Why it's imp. to set limits on feel-good spending?

We almost never buy anything for full price, she told me. We wait for sales, discounts, offers, and buy only then, she added. The joy of getting something at a bargain drives so much consumption that sellers do what it takes to fake it for buyers. Either the product is elevated to something that persuades the buyer to willingly pay the price, or the bargain is cleverly showcased to give them the satisfaction of a good deal.

Consumption drives many large economies, including India. Over the years, we have moved from an economy driven by government spending to one that depends on private consumption. In the years that bogged the US economy in a recession, politicians persuaded people to buy not for themselves, but for their country. Many of my friends in India, too, are unabashed about masking their buying sprees as acts of patriotism. There is no denying the economic benefit and chain of income that spending enables.

However, our conversation is about how spending decisions impact wealth and wellbeing, and why we should think before making these. We are not talking about essentials— mandatory spending done routinely on rent, food, fees, utilities, etc. We focus on discretionary spending. We don’t have to incur these expenses, but we do anyway, for a variety of reasons. We do have better control on these expenses, but tend to lose it for various reasons.

Why spending feels good
Spending releases dopamine, at least for most; not for those who isolate the act as parting with money. For most who see the entire process of desiring and wanting something, taking the time to make the choice, earning the approval and appreciation of others while doing it, and finally owning and holding the object of desire is like an accomplishment. It enhances the mood and feels good.

Recognising that we are spending purely for the high that comes with it is helpful. We are human and have our failings. Seeking happiness through spending sprees is a widespread habit. We also justify it as retail therapy. A quick mood enhancement, like a candy bar, might be needed to cope with what life deals us from time to time. Being aware that we take recourse to spending when we are down is helpful. It is possible then to set a limit, as we would for the number of alcoholic drinks we down, or the helpings of dessert we consume.

A friend’s son had access to his ailing dad’s ATM card. The father thought it would help the boy learn the routines of household financial management. The boy was suffering psychologically from being a ‘failure’. He had not completed his graduation; did not hold a steady job; and was overweight and considered himself unattractive. He used spending to feel successful. He created an imaginary business to hoodwink his unsuspecting mother, and over years, emptied the entire fortune his father had saved, siphoning off the money to spend lavishly on himself, family and friends. His spending habits brought the household to near bankruptcy.

We may not have the extreme disease of this young man, but could be spending for social approval. Brands thrive on this need for association and acknowledgement. The car, phone, watch and clothes that we buy are signalling to the world about a certain financial status. We want to belong to those circles. Walking into a crowd wearing branded shoes and carrying that specific bag gets us the attention we crave for. Being able to afford something that others may find expensive reaffirms our notions of success, accomplishment and affluence.

The dangers
The dangers of these social markers is that they tend to creep into our mandatory spends. They slowly become a part of our identity and preference. They also create rigidities about how we dress up, how we look and behave, where we eat, and whom we socialise with. Notice how each of these habits is designed to exclude the world around us and create a bubble in which we believe we must belong. Narcissism rules.

Research on happiness shows otherwise. It is when we focus on the world and develop the perspective that we are small in the larger scheme of things, that we live a happy life, says Arthur Brooks. When we walk among the woods, stand before the ocean, hike to the peak of a mountain, and listen to the running brooks and birdsong, we become aware of the beauty of the vast world. We begin to see ourselves as one of the many lives here, smaller than we imagine ourselves to be. This fosters lasting happiness and peace. So, rethink that travel bucket list for its objectives.

Be aware and mindful
When we spend to create a grand image of ourselves that invokes awe and admiration it should be tempered by that research. We can be mindful about limiting ourselves to the social more as it were, but draw the line about how far we might want to go to show the world that we have the wealth to splash about. We make personal decisions about comfort, convenience, and the cost we want to incur to ensure these for our family and friends. Being aware that creating an exclusive bubble for ourselves might be a slippery slope of spending, with no lasting happiness, could be helpful.

Our spending decisions are driven by a sense of entitlement. We believe that we deserve what we are getting with money and that we have earned it. We like to spend without thinking too much about it, and see this attitude as a mark of having enough wealth. Pause to consider how that attitude towards spending might be leading to misallocation, wastefulness, and exploitation of resources. It is a macro view that is quite valid. The money might be ours, but the resources belong to mankind. We have no entitlement to use, throw, waste or squander, for we rearrange these resources with our buying power and spending habits. Nothing is as simple as it seems.

The Author IS CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING


(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)