12 Psychological Reasons for Overspending -

Recognizing that you are spending too much money is a good first step, but did you realize there are many psychological reasons for overspending? In this article, we’ll try to figure out the answer to the question, “Why do I overspend?”

A Person Holding a Wallet that is empty due to overspending

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Are You Overspending?

Are you finding yourself without enough money to get through the month? Chances are you’re overspending. According to a 2023 Consumer Budgeting Report completed by Nerdwallet, as many as 83% of Americans admit to overspending. As a result, the scary part is that many are using their credit cards to cover up their mistakes. Even those with a monthly budget find themselves spending too much.

So what can be done to fix this problem? Before we look at how to fix it, let’s figure out why people do it. I’ve come up with a list of 12 psychological reasons for overspending. How many of these sound like you?

Two Women Holding Paper Bags - the psychological reason for overspending could be they are pressuring each other to buy

What Causes People to Overspend

The Need to Feel Better – everyone finds themselves feeling depressed from time to time. Sometimes we feel bored with our lives. One of the reasons people admit to overspending is to try to feel better – regardless of whether they can afford it. Do you sometimes shop to improve the way you are feeling?
They Want Instant Gratification – according to Study.com, instant gratification is the immediate fulfillment of needs or desires. Imagine watching a commercial on TV for an item that just came out that you feel you have to have. Are you willing to wait to get it when you can afford it? Or do you feel compelled to get it now? It’s one thing if it’s something inexpensive that you can afford, but it’s different if it messes up your budget and likely puts you into debt.
The Impulse to Buy is Too Great – picture you’re looking through your social media feed and something appears on sale for a very short time. Or imagine walking through a store and spotting a pair of shoes you feel you’ve got to buy (whether you need them or not). An impulsive person will act without thinking, not picturing the consequences of their actions. Do you consider yourself to be an impulsive spender?
Some are Addicted to Shopping – according to the Cleveland Clinic, some people are addicted to shopping and are compulsive spenders. Signs of being addicted to shopping include lying about what you buy (or maybe about what you’ve spent), purchasing things you don’t use (and probably didn’t need), and looking at shopping as a hobby. Some people don’t feel happy unless they’re buying – they need the good feeling and the feeling of pleasure that shopping gives them, even though they’re financially hurting themselves. Do you feel addicted to the rush you get from shopping?
You Need or Deserve This – one of the psychological reasons for overspending is feeling like you couldn’t have certain things as a child, perhaps because your family couldn’t afford to get you everything you wanted. Some people feel compelled to buy themselves gifts for special events (birthdays, Christmas), even though they know others will give them gifts. The need for these things because they’re (imagined as) deserved causes overspending. Sound familiar?
Rising Income Causes Rising Spending – let’s say you just got a raise. What do you do with the increase in income? Do you immediately start spending it because it’s there? People may find themselves spending more and more as their income goes up. The problem is they don’t recognize “the ceiling” or the limit to what they can afford to spend. A $20 weekly raise disappears very quickly if you begin purchasing a frappuccino at a coffee shop each day on your way to work! Spending $6 daily for that beverage costs you $30 for a 5-day work week, so where’s your raise?
The Need to Keep Up – funny, but this was something my mom always used to say. She warned not to feel pressure to “keep up with the Joneses!” Now I have no idea who the Joneses were, but she didn’t want me trying to keep up with them! I can laugh now, but she was right. It doesn’t matter what other people have or what they can buy. She just wanted me to learn to live within my means and not buy things I couldn’t afford. Good advice Mom, thanks! Do you feel pressure to keep up with what other people have?
Pressure from Others – similar in some regards, but the pressure comes from outside. One of the habits I got into was going shopping with friends. That turned out not to be a good idea! We’d always go to a store planning to browse, but someone would find something they couldn’t resist. I’m sure you can picture what happened next! That person then pressured everyone else to buy it too. Do you feel pressure from other people to shop when you know you can’t afford it?
No Budgeting or Advanced Planning – according to the 2023 Consumer Budgeting Report by Nerdwallet, just under 3/4 of adults say they have a budget. 23% of Americans don’t budget at all – they do no advanced planning. They don’t think about what they’ll need to cover their expenses. There’s no emergency fund for when something goes wrong. They don’t save for the future. What happens as a result when overspending takes place? What’s the answer when bills arrive and there’s no money available to cover them? Are you one of the 23% without a budget?
Figuring You’ll Have the Money Soon Enough to Pay – here’s a dangerous one. Do you want something so badly that you say you’ll have the money when you need to cover what you buy? That’s something to change, and it goes along with the idea of no budgeting or advanced planning. Do you regret decisions like this at the end of the month because, sure enough, the money you need isn’t there?
Credit is Too Easy to Get – way too often when walking into a store, I’m offered another credit card with the promise of a special discount on my purchase just for applying. And equally too often, I’m instantly approved and told if I charge my purchase on my new card, I’ll save even more. I used to fall into this trap more often than I’d like to remember. Do you feel credit can be too easy to get, and is this causing part of your problem?
No Idea of What You Spend – can you honestly say you know what you’re spending your money on? A few days after I’ve made purchases, chances are they’ve been forgotten. Think back over the past month – where has your money gone? If you don’t know, you may want to take a financial inventory to help you manage your spending better.

Now That I Know the Psychological Reasons for Overspending… What’s Next?

Do you understand the psychological reasons for overspending that apply to you? Next, we’ll look at the warning signs that you may be overspending, and then we’ll work on specific things you can do to help you get your spending under control. We’ll discuss various budgeting methods including the 50/30/20 rule of budgeting to try to help as well.

In the meantime, would it help if you could make some extra money? Here are 10 Ways to Boost Your Income.

Do you want to reduce what you spend on food and dining out? Read Make a Meal Plan Based on Weekly Sales. Get Shopping Advice Plus a Weekly Meal Plan that you can use, or focus on How to Make Dinner Fast (with sample recipes included).

To learn more about why you overspend, check out these books from Amazon.

Note: I am not a financial advisor or accountant. The information I’m providing should be carefully considered, as I am just sharing what I’ve discovered that was helpful for me. It’s important to do your due diligence and consult financial professionals before making decisions.