By exploring the deeper issues that go along with our spending habits, we can unlock the motivations that guide us, giving us a clearer picture of why and how we spend and save.

If you asked a child why people spend money, the answer you'd likely receive is "because we need things."

If it were only so simple. Our true spending behavior is part of a tangled web of psychological factors, societal expectations and consumer society pressure. Add it up, and you've got a recipe for overspending, poor savings habits and a slew of other unsound financial decisions.

By exploring the deeper issues that go along with our spending habits, we can unlock the motivations that guide us, giving us a clearer picture of why and how we spend and save.

What Factors Drive Overspending?

All of us, at one time or another, have spent too much on a desired item. Some people, however, do this so often that it becomes a problem - a compulsive cycle with potentially ruinous effects.

A study in the Journal of Economic Psychology asserted that compulsive spenders engage in this activity in the hope it will create happiness, or provide an outlet for emotional relief. In this way, it's similar to someone who overeats, in an effort to deal with unpleasant emotions.

Credit cards have exacerbated this phenomenon. When we use plastic, the "pain" of parting with money is deferred. This lowers our psychological hurdle toward spending money - and encourages overspending.

Societal And Familial Pressure

The mere act of living in an advanced consumer society such as the United States brings its own set of spending pressures. Advertising surrounds us, urging us to buy goods. Many of these goods come with an implicit promise to transform some part of our lives.

At school and work, we must negotiate a social hierarchy that places great importance on status symbols. Those without the means to acquire such symbols may feel strong psychological pressure or feelings of inadequacy. If self-image and self-worth become linked to material goods that confer status, spending habits can easily slide out of control.

Family pressures are also always at play. Parents will spend well beyond their means on items of dubious value, if they believe doing so makes their children happy. Parents of adult children often feel obligated to support their offspring well past the age of financial independence, even if it means compromising their own financial security.

Finally, not every parent is equipped to teach their children the basics of financial literacy - a development that can seriously hinder the cultivation of smart spending and saving behavior early in life.

Recognizing Your Own Spending Patterns

There are a wide variety of factors that influence how we save and spend, and ultimately, our overall financial health. While it may be impossible to recognize them all, we can make an effort to address some of the more obvious questions, including:

  • Am I spending too much money in an effort to be happy?
  • Am I spending money to deal with unresolved emotions?
  • Are my spending and savings habits unduly influenced by societal or family pressures?
  • Could I benefit from a crash course in the basics of financial literacy?

If the answer to any of the above questions is "yes," it's time to take a closer look at your habits. By increasing your self-awareness and spending savvy, you can take steps to significantly improve your financial health.