What Does the Saving Have to Do with Me?

By now you may be asking yourself, what does any of this have to do with spending behavior? 

At each level, the satisfaction of the needs we’ve described often involves spending. 

According to Maslow, when the needs at any of these levels aren’t satisfied, we tend to compensate in some fashion. Unfortunately, many individuals compensate by spending money in particularly unproductive and unhealthy ways. 

In doing so, they often confuse their needs with unwarranted wants or desires. 

Let’s look at two examples. 

• If a person’s “Safety Needs” aren’t fulfilled, they may come to believe that they don’t need anyone, or that they are more important than others. They may shop for items that are an unconscious expression of their superiority (e.g., sports cars, expensive suits, or jewelry). 

• If a person’s “Love Needs” aren’t fulfilled, they may feel inadequate and wonder why people don’t love them. Their desire to be loved and accepted by others may lead them to purchase clothing and other items that they associate with social acceptability. Teens are especially susceptible to this type of behavior, but adults engage in it, as well.  

People commonly misinterpret their “wants” as “needs.” 

This is what leads many to make poor financial choices. 

We tend to spend our money on things we think we need. Do you really need a 65-inch TV, the latest video game system, or the newest iPhone? 

These may be great products, but, in truth, we often want these items only to satisfy unreasonable emotional and social desires. 

We think they will gain us acceptance or happiness. 

Spending money on things we think we need, or that we think will create happiness for us, is based on the notion that we can accurately predict how we’ll feel in the future after the item has been purchased. 

When you say to yourself, “I can’t live without that new phone,” you’re predicting that your life will be much, much better afterward. 

In fact, you can live without a new phone after all, you would have had to do without one if they had never been invented. 

Numerous studies examining the emotional impact of our purchases have confirmed that we overestimate the intensity and the duration of our emotional reactions to the effect our purchases will have on future events. 

In this case, we believe that buying a TV will create happiness and fulfillment because we can’t accurately forecast the emotional consequence of the purchase. 

As a result, we often find ourselves repeating a pattern like the cycle of debt. 

• We purchase an item we mistakenly believe will make us happy. 

• The item loses its value to us over time. 

• We look for the next item to make us happy, and then another, and so on. 

A simple experiment will help keep the wants vs. needs debate in the forefront of your mind as you shop. 

For one week, classify every item you see in an advertisement or on a store shelf as a want or a need. You don’t have to have any intent to purchase the item, in fact, it's better if you don’t. 

You’re simply placing each product in one category or the other. It’s a revealing exercise, and it can be particularly meaningful if you have children. 

Invite them to join in, and you’ll also help them gain an appreciation for the spending decisions you must make for your family. 

You may be surprised at how long the game will linger in your mind beyond that week.

Don’t cheat yourself with quick answers like, “I just want it.” Careless spending may be a symptom of a deeper problem. 

For example, you buy expensive gifts to try to impress someone or gain friendship. 

You buy things to make up for the fact that you don’t believe you’ll ever get what you really want, such as a better education or a nice a charming home your spending habits are a result of unhealthy triggers, you may want to reflect on your motivations alone or with a counselor. 

Careless spending will not take away personal pain, and in some cases, it can lead to serious financial problems that only add stress.

Becoming Happy! Another step in gaining control of your financial life is understanding that your self-worth has nothing to do with your net worth. 

Money does not make the person it is who they are on the inside that defines their lives. 

Many people have lived rich, fulfilling lives without ever earning a six-figure income. 

They’ve done so by coming to terms with the fact that wealth is subjective, and most often has nothing to do with earnings. 

Relinquishing the association of money and self-worth allows individuals to dismantle the psychological barriers holding them back from living productive financial lives.