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HSFPP Update # 218—Depression and Spending Have More in Common than Expected

Message from Flashman: Just as teens have little experience driving so far and could easily have a tragic wreck if they are not careful, teens also are relatively new to spending and saving money and could find themselves in overwhelming credit card debt if they are not careful. Many adults have these problems, too, which shows why financial education is so necessary at a young age; those who have learned wise financial habits early in life should be more likely to become millionaires and less likely to take on crippling debt.

But what about the impact of emotions on spending? Recent news stories show that decisions of any kind are very difficult to make without emotions; however, as necessary as emotions are to our lives and well-being, studies are finding that emotions can play a destructive role in our financial decision-making. Those who try to spend their way out of sadness may find short-term benefits, but the negative consequences can last a long time.

Rather than spending or eating when you feel sad, try going for a walk. It’s good for you and doesn’t cost a cent!

 

Web Site Picks of the Week:

“7 Ways to Control Your Emotional Spending” (MSNMoney.com)

“Money and Self-Control: The Battle Between Thoughts and Emotions” (PsyBlog.com)

 

In the New$... Depression and Spending Have More in Common than Expected

by Claire Kimberly, family studies graduate student at the University of Kentucky

Everyone has a bad day. Whether it is an occurrence at school or an argument at home, a bad day can cause stress, sadness, or frustration. There are many techniques to relieve these intense emotions, including exercising and eating, two common activities that people use to relieve their frustration. What is less well known is the effect that these emotions have on your willingness to spend.

A friend of mine worked the entire time she was in college. After graduating, she was in debt from her student loans and had no money in savings. What was her excuse? She told me that every time she felt bad, she went shopping and that the feeling she received from the experience was almost therapeutic.

Finding comfort in shopping can even happen to the rich and famous. Tori Spelling enjoyed shopping so much that it became an addiction. The situation got so bad that her family cut her off financially, leaving her to paying off her debt of hundreds of thousands of dollars without their help.

Why does this happen to some people? It seems that people who are dealing with difficult emotions tend to shop because it gives them a momentary feeling of well-being and self-confidence. Consumer Action News reports that having money can make one feel more secure. In fact, studies show that people with low self-esteem seem to buy things on impulsive more often. National Public Radio reported on an experiment that confirmed this statement, showing that those who are sad will pay significantly more money for everyday items such as water bottles.

Once you buy something and receive this temporary feeling of comfort, the whole experience of how much money you have spent can become a blur. Maybe in your mind it seems okay to spend that much money or you literally could not stop yourself from doing it. Either way, you could get swept up in your emotions and not consider the amount of money you are spending.

The best way to prevent this is to first understand what causes your emotions to get out of hand. We can try to be logical about money by using budgets, financial plans, and saving techniques. However, it is not until we fully understand why and how we react to certain occurrences irrationally that we will be able to keep our emotions away from our spending habits.

Sources:

1. De Mooy, Michelle. “Why Are We So Indebted?” Consumer Action News, Winter 2008-2009. http://www.consumer-action.org/news/articles/2008_2009_winter_issue/#Topic_12.
   
   
2. Greenfieldboyce, Nell. “Sadness Spurs Spending, Experiment Shows,” National Public Radio, April 20, 2008. http://www.npr.org/templates/story/story.php?storyId=89761759.
   
   
3. “Top 20 Most Outrageous Credit Card Overspending Stories,” March 2008. http://www.apply4-credit.com/blog/top-20-most-outrageous-credit-card-overspending-stories/.

 

Discussion Questions:

1. How do your emotions affect your spending? What techniques do you use to minimize the impact emotions on your spending?
   
   
   
2. Have emotions ever affected your spending in a positive way?

 

Optional Activity:

For one week, record all items that you buy, everything you spend money on. List all expenses under categories such as Food, Auto expenses, Books, Entertainment, etc. How does looking at this information make you feel? Are you upset about the money you spent? What were you feeling when you spent it? If you overspent, try to figure out what caused you to feel comfortable spending more than you could afford.

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/hes/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:
The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/hes/fcs/HSFP/response.htm.

The use of any trade names or products does in no way constitute a recommendation for this product.