Is Your Spending Out of Control? Three Ways to Fix It

A young man holds his empty wallet above his head as he looks into it.

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published 11 November 2023

I’ve been fascinated by “spending” recently, for some odd reason. I’ve seen its addictive qualities in many clients’ lives, friends’ lives and, sadly, even my family’s finances as well. It all seems to start the same — we buy a few items that seem harmless. Next thing you know, you are getting successive credit card bills and thinking, “Boy, this got out of hand quickly.”

The natural first question at hand is, why do we seem to spend more than we should? I’ve done a lot of reading, analyzing, self-reflecting and observing. I’ll distill it down into three main categories below. I’m curious which you most identify with.

Category #1: Ignorance

The first reason I find that people spend uncontrollably is simply ignorance. Now, I don’t necessarily mean these are ignorant people, but it’s ignorance in general. Perhaps one spouse is simply unaware of where the family finances stand. They seem to think everything is fine financially, and yet, things are getting out of control. It is easy to point fingers in this type of situation, but honestly, both spouses are culpable, because they’re not communicating.

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The cure: To me, overspending is the easiest issue to “cure.” For starters, having an open dialogue on finances is critical in any relationship. It is important to be on the same page and don’t be afraid to discuss these things sensibly. In situations where you may need to bring in heavy artillery, I’d recommend consulting with your financial adviser. They can help lay out the immediate ramifications of out-of-control spending but also the long-term negative impact, such as having to work longer or not being able to pay for the kids’ college.

Category #2: Addiction

When we spend, it can release endorphins and dopamine, chemicals in our body that make us feel good. If something makes us feel good, the natural reaction is to do more of it. People who fall into this category usually start out spending on smaller items, then bigger and bigger purchases are needed to get that chemical reaction going. Think of a drug user who builds up a tolerance and needs a bigger quantity each time to receive the same release. It’s no different when it comes to addictive spending — it can spiral quickly and leave a family in financial ruin.

The cure: There are many ways to attempt to thwart addictive spending. One can seek help professionally or join a group much like AA. You can simply go cold turkey, like those who give up smoking on the spot. I’ve seen individuals journal or catalog their spending. In some instances, simply keeping to a strict budget can be very useful.

I’m a big fan of harnessing the addictive qualities for a positive result. For instance, instead of getting that dopamine hit by spending, try getting it by saving. Think of savings or investing as “spending” in a way. See how quickly you can build up that emergency fund, or your child’s 529 account, or perhaps your 401(k). Can you get the balance above $10,000, $100,000, $1 million?

In all seriousness, I’ve seen a lot of people become obsessed with savings milestones, and I would call that a good addiction.

Category #3: Filling a void

The final reason I have read or witnessed people spend is to fill a void in their lives or, similarly, to distract them from harsh realities. Some use spending to combat depression or loneliness. Others use it as a way to cope with difficult emotions, feelings or memories.

Spending is like any other vice that people turn to in difficult times to forget about life’s woes. Some choose drugs, alcohol, gambling or eating. Others prefer retail therapy.

The cure: Let me start by saying I am addressing those who admittedly have a problem with spending. If you spend responsibly to fill a void, I’m not so sure there is a major problem. If you are constantly spending at the peril of your own financial security, then there is certainly an issue that needs to be addressed.

The cure for this, of course, can be professional help to address these voids. For issues that aren’t as serious, you can try to fill this void with something constructive that provides a release and what you need in a more positive way — perhaps volunteering or exercising more. Maybe you can join an organization, group or team that you are passionate about.

We all need distractions in life, and I’d encourage this group of individuals to do some real soul-searching to discover what they are passionate about, other than spending, and use that time and money on developing healthier habits or activities.

Spending when done responsibly can certainly be an enjoyable thing. If you start to find yourself on a slippery slope, I find it best to stop in your tracks and address the cause right then. This way, you can tackle the problem before it becomes a real issue. Remember, we are here to help in any way we can.

As always, stay wealthy, healthy and happy.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.