Times of stress tend to amplify our human nature, including the way that we spend and save money.
While stuck at home during Covid-19, for example, some might be itching to spend or take advantage of upcoming Black Friday and Cyber Monday sales — experts say that stress-shopping is one way we attempt to feel in control of our lives.
Even when there's no pandemic, the way that people spend or save says more about a person than whether they have self control.
Experts don't exactly know why you end up with a propensity to splurge or save, but part of it likely has to do with your family upbringing, says Scott Rick, associate professor at the Michigan Ross School of Business, whose research focuses on the emotional causes and consequences of consumer financial decision-making.
It's a topic that researchers are currently studying in kids, but preliminary data suggests that people tend to pick up the spending habits of their mothers more than other family members.
Individual life experiences also play a role, Rick says. For example, if you lost a large amount of money at a key moment in your life, it might make you stingier. Or if you went through a period of time when your money was tight, you might hold onto those habits even when your situation improves.
Interestingly, the amount of money you make doesn't impact whether you're a spender or a saver, Rick says. (Although, obviously your propensity to spend or save does impact the amount of debt and savings you have.)
All of these factors make up your "money scripts," or your beliefs and emotional connection to money, explains Brad Klontz, psychologist and founder of the Financial Psychology Institute. "They get adapted as you go through life by watching other people, your culture, your neighborhood and your friend group," he says.
Broadly speaking, your willingness to spend money seems to hinge upon one factor: how psychologically uncomfortable you feel when you have to part with your money, explains Cynthia Cryder, associate professor of marketing at Washington University in St. Louis' Olin Business School.
It "predicts things like how much money they have saved, and how much credit card debt they have," Cryder says.
Here's what your habits say about you and your personality. The good news, according to Cryder, is that no matter where you are on this financial spectrum, it is possible to change.
If spending money stresses you out…
People who have trouble spending money "experience a lot of distress when they're considering spending," Rick says. "So, they don't buy the things that they think they should buy or want to buy."
They also tend to have more self-control, act more rationally and plan more, Rick says. They're prone to overthinking things, says Rick, as well as being flustered by thoughts about money.
"For those people, spending money becomes excruciating because they feel like they're making themselves vulnerable," Dr. Klontz says.
Some people who have trouble spending don't allow themselves the opportunity to enjoy their resources, Dr. Klontz says. "People can be so worried about the future that they don't allow themselves to have any joy in the present moment," he says. Of course, if you've recently lost your job or had to close your business due to the pandemic, that can drastically skew the way you view your finances, too.
For these reasons, people who have trouble spending money may be a little less happy in their lives, because they've foregone some purchases or experiences that would've made them happy, Cryder says. (And they aren't just skimping on indulgences; they don't buy practical things such as financial advice and furniture, Rick says. "Some of tightwad-ism is penny wise and pound foolish," he says.)
"But having a little bit too much money in your savings account is a much smaller problem than having too little," she says.
If you love shopping and spending…
People who have trouble limiting their spending, on the other hand, are more carefree and focused on the present, so they only see green lights when it comes to shopping decisions. They don't experience the same sting from making purchases, which is why they often buy more than they think they should, Rick says. There also seems to be a relationship between being a spendthrift and being bored and more materialistic, Cryder says.
But a person's propensity to spend is deeper than just keeping up with the Joneses, Dr. Klontz says. Buying things can be fun, and it helps us connect with other people. Over time, you might develop a sense of pride or status around buying items that's "totally linked into this psychological need we have to be accepted by our peer group," he says.
If you're frugal and strict about saving…
"Frugal people love to save; they think it's the right thing to do," Rick says. Technically, there's a difference between being frugal and actually having trouble spending money. Frugal people might go to great lengths to save and not waste. They may repair their clothes instead of buying new ones or get a kick out of shopping at secondhand stores, for example. People who are stressed out by spending don't necessarily share the same quirks; they just don't like spending money, period.
"It's good to be frugal," Rick says. And if you're frugal and spending stresses you out, "that person is going to be particularly likely to have a large pot of savings and small or nonexistent credit card debt," Cryder says. "Whereas if you have somebody who's both a spendthrift and gets little to no pleasure from saving, then they're likely to be spending more."
However, there's status associated with being frugal, which can add a competitive element that cancels out some of the benefits, Dr. Klontz says.
"We're always thinking about status as being related to overspending or really beautiful watches," he says. "Well, there's an entire group that is trying to outdo each other on how frugal they can be."