How to understand your spending behavior

Your spending behavior is how you regularly, almost automatically use your money. Of course, inherent in one’s spending behavior are the times when one does not spend, i.e., saving behavior.

How does spending behavior develop?

We all see and use money in different ways. As a result, everyone’s spending habits are a bit different. We tend to talk about spending behavior as part of a larger money personality: how do you see money and how and why do you use it? We develop our unique habits and attitudes about money through a variety of sources. These include:

• Our friends and family.
• Our culture.
• The media.
• Religious teachings and traditions.
• Past experiences with money.

Why is it important to understand your own spending behavior?

How we see and use money has broad effects in our lives. It plays a big part in our relationships (friends, dating, marriage, etc.), in our job and career and, of course, in our finances. Yet many people have never really stopped to consider why they do what they do with money. This means that people may, for example, fall into the same old frustrating patterns around money. It may be:

• Why am I always in debt?
• Why can’t I save more money?
• Why do I always fight with my spouse when we’re on vacation?
• Why do I keep getting stuck in dead-end jobs?

Without understanding your spending behavior, you are likely to keep doing what you’ve been doing. That’s why it’s helpful to do a money personality assessment. Like any personality assessment, it’s helpful because it lets you see the forest rather than just the trees. It helps you set goals. And it brings new awareness to certain traps, challenges and weaknesses you may have but don’t realize.

Spending behavior examples

• For example, you might be spending a lot of your income to make a positive impression on others – but not realize it. That might be living in a prestigious neighborhood that’s above your means, driving a car you can’t afford, always buying new clothes, constantly replacing electronics (like a cell phone or camera) to have the latest thing, or frequently offering to pay for others when you go out to eat.
• Other people may not be aware of how much of their spending behavior is really gifting behavior. They may not see the spending leaks that come from always wanting to help out friends and family, thereby leaving them short for their own financial needs.
• It may be that someone saves and saves and saves for a vacation but then a switch is flipped while on vacation that says, “Enjoy yourself no matter the cost!” Then those good intentions to stick to the original budget turn into a vacation that racks up debt.
• You might be really good about not buying unnecessary things – except when you’re in the company of a certain person. You may just really enjoy the experience of shopping with a certain friend or you always buy extra things for your kids when they come along to the store.
• Or it may be that someone realizes that he is always trying to buy the cheapest thing possible – and he only realizes later on how something cheap can have a high cost. That might mean buying a used car that seems really inexpensive at first but then may break down later, need to be towed, require expensive repairs and cost lots of time and frustration to make right.

Nuances of spending behavior

When looking at spending behavior, people often resort to very basic blanket labels. Your spending behavior either makes you a spender or a saver. But people are more nuanced than that. That’s why Money Habitudes shows people a unique combination of money personality types (we use six types). The Money Habitudes results are easy to understand and give people richer information to look at themselves and their financial habits. The more nuanced look leads to richer discussions and real epiphanies where people come to really understand their own spending behavior. It’s easier to talk about money when we can tell a full story; labeling one’s self as simply a “spender” tends not to allow for that. For this reason, Money Habitudes is often used by financial educators, financial counselors, money coaches, financial planners, therapists and career counselors.