Posted by Mike Smith :: October 15, 2007 @ 6:07 amLike any other addiction, compulsive spending can present itself in many forms with varying degrees of severity. A recent article on spending addictions describes the problem, discusses some of the causes, and offers some help to those who suffer from the condition.
The article cites research which puts the percentage of Americans with compulsive spending habits between 2-8%. The numbers vary so widely because of the many definitions of compulsive spending. Perhaps the more shocking number is the level of debt that these compulsive spenders are accumulating. We’ve previously reported that the average American household with at least one credit card is $9,200 in debt. As high as that number is, compulsive spenders are much worse off, with an average debt of $23,000, not including their mortgage.
Part of the problem is attributed to the consumption-driven society in which we live. It does seem as though we are constantly presented with new and exciting have-to-have items on a regular basis. If such temptations, along with the desire to keep up appearances with others in our social circles, are too much for us to bear, then spending may seem to provide relief regardless of the consequences. Whatever the cause, many people addicted to spending find comfort and gratification in the act of spending. The act itself creates the euphoria as opposed to the enjoyment of the actual item purchased. The danger here is that fleeting happiness from a purchase may not last long, even though the debt may take a long time to pay off.
The article cited above includes a list of 10 tips for breaking free from compulsive spending. Of the 10, there were two that seem applicable for nearly all consumers: Taking Control of Your Situation and Writing Things Down. These two tips go hand in hand and are discussed often here on the Lending Club Blog. Taking control of your situation means just that: you have to be an active participant in your finances if you want to be in charge of them. Writing things down is the foundation of successful budgeting. A budget is only as good as the information you use to create it, so having accurate income and expense numbers is critical, along with an understanding your credit cards and loans and their respective rates.
Even if your love of shopping doesn’t rise to the level of a compulsive spending habit, it may still be a drain on your finances. Avoiding elevated levels of debt is a difficult proposition for some people, but one that is a necessity for a healthy financial outlook. Having a clear understanding of your motivation and tendencies towards spending may help to identify holes in your financial plan that are preventing you from reaching your long-term goals.
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