Get a kick out of spending money? Do you often get surprised by and then stressed by credit card bills? Always find yourself living paycheque to paycheque, no matter how much you try to spend carefully? If you’ve answered yes to these questions, you may be a spendthrift.
The makings of a spendthrift
Typically, when it comes to spending money, most people experience slight discomfort, also known as “pain of paying”. This discomfort encourages people to take a pause before a purchase. This pause allows them to question whether they really want to move forward with buying or not. A tightwad, or underconsumer, holds their money tightly because they feel this discomfort to the extreme. A spendthrift, on the other hand, isn’t impacted by this discomfort as much. This lack of discomfort at the time of purchase leaves them free to spend money more easily. In fact, they often don’t feel any discomfort. At least, not until later on when they look at their bank account or credit card bill.
Scott Rick, PhD, offers insight as to why spendthrifts feel less “pain of paying”. As Associate Professor of Marketing at the Ross School of Business, his research shows that spendthrifts are very good at “viewing everything as an investment”. Even if that investment is simply a story to tell. In other words, spendthrifts are good at coming up with a reason to go ahead and buy. Others make purchasing decisions more objectively.
Common signs you might be a spendthrift
- Buy a lot on impulse
- Don’t have a financial plan
- Shop to feel better
- Have a lot of debt
- Miss bill payments
- Forgo saving money
- Live beyond your means
Spotting a spendthrift
Spendthrift-Tighwad Scale
In 2008, Rick and his colleagues introduced the Spendthrift-Tighwad Scale. A short questionnaire is used to assess how much “pain of paying” someone feels. Based on those answers, they are placed on the scale. The higher the number, the more someone has a tendency to be a spendthrift. His research has found that 50 – 60% of people fall in the middle. The other portion is equally split between those classified as tightwads and those classified as spendthrifts.
Research also shows that spendthrifts do tend to lean heavier in a few demographics. For example, women are more likely to be spendthrifts compared to men. What’s more telling is occupation. Tightwads lean heavier in industries like science, technology, and math, whereas spendthrifts gravitate towards communication, social work and the arts.
Nature vs nurture
Nurture
How a child is raised, research indicates, does play a factor in where someone lands on the scale, but more so on the tightwad side of this spectrum. Post-Brokeness Stress Disorder is an underlying stress someone feels about money after experiencing financial hardship. This stress can linger on sometimes and impact a person’s spending behaviour even once out of hardship. Often, these experiences occur while growing up.
Nature
Nature isn’t ruled out completely when it comes to being a spendthrift. Some interesting research has been done to examine money habits in children. A famous one is the marshmallow study.
Researcher Walter Mischel conducted a study about delayed gratification in children. Put simply, children were given a choice of two treats, a marshmallow and a pretzel. They were then told that if they waited until the experimenter returned, they could have their favourite treat. However, if they requested the experimenter return early, they could only have the other, less favoured, treat. Some of these children were given a fun or pleasant task to do while they waited. Those with a fun task to do tended to wait, and so would get their preferred treat.
Two notable aspects of this study can relate well to spendthrifts. First, tolerance for delayed gratification seems to be, in part, inherent. Like most things, some of us are just naturally more inclined than others. Second, when distracted by something pleasant, we tend to do better at delaying gratification.
This second aspect, using a distraction, is really significant when thinking of spendthrifts. As Professor Rick’s research referenced earlier shows, spendthrifts enjoy thinking of a reason to buy something. Their “pleasant distraction” is the very thing that makes them end up wanting to buy something even more.
For any spendthrifts, this is good news and good news. The first good news is that if you tend to beat yourself up for this behaviour, you can stop. It’s not a fault, it’s just your natural tendency and becoming aware of this tendency is a major step forward in making a change. Keep reading to learn the second good news in the tips section about how to navigate being a spendthrift.
Spendthrift struggles
It’s important for spendthrifts to learn how to manage their tendency to overspend. Not doing so often means they:
- Continually live paycheque to paycheque
- End up with unmanageable debt
- Have a low credit score
- Suffer from poor health because of being stressed about finances
- Restrict their futures because of low savings or missed opportunities
Tips for spendthrifts not to spend
Set yourself up for success
Stores have become very adept at knowing how to tempt people to spend. A common tactic is placing highly tempting items, usually small and inexpensive, at the entrance to the store. They do this because they know, by it being tempting, yet inexpensive, there’s a good chance people will pick one up. This is a primer sale. This seemingly innocuous item’s purpose is to open your mind and wallet to the idea and action of spending. Retailers know that by putting you in that mindset early, you are likely to spend more than you planned.
How does a spendthrift combat this tactic? Go on the offensive. Before walking into the store, make the decision to “say no” to the first item, no matter what it is, you’re tempted to buy. This will set the precedent in your brain and body to not buy. With that mindset in place, you’ll be in a good position to make clearer spending choices.
Put a time on it (AKA Good news #2)
In all transparency, the marshmallow study was repeated by other researchers years later, and they were not able to replicate the same results. That being said, the results of the original study were the impetus for several other studies. One of these studies showed that just knowing how much time you need to wait helps people cope better with delayed gratification.
What does this mean for spendthrifts? It means, use your budget as a timer! By adding a line to their budget, a spendthrift can set up a timeline of when they’ll have the money to buy something they want. They can then circle the date on their calendar and use that to help manage their urge to spend.
Make use of obstacles
A great way to discourage behaviours you want to steer away from is to make it harder to do those behaviours. For spendthrifts that might look like:
- Using cash instead of a debit or credit card
- Removing credit card information from devices
- Making use of autotransfers for savings
- Implement a 24-hour waiting period before purchase rule
- Have a friend be your spending accountability buddy
Wrap up
Yes, being a spendthrift comes with its challenges, but it’s not the worst thing in the world, and it’s not an insurmountable issue. In fact, studies show that, when a spendthrift is sad, (a small amount of) retail therapy can actually be good for them. The sense of control and agency makes them feel better. It’s all about being aware of your tendencies and having a plan to mitigate issues before they happen.
If your debt has become unmanageable because of your spendthrift tendencies, we can help. During a free consultation, one of our trained Credit Counsellors will go over a personalized debt-relief plan.
