The Psychology of Spending

Why do people spend so much money on things they don't really need? Why do some people let themselves get into debt when they should be saving for a rainy day, keeping money aside for their kids' education, or saving up for their own retirement? Let's see.

A Search for Satisfaction. If you think you have a problem with overspending, you're not alone. As much as 70 percent of the US economy is driven by consumer spending. So why is this? Psychologists say that quite often we shop for emotional reasons, most of which are negative. Quite often shopping is a means of relieving stress, demonstrating your own importance compensating for feelings of inadequacy, or as a way of alleviating frustration These are the very same reasons that lead people to over-eat. It s all part of the psychology of doing things in excess.

Impulse buying. The worst type of shopping is impulse buying. This is the type of unplanned shopping you do while you’re out in the street. The things that cause you to suddenly buy something are known as 'spending triggers’, and they are usually emotional impulses. Let's see some examples:

1. Relieving stress, you're having a bad day at work and nothing is going well. At lunch you go and buy yourself a new coat to help take your mind off things

2. Demonstrating your own importance: you get a Cartier or Rolex watch just to show everyone else how rich and important you are.

required. Unless they get help soon, they're going to get into an impossible situation' he added.

Another study found that university students in the USA faced similar problems. Results showed that 7.8% of students in the US were affected by ‘problem gambling’ (gambling which they can no longer control). One student was reported to have accumulated debts of $30,000 despite receiving numerous warnings from friends and family. Many experts now refer to gambling as a 'silent addiction’ comparable to drug and alcohol problems and there have been calls for US colleges to campaign against it.

The University of Lincoln in the UK has also expressed concern. One maths student told the college's newspaper, The Line, he had set up a poker account. "Having analysed it carefully, I think I've worked out a way to make money. There's definitely skill involved and it is possible to win, but I'd never be reckless enough to risk large sums of money' he said. "While the stakes are low it remains fun, but enjoyment goes out of the window when things get out of hand."

However, the dangers of gambling are by no means limited to students. A report by Gamcare urges that more be done to prevent people in general from gambling excessively and to help those who get into trouble. It suggests that debts of up to ?60,000 ‘might be common’ amongst problem gamblers. The report highlights a number of areas where there is insufficient understanding of the problems caused by gambling. It says, "Awareness of the help available to problem gamblers.., particularly among GPs (doctors), is equally poor. There is an urgent need to improve education about gambling for young people, alongside or as part of work on financial literacyand understanding chance and risk.'

Over the years, gambling has also become more and more socially acceptable in the UK. Twenty years ago, betting on horses or greyhounds was regarded as seedy. At the other end of the scale, only the rich went to casinos. They were for James Bond, not a first year medical student. But now, however, online gambling allows people to play poker and blackjack 24 hours a day, and has become more "middle-class", with The Guardian newspaper even having a weekly poker column. As a result, more and more people are finding themselves in debt and unable to pay the bills. And there is nothing particularly glamorous about that!

With the recessionkicking in governments around the world are looking for ways to save money. What do you think of these ideas sent in by readers of the Independent newspaper? Would they help slashthedeficit in your country?

• Cut the salary of any government official, earning more than the Prime Minister.

• Scrap all development of nuclear weapons.

• Increase tax on alcohol to Scandinavian levels. Add £3 to 750ml bottles of spirits, £2 to 750ml of wine and £ 1 to 300ml of lager. Also, increase the tax on cigarettes.

• Get rid of expensive cars for the police, such as BMWs. They can manage with cheaper vehicles!

• Stop cutting the grass on roadside verges.

• Huge amounts of money are spent on trying to prevent drugs coming into this country. None of this is working. Nationalise the supply of illicit drugs. • People with more than £300,000 of assets should not receive a pension

• Save money in government and local government by using Open Source software and operating systems such as Ubuntu instead of paying Microsoft all the time.

• Ban the spending of local authority money on publicity or advertising. They currently spend over £400 million on this.

• The health service should not be expected to provide vaccinations for travellers. If people can afford to travel to exotic places, they can afford to pay for their own vaccinations. • Stop smoking breaks. If seven smokers take four 15-min breaks in a day, that equates to a full time job!

• Charge prisoners for their upkeep. They should pay back any costs when they get a job - just as students do. Also, get rid of all unnecessary prison services such as acupuncture, Pilates, and massages.

• Abolish road tax and put the duty onto petrol instead. This would eliminate road tax dodgers and the cost of policing the whole system.

• Compensation payments for unfair dismissal should be capped at £100,000. Anything above that is ridiculous.

• Anyone who gets injured because they are drunk and needs to be taken to hospital should be liable to an on-the-spot £250 fine.

• Force people to work for their benefits. Even if it was for just one or two days a week, at least this would get people in the habit of working to earn money. Also, pay part of the benefit payment in food and clothes vouchers -so it can't be spent on 'luxuries' such as alcohol, cigarettes or Sky TV.

Discussion

Have you ever had any idea for making money? What was it?

What would be the easiest way for you to make money?

Have you ever invested in something?

Decision Time

49) You are going to listen to 4 adverts offering investment / money-making opportunities. What are the ideas? Which advert…

1. …guarantees you a 200% return on your investment?

2. …says that there are 3,000 horses available for you to invest?

3. … says that training expenses are not included?

4. ...promises a return on your investment of 12% per year?

5. … asks you to invest $10,000?

Discussion

1. Have you ever done any online gambling? What games did you play?

2. Have you ever been to a casion?

3. Have you ever played cards or other games for money? How much did you win?

Date: 2015-12-24; view: 793