Why do we enjoy spending money?

Money can buy wonderful things. Yet, apparently, it doesn’t buy things we can’t live without, like love, friendships, family, or good health.

Still, modern society can enable reckless spending in the pursuit of happiness and luxury.

Spending can become a habit, which leads to increasingly needless expenditures.

When we purchase certain items, like luxury goods, we might think it makes a statement to the world — chemicals flood our brains with feelings of pleasure at the thought of boosting our socio-economic status.

The danger arises when this spending becomes part of our identity.

Here are the most common examples of why we enjoy spending money:

• Want it, love it — We spend when we want to get something we’ve wished for or needed. Either way, we may find joy in being able to purchase something we really desire.
• Social aspiration — To fit into society and show off what you can afford. This impacts people who compare themselves to others frequently the most.
• Gratification — Haven’t we all felt this way when we got our first paycheck? Rewarding ourselves for our personal or financial wins can lead to excessive spending, though. Sometimes gratification-driving spending also happens when we want to cheer ourselves up.
• Compulsive buying — This uncontrolled urge to buy has been estimated to affect more than one in 20 adults in the US (from 1.8% to 16%) according to a study conducted by Stanford University School of Medicine.

How to think about money

Spending money is the fastest way to not have it any longer. When we buy things, whether we need them or not, we end up with those things, not money.

Each time we purchase something new, we make a financial tradeoff fraught with opportunity costs.

Ultimately, we should come to an agreement on what outcome we truly desire. Is it buying fancy goods, so we can impress others, or is it financial independence and the freedom to choose how we spend our time?

When you get a new smartwatch, there’s an opportunity cost to no longer having that money available to work for you.

JL Collins, the author of “The Simple Path to Wealth”, elaborates on the importance of understanding that compounding and opportunity cost are like twins, where the opportunity cost is the evil twin.

If we defer spending and add more to our savings, that money earns interest, and that interest then earns interest itself.

He says, “This causes a snowball effect as you earn interest on a bigger and bigger pool of money. Like the snowball, it starts small, but as it rolls along, it soon begins to grow in a rather spectacular fashion. It’s a beautiful thing.”

Wealth is what you don’t see

Those who prefer financial freedom over consumerism don’t want to have to prove anything to anyone.

For example, the billionaire Warren Buffett has worn the same set of suits every day for years.

He also shares, “If you buy things you do not need, soon you will have to sell things you need.”

It’s easy to get caught up with wanting to own high-end things and spending money on exclusive experiences to level up our standard of living.

What’s worth considering, though, is that the real wealth doesn’t show. Life doesn’t have to be about a fancy laptop, designer sneakers, or a bigger house, just to prove something.

Instead, life could be about putting your mind at ease by striving to do what you enjoy, with people you want to be around, and having all of that without worrying about having the means for it.