Young woman opening boxes of shoes purses sunglasses

5 Reasons We Overspend (And How To Overcome Them)

Arizona Federal Staff

Do you sometimes need a little “retail therapy?” We’ve all been there. Maybe it’s that I-gotta-have-it urge that overtakes us when we see a pair of designer jeans or the latest electronic gadget. Maybe it’s that shrug as we reach for the $6 cup of coffee that says, “I deserve this.”

The average American spends about $183 a month on impulse purchases (that's almost $2,200 annually) according to a 2020 survey.

What makes us overspend? Let’s take a look at five common reasons and how to fight the urge.

1. To keep up with others

Humans are naturally social creatures who want to blend in with their surroundings – sometimes by buying things they really can’t afford to try to fit in and keep up with others (also known as “Keeping up with the Joneses”). 

When people who seem to be in the same financial bracket as we are can seemingly afford a pair of designer shoes for each outfit, we should be able to afford them, too, right? 

Break the cycle: Learn to keep your eyes on your own wallet and to ignore how your friends or peers choose to spend their money. Develop a self-image that is independent of material possessions. Adapt this meme as your mantra when you feel that urge to overspend as a means to fit in: Let the Joneses keep up with me!

2. We don’t have a budget

A recent survey shows that 65% of Americans don’t know how they spent their money last month. When all of our spending is just a guessing game, it can be challenging not to overspend. 

Break the cycle: Create a monthly budget covering all your needs and some of your wants (try free budgeting apps like Mint, PocketGuard or Arizona Federal's Money Management). If you’d rather not track every dollar, you can give yourself a general budget for your non-fixed expenses and spend it as you please.

3. To get "high”

Retail therapy is a real thing. Research shows that shopping and spending money releases feel-good dopamine in the brain, just like recreational drugs. 

This is why the addictive quality of shopping or "shopper's high" can be hard to fight. When life gets stressful, or we just want to feel good, we hit the shops or start adding items to our virtual carts.

Break the cycle: There’s nothing wrong with spending money to feel good, as long as you don’t go overboard. It’s best to put some “just for fun” money into your budget so you can make that feel-good purchase when you need to without it putting you into debt.

4. Misuse of credit

Credit cards offer incredible convenience and an easy way to track spending. But they also offer a gateway into deep debt. Research shows that consumers spend up to 18% more when they pay with plastic over cash.

Break the cycle: When shopping in places where you tend to overspend, use cash and you’ll be forced to stick to your budget. You can also use a debit card with a careful budget so you know how much you can responsibly spend.

5. Lack of self-discipline

Sometimes, there’s no deep reason or poor money management behind our spending. Sometimes, we just can’t tell ourselves or our children, “no.” We just simply lack the discipline not to exchange immediate gratification for long-term benefit.

Break the cycle: Define your long-term financial goals. Create a plan for reaching these goals with small, measurable steps and assign an amount to save each month. Before giving in to an impulse purchase or an indulgence you can’t really afford, remind yourself of your long-term goals and how much longer your timeframe will need to be if you spend this money now.

Your Turn: What makes you overspend? Tell us about it in the comments.