Spending money is a massive part of our everyday lives, everything from bills to dinners, gifts to clothes. I’ve been thinking about the reasons as to why we spend money and I’ve broken it into four categories:

1) Spending based on a need (water, food, electricity, rent etc.)
2) Spending based on a want (entertainment, eating out, travel etc.)
3) Spending based on an emotion (boredom, sadness, guilt, loneliness, escape, desire etc.)
4) Spending based on your environment (peer pressure, social pressure, group think etc.)

Spending based on boredom is one of the ways airport shops do so well, you’re stuck in the airport for hours between flights with nothing to do except wander around the shops. Sadly I am not immune from binge shopping from time to time when I’ve felt bored, so it has definitely helped me to limit this by considering why am I really spending the money.

Thinking about which of the four categories above your spending falls into before you pull out your card, helps you to slow down the consumption cycle and start to consciously think about your expenses.

By considering why you are spending before you pull out your card, you start to consciously think about your purchases.

After discussing with a number of people about why they spend, we have come up with the three questions you should ask yourself before spending money.

1) Why are you really spending this money? Is it based on an emotion, need, want, or the environment that you’re in?

2) What value do you place on this purchase, and is it worth the time you spent earning the money?

3) If you left the store right now, would you still want this purchase in a month’s time, and would you buy it?

Now those three questions are by no means an official process, they are a good start when considering your next purchases. I’ve found it really helpful to quickly run through them in my head and force myself to be aware of my spending, rather than mindlessly pulling out my card.

You are going to spend money for many different reasons and that’s perfectly fine, just ensure that you can articulate why you are spending the money.

We discuss these questions about spending money on our recent episode of the How To Money podcast which you can find on iTunes here, or if you can access via the online web-player here.

Catch us on Twitter @HowToMoneyAUS, on Medium at How To MoneyAustralia or on our podcast over on iTunes.

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