Habits guide behavior, and if your habits are bad, your behavior will be bad. Often treated as a joke, a spending addiction is anything but. If left untreated, a compulsive spending habit can ruin your financial life and do serious harm to personal relationships.
You might make light of the fact that you enjoy “retail therapy” after a hard day, but at what point does your spending cross over into addiction territory? Here are five questions to ask if you see hints of a shopping addiction—and three things you can do to right the problem.
1. Do you lie to cover up your purchases?
Lying in a relationship is never a good idea, and lying about money is especially damaging. If you feel the need to hide or lie about your purchases, you might have a serious problem.
2. Are your relationships struggling?
Maybe you just have bad breath, but more likely it’s a side effect of your terrible spending habits. This may not apply to a single person, which is why a spending addiction in a single person can escalate much faster than a person in a relationship. Relationships equal accountability, so if your relationship is struggling, lying and hiding purchases could potentially be the cause.
3. Do you store the stuff you buy, unused?
A spending addiction means the act of purchasing something is what matters, not what is purchased. Therefore, those with a spending addiction often buy things they don’t need, they already have, or they don’t plan on using. Whether it’s a basement full of stuff, an extra bedroom, or a storage unit, if you have loads of unused items tucked away, which have, that’s a solid indicator that you have a spending addiction.
4. Is your closet stocked with clothing—with price tags still attached?
“Oh, I forgot I had that!” If you’ve uttered this phrase more than once in a while, you may have a problem. It’s not uncommon for people to grab a deal for an upcoming season and not wear their new purchase for a few months, but if half the clothes in your closet still have tags then you are spending entirely too much money.
5. Is your credit/debt card physically worn?
Your car tires and running shoes will naturally wear out, but if your debit or credit card wears out, you have a problem. If clerks have to manually type in your card number because it is so worn down, you are probably spending entirely too much money.
Exhibiting any one of these symptoms isn’t a great sign, but exhibiting several or all of these is a big problem. So what next? How do you change your behavior? Well, it won’t be easy, but it is possible. No one wants to admit they can’t afford the lifestyle they are living, but it’s an important revelation. Here are three ways you can start to change your habits and begin to develop spending common sense.
1. Look at the full price of an item, not just the payment amount.
A lot of people can afford a $250 a month payment, but what “afford” doesn’t take into account is the concept of financial prudence. Take, for example, a car loan—imagine you don’t even look at the full price of the vehicle. All you care about is the payment amount. In that case, affording the payment has become your litmus test, but it’s not good enough. Paying $250 a month for nine years on a depreciating asset like a vehicle is just not smart.
2. Use a budget.
Dun dun dun. The big ‘B’ word that overspenders never want to hear. But if you have a giant pile of debt, and you still eat out seven times a week, you need to get it together. A budget is the absolute best and most effective way to do this. Your first step toward creating a budget is having an honest and open look at your finances. You need to get your head out of the sand. Denial won’t help you. Gather all your financial documents, and dig in.
3. Count and reduce your transactions.
Another great way to get an unaffordable lifestyle under control is to count the number of times you spend money. The more times you spend money, the less you care about how much you are spending. The average American family spends money 22 times per week. This is ridiculously high. The average household should only spend money 10-14 times per week. If you want to shock your system and really hit the reset button, then try to reduce your transactions to 5 per week.
Don’t wait until you are up to your eyeballs in debt. Recognize the signs now and work towards fixing them. The way your financial life plays out is really up to you and the decisions you make.
Peter Dunn, aka Pete the Planner, is an award-winning financial mind who has authored five books, hosts the popular Pete the Planner radio show and travels around the country offering financial education. His signature wit will have you laughing as you learn. For more from Peter, visit www.petetheplanner.com.