It sounds a really simple question, but the answer isn’t as straight forward as we would like it to be.

This often asked question actually has two parts to it.

The first is why do we spend money and the second is what makes it so easy.  So, let’s look at these two components in isolation and put them back together.

The first part: Why do we spend money?

Unless you want to be a self-sufficient hermit, you have to spend money!  Basic everyday needs like the roof over our heads, clothing and food have a cost.  So, you do need money to meet these baseline needs.

It is what happens after those needs are met, that make this a really interesting question.

The frugalists would argue that above those baseline needs we don’t need to spend very much money, the basics of life are fine.  If that is how you see life, then great and if it works for you, keep doing it.

But I am guessing that, like me, you like a few nice things in life that money enables us to buy.  Like a car that I don’t have to tend to every weekend, maybe a well-stocked pantry, perhaps the new technology toys and anything else you fancy.

Money is emotional

One of the drivers that makes us spend money are emotional triggers.  It could be anger, sadness, revenge, happiness or any other myriad of emotions that have us swiping our credit cards.

It doesn’t have to be on ‘material things’, it may be on experiences like a night out at a show or a trip.

The first thing you need to check in on is your emotional state.  How do you feel?  If your emotions are heightened, you’ll likely spend more money than you normally would.

If your emotions are heightened, it will take a bit longer for your rational side to kick in.  Our emotions get in the way and override our normally logical self.  It’s these emotions cause us to attach meaning to money.

For example, if money means status to you.  When buying a new car, your emotions are thinking about how cool you will look or how envious your friends will be.

Your logical brain on the other hand, will be saying, “but the five year old model will still get us from point A to B just as well.”  Who is going to win, emotions or logic?

Warren Buffett said, “If you can’t control your emotions, you can’t control your money.”

Money Biases

We are susceptible to a range of mental biases and the stories that we wrap around them.  The scary thing is, quite often we aren’t aware these biases have kicked in.  But marketers are and they use this knowledge to help us open our wallets/purses.

We see money differently depending on it’s source.  If we are given money, or get an unexpected windfall, we are more likely to spend it on anything we want without giving it much thought – after all it’s free money!

With our salaries, however, we tend to allocate to various categories (called mental accounting) and be quite clear on how we need to allocate it.

Justification bias

This is a form of self-deception.  It allows us to spend money (whether we can afford it or not) and make it okay.  It goes a bit like this, “Well, we only spent $80 on dinners last week, so it means we can afford $400 to go away for the weekend.”

Rationalisation bias

goes hand in hand with justification.  You have spent the $400 going away for the weekend, and afterwards you tell yourself, “We work so hard, we really deserved that break.”

“No problem, we’ll put it on the credit card.  If we put an extra $20 a week on the card we will pay it off in four months.”  You conveniently forget the interest, of course.

When you find yourself having these types of conversations, it is time to stop and step back and take time to let your rational brain take control.

We get Anchored!  

We latch onto a fact or an idea and we use that as a reference point for future decisions.  This is why we are so good at buying things on sale.  We have seen the full retail price and then, we get a discount that is just too good to turn down.  We buy and then tell ourselves how well we done and how much money we have ‘saved’.


For instance:  You are in a restaurant looking at the menu.  At the top of the list is an amazing crayfish and truffle platter for two $150.00.  Far too expensive, so you look at the next item which is a steak dish for $45.00 you select that one and feel quite happy with your decision.

The restaurateur anchored you to the high price of $150.00 so you felt really happy paying $45.00.  If you had looked further down the menu, you would have seen fish of the day $35.00!

Confirmation Bias

Once we have been anchored, the confirmation bias is the next thing to kick in. You have bought the jacket and it is the best quality and value in the whole world.  That’s your story and you are sticking to it.

We pick data to confirm our beliefs and then we look for information that confirms that belief and it ratifies our decision.  This is done both consciously and subconsciously.

Not only do we look for data to confirm that belief, but we actively discount and often dismiss information to the contrary.  This applies to people as well as goods and services.

“I’ll have one more biscuit, then I will stop.  I’ll start my diet tomorrow.”  Of course we will have more than one biscuit… why stop at one when you have a cookie jar full?  This is a great example of the Internal Bargaining bias in action.

We have set a future commitment, so we feel quite virtuous and can now justify our excess.

We do exactly the same thing when we spend.

“I’ll buy one more thing and then nothing more ’till next month.”  We have had clients say they did a big spend up before starting to work with us, so they aren’t tempted while we are working together.

Internal bargaining doesn’t help you lose weight, neither does it help you manage your spending.

Keeping up with the Joneses

We don’t want to be seen as not being able to have what our peer group has, so we spend money (often money we don’t have) to keep up with our friends.

Be very careful of this one.  Keeping up with the Joneses can send you broke and guess what, maybe the Jones are already broke…

Easy to spend

Instant gratification

Or as we like to call it, a Freddy Mercury moment.  I want it all and I want it now!  Our brain doesn’t like waiting, we want it now.

And we can because of credit.

The second part: why it is so easy

Credit Cards and Mobile Payments Apps.

Technology has completely changed the way we spend money.

There have always been ways of obtaining credit.  But the advent of credit cards and Mobile Apps such as Google Pay, Apple Pay, Afterpay, Laybuy, etc, has made it much easier.

They have created a paradigm shift in how we think and act with our money.

Before credit cards and mobile payment technologies, we used cash.  We walked into a shop and we handed over our hard-earned money and got something in exchange.

The pain of paying occurred at the same time as the pleasure of buying, so we tended to think more about what we were spending our money on.

easy to spend

Now we hand over a credit card or use a mobile App and we get the pleasure but no pain.  That is delayed until the credit card statement arrives and if you don’t look at it, you are deferring the pain even further.

But you get the pleasure straight away and it feels good to spend.  We are just wired that way.

The ease of ‘buy now pay later’ deals means we can buy larger items for absolutely $0, zero, nix, zip, nothing!  You get the enjoyment of the item right now and don’t have to feel the pain for months.

It’s so easy to spend money that we succumb – and worry about consequences later.

We have given you just a taste of the reasons why we find it so easy to spend money.  These are very generalised reasons.  If you want to dig a little more deeply into your own personal reasons why you spend money, go to our website and take the Money Personality quiz.

If any of this has struck a chord with you and you would like to find out more, we are happy to listen and help.  Drop us an email or click on this link to find a day and time that suits you to have a chat with us, we’re really very friendly.  Best of all, it’s absolutely free!