Good old January and the fear of looking at that bank statement where most of January’s wages are wiped out by the credit card bill. Miserable indeed.
Debt, however, is a matter to be taken seriously. It can take away one of your core emotional needs – autonomy.
Let’s give you some awareness tips to help you, or potentially other people you may know, in this situation.
If you’ve ever bought something you didn’t really need, only to regret it later, you’re not alone.
Money isn’t just about numbers, it’s deeply connected to our emotions, past experiences, and unmet needs.
Understanding how emotions influence our financial behaviour can help us break unhealthy patterns and move towards better financial health.
Our relationship with money is shaped by psychological factors which often operate below our conscious awareness.
The Human Givens framework provides insight into how unmet emotional needs can lead to harmful financial behaviours.
When we don’t get our emotional needs met in healthy ways, we may turn to unhealthy ways to solve them: drink, drugs, overspending or accumulating debt to try to fill the void.
These unmet needs aren’t negative, they’re part of being human. For example, when we feel insecure, either emotionally or financially, we may use spending to feel more secure, even if only briefly.
Buying something new gives a sense of comfort or control, but it doesn’t address the deeper insecurity we’re experiencing.
People who have experienced neglect or emotional deprivation might spend to gain attention or approval or lift their sense of status, two more of the nine emotional needs.
These emotional needs, whether for security, attention, achievement, connection, or control can drive impulsive or compulsive spending.
While these purchases may offer temporary relief, they often lead to a cycle of overspending and debt, leaving us feeling financially and emotionally drained.
Our childhood experiences play a significant role in how we approach money. Growing up in a household marked by financial instability can result in a scarcity mindset, where we constantly fear there won’t be enough.
Alternatively, some might develop an overspending habit, trying to compensate for what was lacking in their upbringing.
How our parents handled money also impacts our behaviour as adults. If money was a source of constant stress or conflict, we may either avoid dealing with finances or develop an unhealthy obsession with acquiring wealth.
Similarly, attachment styles play a role, those with anxious attachment may overspend to soothe anxiety or gain approval, while those with avoidant tendencies may shut down financially, ignoring problems rather than confronting them.
Debt often starts with the craving for instant gratification. In a world where everything is available at the touch of a button, it’s easy to make impulse purchases like everything that’s fake and useless on ‘social’ media.
Our brains are wired to seek immediate rewards, and this can lead to impulsive spending. This is compounded by present bias, the tendency to prioritise short-term rewards over long-term goals.
As debt grows, we often experience cognitive dissonance, a feeling of discomfort caused by holding conflicting beliefs. We might rationalise our spending by telling ourselves we “deserve” it or that we’ll pay it off later. But these justifications rarely address the root cause, allowing the cycle of debt to continue.
Breaking free from unhealthy debt requires self-awareness and action.
The first step is recognising the emotional triggers behind your spending.
Are you trying to fill a sense of insecurity or seeking approval? Once you identify these emotional drivers, you can begin to meet those needs in healthier ways, such as through talk, or even mindfulness or therapy.
Building financial awareness is the next crucial step. Track your spending to identify patterns. By understanding where your money is going, you can make more intentional decisions which align with your long-term goals.
A budget is not about restriction, but about gaining control and reducing financial anxiety.
If you find your emotional patterns deeply ingrained, seeking help through cognitive-behavioural therapy (CBT) can be transformative. CBT can help you reframe irrational thoughts about money and develop healthier coping strategies.
Creating a clear debt repayment plan is essential. Having a structured plan gives you control and helps reduce feelings of overwhelm.
By understanding the emotional needs driving our spending, we can begin to break the cycle of overspending and regain control of our financial future.
- Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial question, call 028 6863 2692 or email info@wwfp.net