Emotional spending is nothing new to most consumers, and many of us can relate to treating ourselves when things are tough. Emotional spending is typically defined as buying an item you don’t need when motivated by a specific emotion. Of course, emotional spending can also be used to purchase something you need or that you’ve wanted for an extended time.
Emotional spending can become a habit that may have roots in your childhood. Maybe you were allowed to choose a new toy when you got straight As on your report card. Alternatively, you may have been taken out to dinner to cheer you up after a bad day. Whether you’ve learned to use spending as a reward or a coping mechanism, the core of the habit is your emotions.
Emotional spending isn’t inherently bad and can have its benefits. However, it can certainly hurt your budget and bring a wave of other emotions, like guilt or regret. With many Americans quarantined throughout the COVID-19 pandemic, we wanted to learn more about emotional spending habits in America.
We surveyed 1,500 individuals on their spending habits and here’s what we learned:
- 13 percent of Americans shop when they’re bored, while 11 percent buy because of excitement
- 39 percent of Americans overspend on impulse purchases
- 47 percent of Americans admit to emotional shopping and 73 percent impulse buy
Boredom is the Leading Cause of Emotional Spending
According to our survey, 47 percent of Americans admitted to buying something they didn’t need because of an emotional reaction. Of those emotional spenders, 28 percent shop out of boredom — the leading cause of emotional spending.
Older Millennials are the most likely to overspend and also have the highest rate of boredom shopping. Nearly 60 percent of those ages 35–44 admit to emotional spending, and 30 percent of those purchases are made when bored.
Boredom was consistently in the top three motivators and most often the number one reason Americans bought something they didn’t need across demographic breakdowns. In fact, the ages most likely to shop while bored also had the highest rates of emotional spending, implying that boredom is a major motivator for emotional online shopping.
64% of Emotional Spending is Provoked by Negative Emotions
While boredom is the primary motivator for unnecessary purchases, a majority of emotional spending is related to negative emotions.
Of the 47 percent of Americans that admit to emotional spending, 64 percent tied their purchases to negative emotion. After boredom, excitement and stress are leading motivators to shop for Americans at 23 and 19 percent respectively.
Emotional spending is often associated with reward and coping. Many Americans have the habit of spending to celebrate something exciting, like a promotion. Others may shop to boost their mood, and many shop both to celebrate and cope with their emotions.
The COVID-19 pandemic certainly brought with it a wave of stress and boredom, which Maria Alcantara of Millennial Money Queens says can be a major motivation for emotional spending.
“A lot of people are stuck at home during lockdown. This leads to boredom, isolation, and stress, which are all major causes of emotional spending. Ecommerce hit record sales during the pandemic as people were unable to shop in brick and mortar in most countries and they looked for distractions and ways to exercise some sort of control over a situation none of us can control.”
73% of Consumers Impulse Shop
Emotional spending is a form of impulse shopping, which most Americans are guilty of. Our survey found that 73 percent of Americans impulse shop and often overspend.
Women admit to impulse shopping about 7 percent more often than men. The habit seems to pick up with age, as 85 percent of women between the ages of 45 and 54 make impulse purchases. They’re much more likely to overspend on their purchases, too.
Generation X (ages 45–54) is the most likely age group to impulse buy. Millennials (ages 25–44) are the least likely to make impulse purchases, and younger generations as a whole tend to overspend less often. This may be because younger generations are likely to have less disposable income. Often, the disposable income they do have contributes to financial goals, like caring for their family or buying a home.
Older Americans making most of the impulse purchases are settled in their careers, often have older or adult children with fewer financial needs, and likely have fewer large savings goals. This may be why they feel more comfortable making impulse purchases and even breaking their budget.
53% of Impulse Shoppers Are Overspending
Of the majority of shoppers who make impulse purchases, 53 percent admit to overspending at least occasionally. In fact, 10 percent of impulse shoppers admit that they overspend on every impulse purchase they make.
The tendency to overspend often correlates with the demographics impulse spending the most, with women overspending 55 percent of the time while men overspend 53 percent of the time. Similarly, Americans ages 45–54, who are the most likely to impulse buy, also overspend on a whopping 58 percent of their impulse purchases.
This may indicate the lack of impulse control when shopping extends beyond the act of buying, and into the shopper’s choice of products and prices. This means double the impact on your wallet, and that validating impulse purchase in the first place may create a habit of overspending.
5 Expert Recommendations to Overcome Emotional Spending
If you know you have a habit of spending to cope with your emotions or reward a job well done, you may be looking for alternatives to your impulsive spending habits. We’ve reached out to personal finance experts and they’ve given us these top tips to control your spending habits.
1. Give It Some Time
Most emotional spending happens when we’re bored or excited, and both of these emotions are temporary. There’s nothing wrong with window shopping, but sit out on any potential purchases that will still be there tomorrow.
Dr. Wyatt Fisher, a psychologist and relationship coach, emphasizes that this time allows the impulsivity of the moment to pass and time for the logical side of your brain to catch up with the emotional side.
2. Identify the Purchase’s Purpose
When you’re emotionally shopping, you’re likely looking to fulfill an emotional need or want. The first step in preventing that purchase is identifying what your motivation is, as well as what purpose the item serves to fill.
Bryce Welker of CPA Exam Guy recommends you interrogate your emotions as you’re making a purchase and ask yourself tough questions.
“It is the same thing you should do before sending an angry email or text. ‘Am I in a neutral state of mind right now?’ should be your first question.”
3. Invest the Money in Yourself
Instead of buying something outright when you’re emotional, consider how that money could be used to support your larger goals and ambitions. You may choose to support personal goals, like investing in a career conference or saving for a vacation.
It’s also not a bad idea to redirect these purchases for your financial well-being. Consider how you can increase your financial knowledge with a book or course, or use this money to build your actual investments with an online advisor or self-directed broker.
4. Check In With Your Budget
If you don’t already have a budget, your first step is to create one. Following a fair budget is the best way to avoid overspending on your impulse purchases. A fair budget will still give you spending money to use as you like, but it can help you stay mindful of your spending and prevent you from using your credit cards on emotional buys.
5. Connect With Others
There are healthier ways to address our emotions than shopping sprees. Tal Mandelbaum is a social-organizational psychologist and shared her thoughts on identifying the root of emotional spending habits.
“Instead of buying things to feel more secure, connect with people in your community for support. Share your sense of unease, or fear of uncertainty with someone you trust and talk it through. More than ever we need mutual support right now, to share and mitigate the burden of uncertainty on our emotional lives.”
Emotional spending is a familiar habit for many Americans, but it doesn’t have to overwhelm your wallet. Look for opportunities to save throughout the year, wait on any unplanned purchases, and make sure you have an updated budget to help guide your decisions.