The Psychology of Spending: Why We Buy and How to Save More

Do you try to save money but always seem to fall short? If impulse purchases are draining your finances and causing stress, it may not just be poor budgeting, but human psychology at work.

Everything from your emotional state to subconscious biases and social pressure plays a role in how you spend. If you want to get a handle on your spending, it’s important to understand the psychology of spending and how you can consciously try to save more in the future.

Emotional drivers behind spending

Our current mood and needs frequently affect how we act, which is why you’re more likely to purchase too much if you do your weekly food shop while hungry. Our emotions can affect our spending habits in a similar way.

Spending decisions are often influenced by our emotions, with prime examples being stress, boredom, and excitement. But why does this happen? Spending triggers a release of dopamine, the brain’s feel-good chemical. That temporary high can lead to impulsive choices that offer short-term satisfaction but long-term regret (buyers remorse), a concept central to retail therapy psychology, where shopping becomes a coping mechanism for negative moods.

A 2014 study published in the Journal of Consumer Psychology found that individuals in a sad emotional state were more likely to increase their willingness to pay, highlighting how mood can distort value perception.

Tip: One way to counter this is through the “cooling off” technique: when tempted to buy, wait 48 hours. If the impulse fades, it likely wasn’t essential. In the old days, freezing your credit card gave you time to think about purchases (there’s actually chrome extensions that change the ‘buy it now’ button messaging for you), nowadays not having your card details in Apple Pay and physically looking for your purse or wallet can make all the difference.

Delayed Gratification: The Marshmallow Test

The ability to delay gratification is one of the strongest predictors of long-term success, including financial wellbeing.

In the Stanford Marshmallow Experiment (1972), led by psychologist Walter Mischel, children were offered a choice: eat one marshmallow now, or wait 15 minutes and get two. Follow-up studies found that the children who resisted the impulse often went on to have better life outcomes, including higher SAT scores, healthier BMI levels, and stronger financial control.

This principle applies to spending: resisting instant gratification today leads to stronger financial security tomorrow.

Tip: Try writing down the item, setting a reminder, and reviewing it in a week. Most “wants” won’t stand the test of time.

Loss Aversion and Why Saving Feels So Hard

One of the most powerful insights from behavioural economics is loss aversion, introduced by Daniel Kahneman and Amos Tversky in their Prospect Theory (1979).

Their research found that losses feel approximately twice as painful as equivalent gains feel pleasurable. In other words, we are wired to fear losing £50 more than we enjoy saving £50.

This is why:

• Discounts feel exciting
• Full prices feel painful
• Saving money can feel like “missing out”

To reframe this, treat saving as a gain, not a loss. For example:

• Rename your savings pot something emotionally positive (e.g. “Freedom Fund” or “Dream Trip”)
• Use a visual savings tracker to build excitement and set achievable goals
• Focus on what future-you will gain, not what now-you is giving up (especially if you factor in incremental interest)

Impact of consumer culture and social influences

Of course, our society and culture constantly drive us to make purchases, whether or not we can afford them. We’re constantly exposed to messages telling us to buy more, upgrade, and compete. Whether it’s targeted ads or influencers showcasing “must-haves,” the cultural norm of consumption reinforces overspending. There is literally a trend called “TikTok made me buy it”.

This is related to social comparison theory (Festinger, 1954), where we evaluate our worth relative to others, often through material cues.

This constant social pressure can reinforce impulse purchases, especially if we feel the need to keep up with societal standards. By understanding the way that society is directly influencing us to spend our money, you can consciously recognise and ignore the many marketing attempts in our daily lives.

Try to make the algorhythm work for you by following and interacting with the right people to make your social media feed to include voices that promote financial literacy, minimalism, or intentional spending. Your environment shapes your mindset. Plus, as soon as you see that commission paid flash up, remind yourself the influencer is doing it for financial gain.

Strategies to enhance saving habits

Now that you understand the issues that are influencing your spending, how can you combat them? While there are several methods and tools you can use, we recommend using a combination that works for you. You might also want to refer to a credit score guide for additional tips you can use to strengthen your financial position. Here are some of our top suggestions:

Set Specific Financial Goals

Saving is easier when it’s attached to a personal “why.” Whether it’s £500 for an emergency fund or a limit on takeaway meals, be specific and visual.

Automate Your Saving

Some banking Apps help you save effortlessly by rounding up transactions or setting daily/weekly triggers. This creates “passive discipline.”

Use Friction to Reduce Impulse Buys

Add small barriers to slow yourself down:

• Delete saved cards on shopping sites
• Disable one-click checkout
• Use Chrome extensions that delay your ability to buy

Final Thoughts

Understanding why you spend is the first step toward lasting change. By combining psychological insight with practical tools, you don’t just improve your bank balance,  you reclaim your autonomy.

Your spending habits are shaped by emotion, biology, bias, and culture, but they’re also changeable. With awareness and small shifts, you can build a healthier relationship with money.

References

Mischel, W., Shoda, Y., & Rodriguez, M. L. (1989). Delay of gratification in children. Stanford University.

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica.

Rick, S., Pereira, B., & Burson, K. (2014). The benefits of retail therapy: Making purchase decisions reduces residual sadness. Journal of Consumer Psychology.

What’s Your Financial Personality?

Take the 2-minute quiz to find out if you’re an Avoider, Spender, or Planner — and how to take control of your money mindset.

Choose the answer that best reflects your typical behaviour.

1. How do you usually feel after making an unplanned purchase?

A) Guilty or anxious
B) Excited or satisfied
C) Neutral — I rarely make unplanned purchases

2. How often do you check your bank balance?

A) Almost never — it stresses me out
B) Occasionally, usually after shopping
C) Weekly or more — I like to stay on top of things

3. When payday arrives, what’s your first move?

A) Avoid thinking about money
B) Treat yourself — you earned it
C) Transfer a set amount into savings or bills

4. If an unexpected bill comes in, how do you react?

A) Panic or delay dealing with it
B) Use credit or overdraft to cover it
C) Dip into your emergency fund

5. Your ideal Saturday includes:

A) Escaping reality — no budgeting talk!
B) Shopping or browsing online deals
C) Reviewing goals, budgeting for the month ahead

Results:

Mostly A’s — The Avoider

You’d rather not think about money, it can feel stressful or overwhelming. But avoidance only increases anxiety long term. Start small: try checking your balance once a week and celebrating small wins.

Next Step: Use tools that minimise friction (like balance alerts or automated saving rules) and consider a simple budgeting app

Mostly B’s — The Spender

You love the thrill of a purchase, and that’s not a bad thing unless it derails your goals. Spending isn’t the issue, unplanned spending is. Focus on intentionality and mindful habits.

Next Step: Introduce a 48-hour pause rule, remove saved cards from shopping apps, and set visual savings goals that compete with impulse buys.

Mostly C’s — The Planner

You’ve got your finances on lock (or close to it). You track your income, budget regularly, and think ahead. Just remember to stay flexible and make space for enjoyment too.

Next Step: Challenge yourself to optimise, automate more, invest wisely, and help others develop strong financial habits.