A large part of personal finance comes down to psychology. Today, we’ll go back to something Aristotle pointed out in the distant past – that materialism and insecurity go hand in hand. While technology has changed, people as a whole haven’t. Insecurity goes a long way toward explaining why we Singaporeans find it so hard to avoid excessive spending.
The Link Between Insecurity and Overspending
You may have Maslow’s Hierarchy of Needs, which is taught to almost every business student. This hierarchy of needs states, quite simply, that people will spend on essentials first (like food and housing), before spending on social acceptance (buying branded clothes). We’re going to tell you a shocking truth: it’s not really true.
The hierarchy of needs is generally accurate – but not with regard to how “abstract” social acceptance is. Consider that some people are willing to skip meals, or downsize their home, just in order to buy a branded car; or have a collection of designer clothes. This suggests that, to many people, social acceptance is almost a basic essential.
Why? The answer is because, deep down, insecurity can create the need to spend. People spend on branded goods because they don’t want to be left out, for example (if all their friends use branded goods, they don’t want to be the poor one). Sometimes, they spend to compensate – they may feel, for instance, that having a nice car and a big house make up for a lack of social skills.
To some degree, we’re all a little affected by this. When we’re insecure, a common instinct is to try and acquire something to make up for it. That often takes the form of spending.
Here’s what makes us overspend when we feel insecure, and how to keep these urges in check:
Learn to Be Okay with Yourself
When you’re not okay with yourself, you tend to spend more in order to “fill the gaps”. Think for a second about what your biggest insecurity is, and ponder how much of your spending it motivates. For example:
- People who are insecure about being lonely or socially outcast may constantly treat others and buy things for them, in the belief it will make up for their (mostly self-imposed) ostracism
- People who are worried about being unattractive may spend thousands of dollars on dating sites, or even try to buy affection with overly lavish dates
- People who are nervous about their weight often overspend on fad diet products and overpriced slimming services
- People insecure about being “looked down” on may overspend on a car or designer outfits, because they don’t want to expose their (self-inflicted) sense of inadequacy
Spend some time with a counsellor if needed, and learn to be comfortable with who you are. When you don’t feel judged all the time, you will lose the urge to compensate by buying material things.
Ask If You’re Buying to Enjoy or to Impress
Before you use that credit card, check yourself. Are you purchasing something for you to enjoy, or something that you want others to be amazed by? If it’s the latter, there is a high chance you are purchasing out of insecurity.
We’re not saying it’s always wrong to buy things to create a good impression (please don’t go for your job interview in shorts and sandals). But at the same time, do not allow yourself to overspend for something that’s purely for others to ogle at.
Cultivate a Sense of Solitude
Solitude is not the same as isolation. A sense of solitude means you can be yourself, even in the middle of a crowd, or with friends who are not like you. It means you can interact socially, without being totally controlled by social expectations.
Remember that there’s nothing wrong with being the financially poorer one, in a group of friends (if it does matter, they’re not your friends). Likewise, there’s no need to buy social acceptance by spending on the same things your peers do – you don’t need the latest gadget just because most of the people you know have bought one.
A sense of solitude comes from experiencing life – travel more, read more, and write more (when you can afford it). The more often you think and express yourself, the better you can assert your own identity.
The original version of this story was published in Singsaver on January 26, 2017.
For more financial tips and tricks, check out www.herworldplus.com/lifestyle/money.