NEW YORK (CNN/Money) -
You've heard about people who rack up $20,000 in credit card debt just because they "had to have" that top-of-the-line DVD player, the iPod and the latest boots for fall. And you think, "What idiots. I'd never be so stupid."
Well, maybe not. After all, you have those things, too, and you (usually) manage to keep your debt in check and your bank account in the black. But that doesn't mean you're not a chronic spender and that your spending isn't having a negative effect on your bottom line (or on your relationship).
Chronic spending is often unconscious spending, so you may not even know you're doing it.
If you're not into pricey soul-searching with a shrink, check to see if any of the following five signs of chronic spending apply to you and if they do, read on for some practical ways to curtail it.
You're sure Prada and a new Palm Pilot will cure what ails you. Interesting philosophy, but not really borne out by reality. Science has shown that handbags, gadgets and other great accessories do precisely diddly-squat when it comes to compensating for what your parents did to you, what your spouse denies you or what your boss bellyaches about. If you're buying to feel better or out of a sense of entitlement, you're spending for the wrong reasons, said certified financial planner Elizabeth Lewin, coauthor of "Family Finances."
You think of yourself as a Puritan, yet your favorite phrase is "Oh, why not?" Everyone falls prey to immediate gratification occasionally. But when it's your shopping M.O. -- that is, you can't resist getting that buttery, designer-label leather jacket despite the fact that you're wearing the one you bought last year -- a few alarms should go off in your head. The problem for people who can't curb impulse purchases is that "they don't have deeply held, core goals that they're focused on. You can't think of something you want more at the time. So you buy it," said Grady Cash, a certified financial planner and founder of the Center for Financial Well-Being.
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Flashing feels good. Flashing your credit cards, that is. You like showing yourself and others that you've got money to spend. As counterintuitive as it may seem, some people become chronic spenders out of a fear of poverty, said Mary Hunt, founder of Cheapskate Monthly and a former chronic spender herself. "Spending makes you feel wealthy. ... It gives you such a high. But it's short-lived," she said. Buying to impress the world is another pitfall Lewin has seen in some clients. "They have to have the trophy kitchen. They have the subzero refrigerator, the Viking stove and the granite counters. And they're not even cooking," she said.
In an effort to minimize wrinkles, you vow never to worry about money. Financial ignorance, Hunt said, is part of the reason people overspend. But sometimes that ignorance is willful because it's more comfortable than taking action based on what you know or on information that's readily available to you.
You see your $5,000 credit limit and think, "Fabulous, I have $5,000 to spend. What should I get?" OK, not to put too fine a point on it, but your credit limit is not actually money in your pocket and the goal is not to spend as much of it as you can. One sign you may have a chronic spending problem is if your credit card balance runs close to your credit limit or if it's too large to pay off in full in a single month, Hunt said.
What you can do about it
There are some relatively simple things you can do to curtail your chronic spending, if not stop it entirely.
"Most people tend to make spending mistakes in a specific, recurring area," Cash said. To find out where yours are, he recommends going through your house and taking an inventory of what you own. For instance, if, when you look through your closet, you find 50 pairs of shoes, only five of which you wear regularly, you might make a mental note to resist the urge to pick up another pair any time soon.
You can do much to quell that urge if you postpone buying what you think you want for 24 hours. "Nine times out of 10, you'll change your mind," Hunt said.
If you can't resist the urge entirely, then buy less than you ordinarily might, Lewin said. Instead of two pairs of shoes, buy one.
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Another approach is to put yourself on a 30-day spending moratorium, Hunt said. Use only cash to pay for basic necessities such as food and transportation and keep track of every penny you spend. Most people who try this exercise don't just stick to the basics, she said, so it's instructive to see where you choose to fall off the wagon.
You also might practice living beneath your means. Hunt recommends allocating your take-home pay in the following way: 80 percent for living expenses and purchases; 10 percent for savings and 10 percent for charity.
The charity and savings portions of your budget "quiet those insatiable desires," she said, since they open your eyes to the world's needs and to your long-term financial security.
Lastly, Cash said, "take the time to set long-term goals. First, you have to decide what's most important in your life." The objective is to see if your money is being spent in line with your values. Picture yourself at age 80 looking back on your life, he suggests. What have you done that you're proud of? For most people, Cash said, "It's not a matter of driving a new car every year."