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The psychology of overspending

Learn about the three main money disorders and how to deal with them

Money doesn’t buy happiness, so why do we treat it like it does?

We’ve all done it. We buy something we think will make us happy. Sometimes it brings us a measure of happiness or satisfaction. Other times, the feeling we think we’re going to get falls flat, almost as soon as we bring the item home.

As humans, we have a complicated relationship with money. We need it to survive. And we can become unhappy if we don’t have enough of it to pay our bills. But it becomes a crutch when we use it to fill an emotional need or fix a problem.

Six out of 10 Americans admit that money is a significant source of stress in their lives.1 With the average American being $38,000 in debt, it’s no wonder that money is a major stress factor.2

Experts say that money disorders contribute to our growing debt.2

To help us better understand money disorders, we must pull back the curtain on them — and take a close look at what causes them and how to go about fixing them.

Common types of money disorders

Money disorders are more common than you may think. They can be the result of other underlying issues such as anxiety, depression, or trauma.2

“As a society, we tend to bottle up any confessions about personal finances, and carry on with our silent struggle to mitigate our stress,” says Dr. Alex Melkumian, founder of Financial Psychology Center in Los Angeles. “The bottled up emotions and limiting beliefs can snowball into full-blown financial disorders.”

The three big disorders include:

  • Money avoidance issues. People who are in financial denial avoid thinking and talking about money issues.2 Some might reject thinking about money because they believe it’s inherently bad. Others are excessively worried about risk, so they don’t trust anyone else with their money. Some might believe that money is an extravagance and they shouldn’t spend it on themselves.3
  • Relational money disorders. Relationships with others are at the core of this disorder. Financial infidelity involves trying to hide your spending from someone else, like a partner, because you feel guilty.2 Financial enabling is when you don’t hold others financially responsible because you fear their rejection. Financial dependence is when one person relies on someone else to take care of their money problems.3
  • Money worshipping disorders. It can become a problem when someone equates spending money with a sense of happiness or connection.2 For example, oftentimes, a person with a compulsive buying disorder has an emotional hole they are trying to fill. Money worshippers might be a compulsive hoarder, a workaholic (or someone who stays busy all the time), an unreasonable risk taker, or compulsive buyer or overspender.3

The effects of money disorders

Money disorders can lead to financial strain that affects a person’s family and their day-to-day life and well-being. These disorders can wreak havoc on a person’s mental and emotional health, possibly resulting in them using maladaptive coping behaviors such as drugs, the overconsumption of alcohol, and gambling.4  

“As adults, we find we may have unconsciously adopted problematic financial habits, creating roadblocks to our own personal success,” Melkumian says.

The treatment of money disorders

The good news is that money disorders are treatable — and roadblocks can be removed.

A relatively new field, financial therapy (or counseling) integrates the cognitive, emotional, behavioral, relational, and financial aspects of a person’s well-being. Not to be confused with financial professionals, financial therapists help people change the way they think and feel about money.4

“It is imperative that individuals with financially dysfunctional behaviors work toward a comprehensive alteration of their thoughts, feelings, and habits with money,” Melkumian says.

This might be done by using cognitive behavioral therapy (CBT), a structured method used by financial therapists. Through the use of talk therapy, CBT examines underlying issues that might be contributing to a person’s money disorder. Doing so can help people make the needed changes to start living a more fulfilling life.5

Simply thinking about why you feel and behave the way you do when it comes to money can be eye-opening — and lead to better decision-making and fewer impulse buys. For example, to avoid overspending while shopping, ask yourself some questions: Why am I here? How am I feeling? Do I need it? Can I wait to buy it? How will I pay for it? If I purchase the item, where will I put it?2

Asking yourself these questions could help you tap into your understanding of your financial psychology and help you challenge and change your money scripts — or beliefs about money.1

Just remember that money doesn’t buy happiness. But how you think about money can.

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1. Klontz, Bradley T., Psy.D., CFP. “Op-ed: Why your financial issues make perfect sense to a psychologist,” www.cnbc.com, August 23, 2021.

2. Sprague, Kate; Exley Jr., Robert. “A ‘money disorder’ may be behind your growing debt — here’s how to know if you have a problem,” www.cnbc.com, February 8, 2022.

3. Friedberg, Carrie. “12 money disorders,” sfmoneycoach.com, 2022.

4. Latif, Saima, Ph.D. “Financial counseling 101: Managing money for couples and individuals,” positivepsychology.com, February 5, 2022.

5. Singh, Akanksha. “Can financial therapy untangle our relationship with money?www.bbc.com, July 23, 2021.


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DOFU 7-2022
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