Emotional Spending

I came across this term emotional spending and decided to read a little more into it. On investopedia, emotional spending is defined as when an individual spends money for the sole purpose of improving a mood. Some reasons why people engage in this behavior are to improve or maintain a mood and to cope with stress.

Personally, I am not too much of an emotional spender so it makes me wonder if it is all true. Does spending money really makes one happier, does it really improve mood and helps cope with stress?  I am not the first to question that so the below is merely a summary on what I have gathered from existing papers (power of google). 

Spending money improves a mood

Yes, it improves the mood but no, it does not make you happier.
Spending money will improve your mood especially when the money is spent on something that is out of the routine. However, mood is merely a temporary state of mind and the happiness felt is likewise temporary. This is especially so if the money is spent on material goods as people adapt particularly well to commodities. Also, we may be happier with the item purchased (For example, upgrading and moving into a new house will make us happier with the house) but the item itself does not make us happier with our lives.

The better advice:
Spend on experiences, especially novel ones. Novel experiences provide the basis for valuable memories. Valuable memories will have a lifelong effect as you will keep coming back to it, and as we share this experiences in social context. Unlike things, experiences also do not deteriorate with time. So spending on a weekend getaway could be the better option than your 104th handbag/sneakers.

Spend on others. Multiple researches done found a strong correlation in this. Quoting Elizabeth W. Dunn, human beings are highly social creatures and much of our happiness hinges on the quality of our relationships. “Almost anything we do to improve our connections with others tends to improve our happiness as well, and that includes spending money.”. So if you have to engage in some emotional spending, buying a gift for someone else could improve your mood and happiness more substantially.

Spending helps one cope with stress

I did not read too much into this because one quote came immediately to mind:

Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like. (Will Smith)

In the financial aspect, compulsive emotional spending is likely to create more stress for people in the long run if they spend beyond their means. In addition, one may end up working harder to earn more money so as to enjoy more of these temporary reliefs. The price is that we lose more ‘time’ because of these pursuits – rest time & time with loved ones. From the emotional aspect, this would likely increase stress levels.

For the super famous or wealthy where money is not a concern, spending is also unlikely to help them cope with stress. These are the people most likely to be over-saturated with material goods and the temporary stress relief effect is likely to be even less significant.

The better advice: find an alternative way to deal with stress. It is hypocritical for me to say this since I do not exercise as frequently but an exercise regime has to be (one of) the best method. After all, not only would you feel better after exercising, you would probably look better (and this is well researched and proven to make you happier).

So if you have to an emotional spender, be a better emotional spender – spend on experiences & on others. And if you are strong enough to rid of the habit, go exercising instead of shopping. 

2014 resolution, perhaps?

Cheers!