The most common reason for large credit card debt, unpaid bills, and lack of savings is the result of overspending, or not living within our means. While this is common knowledge in our society, why is it still such a struggle for so many Americans today? Why are we still seeing so many of our clients mismanaging their finances even after they have sought help? More importantly, what can we as financial counselors and educators do to help our clients understand the importance of living within their means and making it a healthy long term habit?
Is Forgetting that Easy?
I recently spoke with a couple who filed for bankruptcy only two years ago. At the time, the entire experience was emotionally and physically taxing for them. However, only a few years later, those negative emotions have been washed away like footprints in the sand. Over the last two years they continue to accumulate more debt, they struggle to pay those debts monthly and their spending habits have not changed. They are quickly headed in the same direction once again.
Frustrated, I cannot help but wonder what is the root of this problem? The couple understands what they have done wrong and knows what they need to do, so why do they continue to justify overspending? I believe the root cause is addiction to spending money. When it comes to spending money, they suffer from lack of willpower. According to Sternberg (2015, para. 1), the definition of addiction is “…a disease of the brain that causes dependence upon or a persistent, compulsive need to use a habit-forming substance or an irresistible urge to engage in an activity, despite harmful consequences.” Clearly, living beyond one’s means on a regular basis is an addiction for not only this couple, but for many Americans. With that in mind, how can we help our clients overcome this addiction? I believe we can get closer to a solution to this nationwide epidemic by utilizing our tools and resources in the field of financial counseling and education. But, exactly what tool(s) could aid us in this quest to help clients find financial success?
Behavior, Addictions, and Finances
Can behavior, addictions, and finances truly be used in the same sentence? Typically overspending has been categorized in impulse-control and/or obsessive-compulsive disorder models. However, more recently, overspending has been regarded in the behavioral addiction models. Among the medical field overspending is commonly referred to as oniomania, shopaholism, compulsive shopping, compulsive consumption, impulsive buying, compulsive buying, and compulsive spending (Aboujaoude et al., 2005, para. 1). There have been several assessments created to measure these issues. (It is important to note here that overspending is not strictly about the stereotype of buying clothes and shoes, but is much broader. Overspending can be any of the following: spending money on house renovations that are not absolutely necessary nor within budget, going on vacations by using credit cards, entertainment, or simply spending money on things that are more wants than needs on a regular basis.) Should we as financial practitioners utilize screening tools, such as the Bergen Shopping Addiction Scale (to name just one assessment option) with clients that demonstrate high risk factors? Should we even have the authority to do so?
Encouraging Positive Outcomes through Assessments
In certain situations, such as the couple mentioned earlier, I believe clients could benefit from such tools and we should have access to a universal assessment screening used among the field of financial practitioners. Conducting an assessment for high risk clients could prove beneficial for the treatment and ongoing issues of overspending. The clients that do fall into this category should be aware of it, and this is best done through education. Making clients aware of “addictive” spending behaviors can have valuable implications on their future financial success. Clients must learn to identify their spending patterns and understand that just because they were able to turn their finances around once does not mean they won’t be tempted to turn back to old habits. Like any addiction, temptation can be a continual struggle. Being consciously aware of this is the client’s best chance of turning an unhealthy addiction into healthy habits. I strongly believe that using an assessment tool could help many clients with the financial behavioral problems we often address when working with clients.
Please share your thoughts!
- What are your thoughts on categorizing over-spending as an addiction behavior and should professionals use assessments in the diagnosis and treatment of such conditions?
- Do you believe such a tool could help with this epidemic in America?
Guest Contributor: Sabrina Johnson, AFC®
Aboujaoude, E., Andreassen, C.S., Bilder. R. M., Griffitchs, M D., Pallesen, S., Torsheim, T.
(September 2015). The Bergen Shopping Scale: Reliability and validity of a brief screening test. Frontiers in Psychology. Frontiers Research Foundation.
Alic PhD., M., Finley, K., Sternberg PhD., B.S., Willingham PhD., E.J. (2015). Addiction. The
Gale Encyclopedia of Medicine. Ed. Jacqueline L. Longe. 9 vols., 5th ed. Detroit: Gale.