Why We Can’t Stop Spending Money

Look up any commentary or news piece about poor Malaysians and the (sad) state of our finances, and you can find discussions about our self-control.

Apparently, some of us lack self-control so much that we simply can’t help buying all the H&M clothes and trying out all the Starbucks drinks against our better judgement. That, said the commentators, is the reason why many of us complain too much about the cost of living, so stop complaining and just buy less lah!

This shallow reasoning makes me angry.

Are we simply going to ignore decades worth of behavioural economics research that is used to influence our purchasing behaviour and habits? Or do we just not take into account thousands of people employed in big companies whose jobs is to develop and execute sales, advertisement and marketing strategies?

And you expect me, a mere individual, to be able to resist all these combined efforts and temptations, 100% of the time? And tell me I lack willpower?

Factors that Led to Us Spending Money

I want to make something very clear. There are spenders among us, who really do consider shopping as a legitimate activity for every weekend (and even weekdays). There are people who battle shopping addictions. There are people who continually make new purchases after new purchases, just to feel good for that moment, just to distract themselves from whatever hardships they’re experiencing.

To which I’ll just counter back: not my money, not my place to advice.

This opinion piece is more for people like myself – people who actively make efforts to save money, yet sometimes still fall prey to shiny new items that we rationally know we don’t need.

Recently, I read a book entitled Bargain Fever: How to Shop in a Discounted World by Mark Ellwood. I picked it up expecting to find bargain-shopping tips, but what I got instead was the historical evolution of retail strategies, and how it got better over time. It’s a great book, I highly suggest it. Look for it at Book Xcess at Amcorp Mall, PJ.

Here are a few things I got out of the book, related to strategies used by companies to encourage us to part with our money.

The role of price consultants

Price consultants advise companies about product pricing. Way back, the accepted pricing strategy was cost of producing item + reasonable profit markup. Nowadays, it’s more to ‘the highest amount people would pay for them’.

Because the latter is a lot more flexible, price consultants have devised ways to sell the exact same product to people with different price motivations. This is how a garment that costs RM10 to produce can sell for RM100+, RM50+ and finally RM10+ during stock clearances.

It’s almost scary reading about how price consultants can engineer, induce and manipulate dopamine rushes – the type that we get when we come across ‘good deals’ (in quote marks because in many cases, they aren’t actually good deals). When we get those dopamine hits, that’s it, our resolve weakens, and we are much more likely to buy things we may not need.

Price consultants use many strategies. Like, did you know:

• A product with $9.99 price tag sells 10-20% more than a product with $10 price tag? It’s the ‘9’ ending that somehow tell us the item is a value item, even though it may not be the case
• The ridiculously-priced item in the menu is not designed to be sold, but rather designed to appear cheap next to the other offerings. In other words, the RM95 Lobster Truffle Extravaganza makes the RM25 burger looks downright affordable. This applies to many shops, including fashion and accessories
• Shops like to display three options – cheap, medium and expensive – and knowing many of us usually pick the in-between (to not appear cheap but still not splurging, we tell ourselves). The highest profit margin tends to be the middle one.
• Labelling items as bargains or cheaper than usual even though they’re the usual, exact same price.
• Using time-sensitive promotions will increase sales (even if it’s a fake price reduction).
• Related: 10 Manipulative Advertising Techniques You Should Know

As I type this out, I realised I have fallen for these tricks more times than I care to admit. For example, I like Uniqlo – I think of it as a shop that sells quality and value-for-money clothes. Did I get the ‘value for money’ part from their price tags, which tend to end in ‘.90’?

I have also bought grocery items not on my grocery list simply because the products were labeled on sale at the shops. More than once, I found out they actually sell for more or less the same price at other places.

And I have felt good about ordering that RM25 burger after deciding against the RM95 menu items. I felt so good about saving that money (hah!), I even ordered dessert with the money I saved (hah!!).

So price psychology is one aspect explaining why we shop more excessively than we have to. There’s more.

The role of technology

This segment is broad, but I’ll do my best in explaining how technology is used to encourage your spending.

Firstly, the use of technology in data collection. Companies can now profile and study your purchasing habits, and send you personalised offers. I certainly received coupons from Tesco that encouraged me to make an additional, unplanned trip just to use it up.

They can even predict what you’re likely to buy in the future – read up this case about a dad who rage-complained to Target for sending coupons for baby products, when his teenage daughter was indeed hiding a pregnancy!

Secondly, algorithms – AI or otherwise – that ‘adjusts’ prices according to variables like time, location and even your device. Did you know that some prices, like flight prices – are higher for Apple users? This demographic have been targeted as high spenders, thus y’all are paying more than what others are paying.

Thirdly, technology that advertisers use to target you. You know this already, I’m very sure you get a shit ton of ads every day. You even get it from this website, because I earn passive income by allowing advertisers to reach you finance-conscious folks.

But here’s the shitty part – I actually like receiving targeted ads. I like discovering things I might like, and sometimes I do. So in this case, it’s more like me wanting to be angry but actually not. Yeah privacy and all that, but.. *runs out of excuses*

Okay, anyway, my point is that technology both increased the relevancy of ads, AND the frequency of you discovering it. It’s like casting a thousand fish rods – it’s stupid to not expect any bites!

Where Do We Go From Here

No freaking idea. I concede defeat. I will now refuse to beat myself, and my generation up for not saving as much money as we should. We will always have flaws, we  will always experience momentary lapses in judgement, and if we create financial damage out of it, well that sucks, but it’s not the end of the world.

Wait, hold one. I do not concede defeat, not fully anyway. I understand I cannot fully win all the battles, but I CAN reduce the casualties. I just have to be more diligent with purchases. Set clear wants/needs boundaries. Recognise the price strategies in the wild. Reduce my technology usage. Okay let’s start with these first.

What do you think? Do you beat yourself up for failing to stop spending money? Do you see now how it’s not all your fault?

Related: 8 Rules to When You Should Splurge and When You Should Skimp