"The Psychology of Wealth" Author: Five Signs of Unconscious Spending

Is This You? Five Signs of Unconscious Spending—and How to Avoid It

psychology of wealthIt’s easy for many of us to fall into unconscious behaviors when it comes to money—especially when it comes to borrowing. Debt has a way of creeping up on us. A small purchase here, an online order there, and before you know it, your monthly credit card statement is taking a sizable chunk out of the checking account. One of the most powerful ways we can get a handle on our finances is simply to turn up our level of awareness.

How conscious are you of how, where, and why you spend your money? Do any of these unconscious habits sound familiar?

  • You find items that you forgot you had purchased and that you’ve never used or worn.
  • You purchase things without knowing how much you’re paying—i.e., purchase price plus interest.
  • Your credit cards are maxed out, and you can’t remember what you bought.
  • You own multiple tech gadgets, but you sometimes have trouble paying your bills.
  • You are still making payments on things you no longer own or that no longer work.

As a psychotherapist who works with people in all states of financial well-being, I’ve observed that the problem with accumulating debt lies not in the fact that we borrow money, but often in the way we borrow, and how we use what we borrow. The habits listed above are those of unconscious borrowing and spending. While debt itself has gotten a bad rap in recent years, the use of credit is a modern necessity—and a welcome one when used smartly. How many of us would own a car or a home or have attended college if it weren’t for the ability to borrow? Sometimes we simply can’t pay for an item or a repair out of our monthly cash flow. Credit allows us to obtain what we need and want without decimating savings or taking a very long time to achieve our goals. When used consciously and wisely, credit can be one of the most effective ways we have to reach our broader financial goals.

To avoid unconscious borrowing, I recommend using credit options that encourage awareness of what you’re spending and what you’re spending it on. Before you unconsciously pull out the plastic, research your options and choose one that discourages impulse purchases and compounding interest.

Several borrowing methods fit this bill—and will save you money in the long run, especially for larger purchases and expenses. For example, a fixed-rate installment loan, which comes with a specific payoff date and set monthly payments, requires a high degree of money awareness. Since you’ll know exactly how much you’re paying each month, a fixed-rate loan makes it easier to incorporate new expenses into your household budget in a manageable and predictable way. (In fact, you can often work with the lender to help set the amount of your monthly payment.) These loans are available in amounts that range between a few hundred dollars and $10,000.

Taking this type of loan to pay for things that are best not paid for from savings—or that you can’t pay for in your monthly cash flow—helps you steer clear of impulse spending and borrowing. And the built-in discipline of installments makes you stick to your good intentions to pay off a purchase in a timely fashion. Once such loans are successfully retired, they will also show favorably on your credit report.

Borrowing money doesn’t have to lead to an ever-expanding mountain of debt. By choosing credit options that keep you conscious of what you’re borrowing and spending, you can use credit to your advantage without the downsides of this powerful financial tool.

Dr. Charles Richards is a licensed psychotherapist in Encinitas, California and author of the book “The Psychology of Wealth: Understand Your Relationship with Money and Achieve Prosperity

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