The psychology of money: Why we sacrifice our financial future for instant gratification

By Steve Savant

Ash Brokerage Corporation


Financial literacy can only be applied after consumers understand the psychology of money. Just referring to the American population as consumers reveals our core identification as the minions of material consumption. We’re trading instant gratification from the purchase of an item for our long-term financial security.

Financial literacy is the greatest educational scandal in America. We teach math, but not its economic application in daily life. The consequences of the lack of financial literacy include maxed out credit cards, leveraged second mortgages and long-term auto financing that busts household budgets — if there is a budget at all. Financial literacy can only be applied after consumers understand the psychology of money. Just referring to the American population as consumers reveals our core identification as the minions of material consumption.

Our vulnerability to overspending is a result of a generation of conditioning by psycho-marketers that play on the low self-esteem issues of our souls. That conditioning causes a false self-image that relies on symbols of success like our home, cars, clothes and jewelry. So in reality, they are marketing to our chronic insecurities, causing us to ignore the basic need to feel financially secure, in favor of the need to raise our self-esteem. We’re trading instant gratification from the purchase of an item for our long-term financial security.

Psycho-marketers play on our human weakness to belong, to be loved, and our desire to appear important. They also understand the role of core irrational beliefs in spending habits, some of which are so habitual that they’ve morphed into full-blown spending addictions.

There’s a book by psychologist Harriet B. Braiker, Ph.D. called "The Disease to Please." Following are a few extrapolations on irrational beliefs from her book and from an interview with nationally recognized sports psychologist, Dr. Jack Singer.

If you don’t go to great lengths to please others, they will abandon or reject you. This false belief is a by-product of low self-esteem. If you sacrifice your “needs” to please others, most will simply take advantage of you and expect you to continue to do so. An example of this is the baby boomer generation, also known as the “sandwich” generation, by virtue of their spending on their children and caring for their parents. They've burned both ends of their checkbook while losing significant equity positions in their home and 401(k)s through the housing bust and market meltdown.

Now the reality of retirement looms large in the near future with inadequate accounts and projected life expectancy. The old Star Trek adage, “The needs of the many outweigh the needs of the few,” may have been the boomer mantra, but now they must turn inward to secure their own lifestyle in retirement. They need to assert themselves by understanding the needs of their future.

When people disapprove of you, it is often internalized in the form of bad emotions and, in turn, sparks chronic anxiety in interpersonal situations. It suggests that one fault or unattractive feature renders you worthless. Codependent relationships that center on your money are destructive, especially when they orbit around a character flaw your abusers constantly address. You need to make a quantum leap to a universe that prioritizes your needs first.
Another irrational belief is that your self-worth as a person depends on how much you achieve and produce or, in economic terms, your self-worth is based on your net worth. There’s nothing wrong with accomplishments and successes, but when failure occurs, and it will, it often tailspins into depression and the loss of self-worth and self-esteem, or worse, the sense that you’ve lost control. In truth, you have some control over much in your life and much control over how you interpret and emotionally respond to life events. Financial crisis can generate great despair. Financial insecurity strikes at the heart of your well-being.

The addictive idiosyncrasies of excessive spending come after surrendering to a habitual obsession. Behavior that impairs the performance of a vital function is a harmful development. Addiction causes you to lose your sense of balance and rationality. Beneath all addictions is a longing for immediate gratification — to feel good, powerful, worthy of admiration and problem-free — and an insistence on ignoring the long-range, self-destructive implications of the behavior.

A spending addiction is an attempt to try to buy happiness — to feel admired, to feel accepted, to feel empowered, to push away troubling feelings like self-doubt or self-disappointment — and can ruin everything you hold dear.

Spending addiction is a symptom, a flashing warning sign hat there are deep-rooted feelings you’re trying to avoid facing. Indulging yourself in shopping temporarily numbs troubling feelings, but only for for a while. Every time you try to stop the pattern of compulsive spending, you find you still have to deal with distressing feelings — the panic and fear that pops up is almost indescribable. Even though you may have promised yourself you were going to curb your spending, you go on yet another shopping binge in an attempt to feel better fast.

What feelings could be so distressingly terrible that they're capable of sending you on a spending path of self-destruction? Maybe you’re afraid that you’re not as attractive or successful as you’d like to be. Perhaps your fear stems from believing that the real you isn’t lovable. Or maybe you’re afraid that the façade, the outer you that you’ve worked so hard to build and have maintained so painstakingly, will crack and that others will then see what, in your mind, is behind that front: that you’re a fraud, a pretender, a failure.

When you have spending addiction, what you’re actually attempting to buy is the admiration and affection of others. To erase self-doubt and self-disappointment. It doesn’t matter how much money you have, how successful you are, or what prestige you hold in your community; it’s the inside of you that feels empty and insignificant. When you’re out there spending money, that gaping emotional Grand Canyon inside of you feels nearly filled and, if only for a little while, you feel on top of the world.
Heavy-duty denial is a major component of addictive behavior. In order to determine whether or not you’re suffering from spending addiction, you’re going to have to do a scathingly honest audit of your spending habits: How much and how often do you spend? What damage does your spending cause to your bank account, your work, your family, and your personal life? And, most importantly, what feelings of fear and/or insecurity do your spending habits attempt to cover up?

It's no secret that recognizing you may have an addiction is the first big step towards recovery. If you suspect that spending is a likely source of problems for you, you might consider talking with a therapist.

We need to change our core beliefs so we can change our life. Examine your internal dialogue and look for distortions, such as mind-reading, “catastrophizing,” and over-generalization. Then, change your beliefs to more rational ones.

“If I don’t go to great lengths to please others, they will abandon or reject me.” Is there any real proof of this? “My worth as a person depends on how much I achieve and produce.” This is catastrophizing that you will never get the accolades you deserve. “When people disapprove of me, it invariably means that I am wrong or bad.” Is this coming from overgeneralizations from childhood and/or marital situations?

Consumer overspending is based on our distorted views of what we need versus what we want. Our desire for immediate gratification is creating a perilous financial future. Financial literacy is important, but it’s meaningless without correcting the emotive drivers that are steering us into a ditch. To get back on the road to recovery, we need to drive out of the ditch with a self-image that believes in long haul thinking. After all, it’s smoother on the road.