The Mind and Money: Unraveling the Psychological Reasons for Overspending

For some, the thought of making a big purchase—or any purchase—is enough to send them into a stress spiral. In fact, did you know approximately 74% of Americans are stressed about their finances in one way or another? But where exactly does this money anxiety come from? 

Establishing clear financial objectives can give you a sense of control and direction.

This is one question this article will explore, and we'll also explore the other side of this equation: overspending. Notably, we'll look at the psychological reasons for overspending and what you can do to develop a healthy mindset about spending money.

What Are the Signs of Money Anxiety?

Money anxiety can look a little bit different to everyone. Still, these are some common threads you may be familiar with:

• Constant Worry: Excessive worry about finances, even when you have enough money.
• Impulse Buying: Making unplanned purchases and regretting them later.
• Avoidance: Avoiding financial discussions or refusing to check online bank account balances.
• Emotional Distress: Feeling stressed, guilty, or ashamed after spending money.

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Where Does the Fear of Spending Money Come From?

Understanding the underlying reasons behind money anxiety is crucial—it offers a starting point to develop a healthier relationship with money. 

Here are a few common reasons many people develop anxiety over spending money.

A History of Deprivation

Growing up in an environment with limited resources can lead to an irrational fear of insufficient money. If you often heard phrases like "money doesn't grow on trees" or "we can't afford that," these beliefs likely have stuck with you well into adulthood.

Low or Unsteady Income

Another common cause of money anxiety is a lack of financial stability. Financial instability can make it difficult to feel secure about spending, especially when expenses continue to rise while your income remains unchanged.

Rising Expenses

It's no secret that the cost of living continues to increase. As major expenses like housing, healthcare, and education become more expensive, people may fear their money won't stretch far enough.

Debt and Overspending

Owing money or living beyond one's means can also contribute to money anxiety. The stress and pressure of managing debt and trying to keep up with expenses can cause significant anxiety and strain on one's mental well-being. 

Be sure to learn more about the psychological reasons for overspending to help overcome this issue if it relates to you. For example, many people overspend for emotional reasons, such as trying to fill a void or cope with stress. Seeking help from a therapist can be particularly beneficial in addressing these underlying issues and developing healthy spending habits.

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How to Reduce Anxiety Over Spending Money

Now that we're more familiar with the potential causes of money anxiety let's discuss some ways to reduce it.

Emergency Fund

Building an emergency fund can provide a safety net for unexpected expenses—ones you don’t have time to prepare for such as urgent car repairs. Start by setting aside a small amount each month and gradually increase the amount to build a comfortable cushion.

Automated Monthly Payments

Setting up automatic bill payments can help avoid late fees and give you peace of mind knowing your bills are covered. Just be sure to keep track of the payments and make sure you have enough funds to cover them.

Save Regularly

Cultivating a savings habit not only helps ease financial stress but also provides a foundation for long-term financial security. This sense of security allows you to have peace of mind and focus on your financial goals, knowing that you have a solid financial foundation to rely on. 

Set Goals and Work Toward Them

Establishing clear financial objectives can give you a sense of control and direction. Whether it's saving for a big purchase, paying off debt, or building retirement savings, having goals in place can help alleviate money anxiety.

For example, setting specific, achievable goals with a timeline can give you something tangible to work towards and help you feel more in control of your finances. Another trick is breaking down big goals into smaller milestones to make them feel less overwhelming and more attainable.

Get Financial Help

If money anxiety persists and becomes overwhelming, don't hesitate to seek professional help. A financial advisor can provide guidance and support with managing finances, while a therapist can help address any underlying emotional or mental health issues.

It's also helpful to educate yourself on financial topics as much as possible—the Lendstart blog is a great place to start!

Final Word: Get Control of Your Fear of Money

Struggling financially and experiencing anxiety about spending money are common challenges in today's society. However, they are not insurmountable. By recognizing the signs, understanding the root causes, and implementing practical solutions, you can break free from the psychological grip of money anxiety and regain control of your financial well-being.

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