Debt and the Pressure to Spend

In this topic, you'll learn:

• Recognizing how we're confronted with marketing messages almost everywhere we look.
• Thinking critically about the spending behaviors of others - recognizing they may not be making good financial choices.

We’ve all heard of people getting into debt because of a single catastrophic event like the loss of a job or expenses associated with a major illness. A less obvious source of debt is unplanned everyday spending. 

We’ve all been tempted to “save” money by buying something on sale (even if we wouldn’t have bought it otherwise), pressured to spend more than expected when with friends, or taken the easy way out by purchasing food on the go rather than cooking it at home. Especially when combined with a credit card, even small expenses can add up to a major financial challenge. Let’s take a look at some of the factors that can influence any of us to make unplanned purchases. 

As Americans, we’re lucky to live in a country that values innovation, opportunity, and freedom. One of the best places to see these values in action is in your local shopping mall. Every item for sale is the result of manufacturing innovation, each store represents an opportunity seized by an entrepreneur, and each shopper demonstrates the freedom we have to buy what we want when we want it. 

Because we have so many choices, companies invest billions of dollars per year to persuade us to spend money on their products and services. They advertise, send catalogs, and even hire consultants to carefully orchestrate the pricing of their products to make them seem like a fantastic deal. 

We’re confronted with marketing messages almost everywhere we look, but how many billboards have you seen that say, "You look great in what you’re already wearing" or "Is it really worth $25 to sit in a movie theater for 90 minutes?" No company has anything to gain from you not consuming their products and services, so you’re not going to find a lot of positive reinforcement out there for saving money. Even “money gurus” with promises of financial independence are usually just selling books or expensive seminars to people who want an easy way to find success – with Master Card, VISA, and American Express gratefully accepted.

Pressure to spend can also come from friends and acquaintances. Sometimes it can seem as if no one worries about money - except you. But everything is not always as it seems, so it’s important to think critically about the spending behaviors of others. For example, some young adults are completely supported or subsidized by their parents, so there are few real consequences to their spending. For them, a daily latte at Starbucks doesn’t make a difference. For everyone else, that habit could result in an extra $5,000 of debt over four years of college - nearly 20% of the average undergraduate student loan debt. Is it fair? No. Is it real? Yes, it is.

When observing the spending habits of others, remember that the benefits of buying are public, but the downsides are private. It’s easy to capture the fun of a new purchase or an expensive night out with a picture on Facebook. But no one posts a selfie when they’re shocked by their credit card bill or learn that they have a poor credit score. Especially when it comes to money, someone’s financial appearance can be very different than the whole picture.  

It’s wonderful to have the freedom to buy so many products, but unless you’re rich, the key to happy spending is planned spending. Otherwise, you could be taking risks with your financial future without even knowing it.