely include waiting 48 hours before purchasing, to allow emotional impulses to subside.

“Some people even advocate for freezing credit cards, forcing the ice to melt before you can access the card,” she says.

Spending can be silly sometimes. “Creating a budget that includes ‘fun money’ allows room for occasional splurges without guilt,” Smits says. “If we approach finance mindfully, even silly spending can be permitted when there are predetermined limits that are included to add purposeful joy to life.”

Author and behavioural economist Phil Slade says spending is linked to emotion and identity.

“At the most extreme level we see this in shopaholics, where there are high levels of regret after spending decisions but they can’t stop,” he says.

“A lot of the time what’s going on is a loss of control. There are other parts of their life that aren’t going so well, so they spend to get the dopamine hit that comes when you do something for yourself.”

HOODWINKED

Slade says our brains can link materialistic possession-grabbing with success. “We mix that with marketers and advertisers, who know this, and we get some sort of status hit as well as the short-term hit,” he says.

“You regret being hoodwinked by a marketer.”

Slade says rather than see yourself as a bad spender, ask what problem your brain is trying to solve.

“If you can answer that question you have a good pathway towards kicking the habit,” he says.

“A lot of the time it’s about hating your job and low control. We often see people eat out more because they have a crappy job.

“We know the idea of comfort eating, and comfort spending works the same way.”

Slade says money is simply an enabler, and if that means sometimes you spend just to feel good “I have no problem with that”.

“Hobbies don’t make financial sense but it doesn’t mean it’s not a good spending decision. If all we did was spend on things to build our physical wealth, and not understand our emotional wealth, I think that’s going too far the other way.”

Slade’s tips for beating bad spending habits include setting up multiple bank accounts: you’re more likely to raid one account holding $1600 than four accounts holding $400 each.

“I think a big thing nowadays is learning some mantras – this idea of inner peace” he says.

“Learn to say ‘I have enough’ and ‘I am enough’ and you are less likely to have those impulse spends.”

Behavioural economist Phil Slade, author of Going Ape S#!t?

PURCHASES PEOPLE HAVE REGRETTED

• Smaller-sized clothes ahead of planned weight loss that didn’t happen.

• A life-size Danny DeVito cardboard cutout.

• A Porsche in a midlife crisis.

• Claw-like fake fingernails.

• Political donations.

• Non-fungible tokens (NFTs) using cryptocurrency.

Originally published as Silly spending: what causes us to waste money, and how to stop it