The Scientific Reason You Overspend and How to Turn Things Around

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  • Spending releases chemicals and hormones that make us feel happy -- for a while.
  • A spending compulsion must endlessly be fed.
  • You can slowly replace old spending habits with new, by considering purchases carefully and sticking to your shopping list.

Understanding why you overspend is the key to creating new habits.

You know that old cliche of an angel sitting on one shoulder and the devil on the other? It's the perfect illustration of what I used to experience every time I went into a store selling anything home related. For many years I could easily pass up expensive restaurants, fancy holidays, and cool cars. But I could not get anywhere near a store selling pillows, candles, ceramic pots, or picture frames without practically breaking out in a sweat.

I've managed to turn things around, but not without effort. And not without fighting the neurotransmitters that acted like angels and devils on my shoulders. If you're an overspender, there's a scientific reason for it. The good news is this: Once you know the reason, you also have access to the tools that can help you escape the trap.

Stinkin' dopamine

When you're anticipating a reward (think an ice cream cone on a hot summer day), your brain releases dopamine. As dopamine courses through you, your desire for the thing you're anticipating heightens. It's not only the delicious ice cream, but also the feelings accompanying that anticipation.

After a while, you seek the highly-pleasurable dopamine rush. For some, it can lead to truly dangerous issues, like gambling and drug addiction. For others, it perpetuates negative habits, like wasting money we don't have on another wicker basket.

Dopamine creates a reward-seeking loop that draws us back to the habits we're trying to break. And when we give in to it, dopamine makes us feel a little giddy. That happiness is short-lived, though. By the time we've acknowledged the damage to our checking accounts, we're already looking for our next reward.

Ridiculous endorphins

If you've always associated endorphins with long-distance runners, you might be surprised to know that this sneaky hormone also plays a role in shopping for pleasure. When an athlete has pushed their body to the point of pain and exhaustion, endorphins kick in to help reduce the pain. When the rest of us feel a little blue, we know that buying something new will release endorphins that will lift our moods.

Here's how dramatically endorphins can impact our decision-making: In 2013, a study was conducted at the University of Michigan. Participants were first shown a movie clip portraying a bullying incident designed to impact their emotions. Those who made purchases after viewing the clip felt significantly happier than those who did not spend money.

Researchers believe that making buying decisions can help a shopper restore their mood through a great sense of self-control. Even handling money has been shown to increase endorphins and our sense of well-being. That explains why 62% of people pull out their wallets when they're feeling down.

Herein lies the problem. After making a purchase, we feel pretty good for a short time, but that high does not last long. When it wears off, we're left with shame and guilt. We know we should have put the money in an emergency fund or paid down a high-interest credit card, but we chose to flood our brains with feel-good chemicals instead.

Sneaky serotonin

Serotonin -- the same stuff many antidepressants help us regulate -- is also known for regulating moods. Research shows that we have stronger decision-making skills when our serotonin levels are where they need to be. Just as importantly, serotonin helps us weigh the potential cost of the things we're tempted to do. For example, serotonin may help someone recognize that going on vacation with friends means not having enough money to pay next month's rent.

This is in no way saying that you have a low serotonin level. But if you have trouble weighing risks and continually find yourself sabotaging your financial future, it's worth asking a doctor about the possible role of serotonin in your overspending.

Heart-pounding adrenaline

When I think of an adrenaline junky, I automatically imagine someone who cliff dives or becomes a ski jumper. The person I don't picture as an adrenaline junky is the one who pulls out a credit card to buy a round of drinks even though they just missed a car payment or the friend who shops for new clothes every week without fail, whether they need them or not.

Adrenaline provides a surge of energy. Our heart rates increase and we feel supremely alive. Many people get the same rush from buying something new, especially when they find it on sale.

Tips for turning things around

If you're serious about taking control, consider combining these tips.

Pay with cash

Research from the University of Toronto Scarborough indicates that paying with cash hurts far more than pulling out a credit card. That's because the sting is immediate, while you can forget about the credit card debt until the day it comes due. Interestingly enough, we appreciate the things we pay for in cash a bit more. Want inspiration to pay in cash? Bloomberg reports that 60% of Americans have carried credit card debt for over a year.

Take three minutes to think

Let's say you're dying to buy a new pair of tennis shoes. By all means, pick them up if you'd like. But walk around the store for at least three minutes before making the purchase. During that time, ask yourself if you need another pair of shoes. Then, name three things you could do with the money if you put the shoes back on the shelf. For example, you may consider building your emergency account, buying new mulch for the yard, or having your dog's teeth cleaned. You're making the right decision if you can honestly tell yourself that the shoe purchase is the greatest necessity among the four options.

Find an accountability partner

I have a friend who helped keep me accountable as I moved from overspending to saving. To describe her as conservative in her approach to spending is a gross understatement. I have never known anyone who spends so much time deciding whether she needs a new pair of slacks or whether the plant she's about to purchase is guaranteed to survive. I love it but did not understand it for years. She was who I turned to when I slipped up and bought something silly, and she's the person who celebrated my successes as the situation improved.

Use a retirement calculator

Few things on this planet will straighten your head faster than figuring out if you can afford to ever retire. Retirement calculators are not sensitive, do not care about your feelings, and will tell you the truth about your situation. Any time you're tempted to buy something you don't need, picture that calculator. It's sure to cool your ardor.

Don't leave home without a shopping list

I know you're probably sick to death of hearing this, but shopping lists really can keep you on track. If you're going into a store to buy pillowcases and a birthday card for your mother, that should be all that's on your list and all you pick up on that trip.

Remember that it's never too late to reconsider your spending. Timi Merriman-Johnson notes that it might be helpful to just review your recent spending and make small changes to build better habits. "Everyone can take a look at their past week of spending, and make a plan for how they'd like their next week to go."

I've been down this road and know it takes work. I can tell you, though, it becomes more natural with time. Today, I get the same thrill from saving and investing that I used to get from spending. Maybe I traded one addiction for another, but this habit makes it possible to cover emergencies, travel, and perhaps even retire when I'm very, very old and ready to take up salsa dancing.

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