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The Science Behind Spending Habits: What Makes You Want to Spend?

Deborah Gan

Deborah Gan

Last updated 28 October, 2022

According to a survey done by Smart Wealth, one in 2 adults in Singapore don’t know how much they are spending on every month. With such alarming stats, is this a cause of worry? And just what is making our money fly out of our wallets just like that?

Money makes the world go round. There are some things you can’t really go without, say basic necessities like food or your monthly mortgage to keep a roof above your head. 

And yes, money is meant to be spent anyways. You bring your million-dollar stash to your death bed, but you can, though, pass on that stash to your children and make their lives a whole lot better.

Spending money is essential to keep us all alive. And while you may be spending within your means, sometimes your expenses can be cut down significantly to help you accelerate your progress towards your financial goals.

But don’t you realise that spending money can sometimes be quite addictive? How you think retail therapy is actually a legitimate solution because it gives you happiness, even if it’s just for that one day or two.

So what’s making us spend more money than we need to? And why are we falling prey to them? Here are the answers you might be looking for.

More on this topic:
8 Simple Life Hacks To Spend Less Money On Your Wardrobe
Money Confessions: What's The Most Singaporean Thing You Have Done To Save Money?
My Wallet Is Not Looking Forward To Post-Covid Life
A Singaporean's Money-Saving Guide To Stop Overspending
22 Ways to Succeed in Your Money Goals 

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#1 Instant gratification

Instant gratification is the temptation of forgoing a future benefit in order to attain a less rewarding but immediate benefit when you do something. It could be buying a luxury bag you just saw and then buying it for that temporary happiness, but in the long run forgoing savings you could have made from not buying that ‘want’.

And many people fall prey to it because of the immediate satisfaction that comes with it. It’s really a natural human urge to want good things for yourself and to get it NOW, in the moment. 

Logically speaking, it is easy to see that delayed gratification might benefit you more and is generally the siser behaviour, but it’s that innate temptation that keeps all of us giving in and just purchasing it for that short boost of endorphins.

#2 Cashless society 

Now that we’re all moving towards a cashless society where purchasing items are becoming incredibly easy, it’s often so easy to give in to our immediate desires. With just a tap of a card, you could purchase that item of clothing that’s on sale. You may not be hungry but you see this delicious piece of chicken skewer that smells incredible, and you just get it anyway because you can easily tap and go on your credit card or phone.

Gone were the days when you had to fish out cash from your wallet that’s in the depths of your bag. There could be a higher chance of you forgoing that unnecessary purchase because you just took too long trying to find your wallet amongst your other belongings, or you just decided that you’re way too lazy to rummage through your bag.

Because of this, you might find yourself spending more on unnecessary items that you probably could do without, but just wanted to buy it anyway.

Not sure which credit card is the best for your spending needs? Compare the best credit cards in the market to see which is the best fit for you.

Read more:
I tried a '7-day cash cleanse' in Singapore: Here's how it went
Mobile Wallets In Singapore: Complete 2022 Guide
3 Ways Technology is Changing Money for Singaporeans
5 Types of People Who Should Use E-Wallets

#3 Buy Now, Pay Later (BNPL)

The advent of Buy Now, Pay Later or BNPL platforms is a true testament to consumers’ changing spending habits and preferences. In the past when only cash was available, a shortage of cash would mean that you had no other choice but to forgo your purchase. When credit cards came, you could buy first, and only pay when your credit card statement came.

But this BNPL service has changed the entire retail space. You can now pay by interest-free installments to spread your purchase expenses over a few months. And that’s what gets spenders going.

Having your big-ticket purchase split into three or four manageable installments entirely changes your perception. You’ll likely think to yourself “hey, it doesn’t seem that expensive”, and then proceed to make the purchase. A S$1,200 brand new phone becomes affordable because you’ll just have to pay S$400 for 3 months. Seems affordable right?

But if you think about it, you’re just delaying the payment and spreading it into bite-sized payments that your brain thinks is affordable.

See also:
3 Tips For Using ‘Buy Now, Pay Later’ Facilities Like A Real Shopping Pro
Best Credit Cards + Buy Now Pay Later Rewards Combo

#4 Marketing gimmicks

Ever seen a deal thinking “wow this is the best deal ever, I have to get this” even though you had no intentions of purchasing it before? That’s how good marketing tricks people into buying their products. You would probably think that you bagged some good deals with a huge discount, but on the flipside, you wouldn’t have even spent anything if you skipped out on that purchase altogether.

But don’t be too hard on yourself because I’m guilty of that too. Who can’t resist a good deal right?

You would have also realised that when you buy items, many of their prices have decimal places like “S$14.90” or “S$62.99”. In a 2004 study done by Monica Wadhwa and Kuangjie Zhang, they found that when we see a price with a decimal place, our brain takes time and struggles to process the number quickly. To compensate for this, our brains tap into ‘cognition mode’ to logically evaluate it (though often poorly).

Our brains are tricked into thinking that these prices are cheaper than they really are. Say a chair that costs “S$49.90”. Your brain immediately thinks it’s still affordable because it's still less than S$50 and in the S$40 range, though in actual fact it’s just 10 cents less than S$50. 

Because of these, people tend to spend more than they should, and more on things they don’t need.

Read more:
5 Marketing Tricks That Make Singaporeans Spend More
Best Credit Cards Promotions in Singapore (2022)
Best Shopping Credit Cards in Singapore (2022)
Best Credit Cards for Overseas Spending
Credit Card Welcome Offer: A Comparison of the Best Gifts

#5 Lifestyle inflation

Another reason why you feel the need to spend? The culprit is lifestyle inflation. It refers to an increase in your expenses alongside your salary increase. 

It’s again, normal human instinct to want to “treat yourself” when you get a salary increment or bonus. With more spending power than you had previously, you’ll feel richer and have the realisation that you can afford more things now.

And the scary part is that you probably won’t notice it unless you scrutinise your credit card statements each month.

Whether it’s transitioning from a student to a full-time employee, or you’ve just gotten a raise, anyone can fall prey to this affliction, if you don’t keep track of your expenses. When your disposable income increases, things that were once “luxuries” can easily become “necessities” because you technically can afford them right now. This could potentially result in an increased spending and get in the way of you achieving your financial goals.

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#6 Your parents’ spending habits

Wonder why you’ve been a spendthrift since young? Your parents’ spending habits may be the reason why you are a free-spirited spender.

The saying “monkey see, monkey do” applies even to you as a child, adopting your parents’ spending behaviour. But not just parents though, your older siblings, extended family and school teachers, and caregivers can also have a lasting impact on the way you deal with money.

If you were raised by people who were always saving whenever they can, and spending only on necessities, you might be less likely to overspend. Conversely, if they always splurged whenever they can or often treat themselves to material gifts, it is likely that you might do the same. 

#7 Peer pressure

Another reason for you overspending might also have to do with peer pressure. It might not be your peers forcing you to buy that new game console or that pair of shoes they absolutely love you in, but it could be you not wanting to miss out on these materialistic goods that everyone around you had as well.

Remember the time when everyone had the same Jansport bag in Secondary School, or Converse shoes that made the “cool kids” stand out? As humans, we definitely also want in on the latest trends. If our friends have it, then we want it too. More for the reason of not wanting to be left out instead of us buying it just because we like it.

If everyone has that same Chanel 2.55, it doesn’t mean that you have to have it too. Decide for yourself whether you really want it or you just want it out of peer pressure. Sit on it a few days and logically consider its practicality. If the trend dies out and your desire for purchasing it also declines, you’re probably just FOMO.

Read more:
4 Subtle Ways Your Friends Make You Spend More
9 Crucial Things You Should Not Be Saving Your Money On
20 Money Habits Singaporeans Should Have By Age 30

A mahjong addict with an undying love for dogs, Deborah is always on the hunt for cheap deals because she is always broke. That is why she is attempting to be more financially savvy to be.. less broke


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