A spendthrift is someone who spends money impulsively, often without considering long-term financial consequences. The priority here is immediate gratification, often triggered by emotional states or external cues.
Spendthrifts: driven by emotion
This pattern of impulsive spending is not about a lack of willpower; it is often connected to emotional and psychological triggers. At this point, people are not making rational spending decisions. Instead, they are responding to immediate desires. Over time, habitual impulsive spending can cause financial difficulties. Although impulse spending can boost your mood temporarily, it can lead to overspending and debt.
According to the University of Michigan, people fall on a spectrum between “tightwads” and “spendthrifts”. For tightwads, they feel what’s called the “pain of paying” and are hence reluctant to spend. On the other hand, spendthrifts feel little pain while spending and prioritize the present. They actively consider reasons to justify making a purchase and view it as an investment. They tend to make impulsive decisions because of that. However, they do feel that pain when they look at their bank account or credit card bill later. Experiencing discomfort naturally curbs spending for tightwads. Conversely, spendthrifts are consequently at a greater risk of financial difficulty.
Am I a spendthrift?
If you’re wondering whether you’re a spendthrift, here are several key signs to look out for:
- Impulse spending: You often buy things on a whim, without planning or considering if you really need them.
- Difficulty saying no: You find it hard to say no to spending money, even when you know you should save or wait. You may feel a strong urge to buy something now simply because you want it now.
- Living beyond your means: You spend more than you earn, maybe by using credit cards or loans. You use debt to prop up your lifestyle. This could lead to growing debt, in turn leading to financial stress.
- No budget or financial goals: You don’t track your spending or set goals for saving money. Without a budget, it’s easy to lose track of your spending. It’s a slippery slope towards losing control of your finances.
- Difficulty saving: You struggle to put aside money for emergencies or future needs. Even if you try to save, you may end up spending it on other things, like non-essentials.
- High debt levels: You owe a lot on credit cards or loans. Your debt is increasing. You may even find yourself paying bills late or even missing them, because you spent too much elsewhere.
- Paycheck to paycheck living: You find yourself running out of money and repeatedly checking your balance before your next paycheck arrives, irrespective of how much you earn.
- Shopping as a hobby: You shop to feel better, relieve stress, have fun, or simply for instant gratification. You may not need any of these things, but you would find that you have actually spent quite a bit.
If you said yes to more than a few of these key signs, you may be a spendthrift. Being aware of it is the first step to making a real change towards developing better financial habits. This will help you avoid money problems in the future and set you up for financial security. You can also check out your score on the Tightwad-Spendthrift Scale.
How to manage spendthrift habits
If you recognize these habits in yourself, don’t worry – acknowledging and accepting them is the first step. Here are some steps you can take to manage your spending and improve your financial health.
1. Accept and acknowledge
The first step is to be honest with yourself. Accept that you may have a problem with spending and acknowledge that it’s something you want to change. This self-awareness is important because you can’t fix what you don’t recognize.
2. Make a realistic budget and track expenses
Create a budget that fits your actual income and needs. Write down all your sources of income and list your monthly expenses, including rent, groceries, transportation, and entertainment. Track every expense for a month to see where your money actually goes. Compare this with what you thought you were spending, and you might be surprised!
3. Allocate a percentage of income to savings first
Move money into your savings accounts as soon as you get paid, so it’s not sitting in your checking account tempting you to spend it. Out of sight, out of mind!
Before you spend any money, decide on a percentage of your income to save each month. Start with 10% if you can. Set up an automatic transfer to your savings account as soon as your paycheck arrives. This way, you “pay yourself first” and make saving a habit.
4. Use cash instead of credit cards
Try using cash for your daily purchases instead of credit cards. When you pay with cash, you can physically see your money leaving your wallet, which can help you think twice before making impulsive purchases. Once the cash is gone, you know you’ve reached your spending limit.
5. Shop with a list and stick to it
Before you go shopping, even if it’s just groceries, make a list of what you need. Promise yourself you won’t buy anything that’s not on the list. This helps you avoid buying things just because they catch your eye or are on sale. It also helps you get into the habit of being able to say “no” to that impulse.
6. Delay discretionary purchases
If you want to buy something that isn’t necessary, put it in your online shopping cart and wait a few days before buying it. This “cooling off” period gives you time to decide if you really want or need the item, or if it was just an impulse. If you still want it after a few days, go ahead and make the purchase! You will know it was a well-considered purchase.
7. Set up different savings goals
Create separate savings accounts for different goals, like an emergency fund, a vacation fund, a hobby fund, or saving up for a car. Having clear goals can motivate you to save and help you see your progress.
8. Talk to a financial planner
If you’re struggling to manage your money on your own, consider talking to a financial planner. They can help you make a plan, set realistic goals, and give you advice that fits your situation.
Key takeaways
Being a spendthrift means sometimes spending money impulsively, or not considering long-term effects. It is often connected to emotional or psychological triggers. Some signs include impulse buying, living beyond your means, and not saving as much as you’d like – or at all. The “tightwad-spendthrift” scale shows that people fall on a spectrum – some people find it hard to spend, while it comes easily to others. Knowing where you fall on this scale can help you understand your habits.
To manage spendthrift habits, start by accepting the problem and tracking your expenses. Make a realistic budget, set savings goals, and use cash instead of credit cards to limit impulse buying. Always shop with a list, wait before making non-essential purchases, and move money into savings accounts right away. If you need extra help, talk to a financial planner. By taking these steps, you can control your spending, save more, and avoid future money problems. If you’re currently dealing with debt, you can contact one of our trained credit counsellors for advice – they can help you figure out which debt solution could be the right fit for your specific situation.
