Are you in control of your spending?

WITH the holiday season and celebrations happening now till Chinese New Year 2013, we all have reasons to spend. Retail product suppliers are taking this opportunity to tempt us with new launches and festive sales.

Well, how good is your self control? Are you controlling your urge to buy with the money from your year-end bonus? Or are you affected by the never-ending stream of news and endless advertisements promoting new products and fantastic prices? Do you find it difficult to avoid the temptation?

Triggers that stimulate needs
There's lots of “noise” around us every day that influences our spending decision-making process. So, why are we easily swayed by such temptation; wanting more than necessary? This is because our different wants and desires are driven by our five senses: what we see, hear, taste, smell and touch.
Our brain's decision-making process is directly triggered by what we see or hear and how we feel. If something stimulates our brain's pleasure centre through these senses, we want as much of it as we can get. When our emotions are aroused, they often overwhelm our good sense and we end up making a purchase to maximise the “good feeling”.

Merchants and advertisers know our human weaknesses very well. For that reason, I caution you not to be easily fooled by your own biological triggers that stimulate emotional spending.

Illusion of basic needs
In reality, there are many temptations driven by our needs and wants. We must try to control those temptations, but still maintain a healthy level of self-esteem.

We have several basic need drivers: survival, fun, happiness, love, and relationship. Advertisers try to link their products to these basic needs. We often find it difficult to differentiate between our basic needs and the wants that are persuasively substituted via various media. This confusion has a direct impact on our spending decisions.

Survival is our most basic need. Besides survival, we need to have a sense of security and to be physically healthy. Hence, we have biological need that is critical for our continued existence and physical well-being. We must have social needs in the form of love, a sense of belonging with people, relationships by affiliation with and acceptance by others. Some of us spend money to express our love, affection and friendship to the loved ones, family and friends.

Self-esteem needs achievement, respect, approval and recognition from loved ones and people who are important to us. These are the needs that drive our positive self-esteem, self-worth or self-image. Without these needs, we may experience anxiety, depression, stress or helplessness because we will not able to fulfil our personal potential.

None of us are perfect, and daily life brings us into constant collision with evidence of our own incompetence and inadequacies. If we listen to negative feedback and don't create what psychologist call “positive illusions” our self-esteem will go through the floor. Sometimes we will use spending as a mechanism to boost our bruised self-esteem. Does a bad day at the office seem to always end up with a shopping spree at the mall?

If we have a better understanding of our basic needs, and avoid the trap of wants and desires (at least kept to a minimum), we can manage our spending better. And limit the buildup of debt that we may not be able to pay off.

Inner voice of needs
We have an “inner voice”. Sometimes that inner voice can lead us astray. The less skilled or experienced we are at something, the harder our inner voice works to convince us that we are brilliant at it. And that's good, up to a point. When we look to fulfil our needs, we may have a strong tendency to turn our desires, wants and preferences into self-talk or dogmatic thoughts of “I should”, “I must”, “I need”, “I want”, “I always”. These statements overwhelm our otherwise rational spending attitude.
Perhaps you recall your “inner voice” saying things like: “I always hang out with my friends at Cooler Bar on Fridays. If I don't, I will feel that my week is not complete.” or “I need to buy a pair of the top price FastFeet running shoes for my gym workout; otherwise, my feet will get sore from running on the treadmill.” Learn to question these dogmatic statements when you hear your “mischievous inner voice”.

Use the power of the most successful advertiser to your personal benefit. Don't “Just do it” when you hear yourself saying statements like: “I need”, “I always” or “I have to”. Instead of being
misconstrued by your self-talk, “Think different” and make a decision only based on your genuine needs.

The need for convenience'

These days, people seem to be living a hectic lifestyle in an urban city where time is limited. We have so much to do, yet there's so little time. For instance, some will spend hours in the office or stuck in traffic, then end up not spending time to cook dinner. Instead, we have our dinner in the restaurant or make a call for home delivery.

Some of us are constantly looking for services or items that can save time, are easy to use and give us the “convenience” we want. We are willing to pay more for services that provide convenience including an express service or online booking. And our credit card provides the convenience for us to spend, spend and spend.

Anything that provides convenience has become a “need” for us, to the point that we will spend money to achieve convenience. In short, we strive for a “lifestyle of convenience” at a price a symptom of a developed country with constant inflationary pressure!

Future needs and wants
In the business world, merchants, service providers and manufacturers who experience overpricing of resources and high operation costs will pass the higher costs to us in the form of higher prices. With the depletion of natural resources, rising labour costs and climate change, we will continually be paying more in the future for the goods and services that satisfy our needs and wants.

If you are a smart consumer, you should be in control of your needs and wants all the time. When you are able to address some of the psychological root causes of your needs and unnecessary spending, you will be in a better position and state of mind to manage your personal finances.

Just spend a moment to reflect upon some of your past decisions. Very likely, you will notice that inside you lurks “a mischievous inner voice” that is forever cajoling you into an inflated sense of your own power.

So, before you spend your next dollar during the festive holiday, you need to keep asking questions like an inquisitive five-year old. It is always safer to make a habit of asking questions over and over again to test your needs and spending decisions so that you don't have regrets later in life.

Carol Yip/Thestar