Why We Buy What We Don’t Need

Throughout our lives, we make many purchases, sometimes out of necessity, but more often out of want. Studies suggest that ninety-percent of our financial decisions are based on emotions, which means only ten-percent are made rationally. We spend money to feel good, whether on new clothes, custom shoes, a designer purse, or a new car. Yet, if we stopped to think about it, we might realize that buying these items used or pre-owned would be a great, money-saving substitute. So, why do we buy things we don’t need? The answer lies in our psychology, specifically how our brains are wired. Marketing companies use this knowledge to encourage us to keep buying even when we don’t need to. Let’s break down a few of the biases that keep us wanting beyond reason.   

Projection Bias  

Have you ever gone grocery shopping on an empty stomach, only to purchase more food than you intended? This happens because of something called projection bias, which is the tendency to make short-sided decisions based on our current feelings assuming those feelings will remain in the future. To save money next time you go grocery shopping, make sure you’re not hungry and bring a grocery list so you only buy what you need.  

Fear Of Missing Out (FOMO) 

The fear of missing out, or FOMO, affects all of us, particularly youth. FOMO rates are increasing with social media usage causing many to overspend, a behavior driven by emotion sometimes leading to crushing debt. If FOMO is factoring into a large purchase, sleep on it. Wait 24 hours and see if you still want it the next day. Practicing gratitude for what you do have and budgeting for eventual purchases can manage the temptation, ease stress, and lower debt risk. Buying something when you can’t afford it may lead to increased stress levels and a cycle of increased debt affecting both your physical and mental health.  

Bandwagon Effect  

Today’s latest craze is the Labubu, with both children and adults buying them up. Twenty-five years ago, it was Pokémon, Beanie Babies; before that it was Garbage Pail Kids.  But why do people, regardless of age, feel the need to purchase a Labubu? What’s wrong with the other similar products? Nothing is wrong with them. What consumers are exhibiting is called the bandwagon effect, buying them because many others are doing so, even though the products have no real benefit for them. The next time you’re poised to buy into the latest fad or craze, ask yourself: Do I need it? Can I afford it? Why am I making this purchase? Does this item align with my goals and values? You may find you’re purchasing it because it’s popular, which could deter you from achieving your financial goals.  

Cashless Effect 

Before cash and coins, people would barter or trade for what they wanted. Today, people are using cash less and increasing their use of debit cards, credit cards, or phones to make purchases. While these make it more convenient to buy something, they also make it easier to spend money and increase debt. The cashless effect occurs every time you use cards or digital payments: instead of feeling the pain of payment, cash leaving your hand, you run the risk of spending without second guessing your purchase. To avoid this trap, try carrying more cash with you and setting a budget. This will help ensure you don’t spend more than you should. 

If you want lasting happiness and to step off of the hedonic treadmill, studies show that people feel better and are more joyful when they focus on meaningful experiences, volunteering, giving, spending time with others, and finding meaningfulness. Buying something new provides a fleeting high, which leads to wanting to buy something new again. This creates a constant cycle of chasing happiness. Break this pattern by taking control of your biases, understanding what they are and when you are experiencing them. Don’t let them control you and your money.  

Samuel Molina is an Accredited Financial Counselor® and CEO and Founder of The Academy of Financial Education, a non-profit organization dedicated to narrowing the wealth gap for its community through activities, coaching, education, and instruction. Visit Samuel’s FindAnAFC profile to view his services and connect with him on LinkedIn.