Throwing Away the ‘Retail Therapy’ Crutch

Mary wrote in with a brilliant question that I feel deserves a much longer answer than what fits into the weekly mailbag. Here’s Mary’s problem:

First, the facts:

I am 26 years old. I graduated two years ago with a masters in accounting (so I’m not writing to you about crunching the numbers as I can do that on my own!!) and I still have about $70,000 in student loans which are all around 5%. I also have a car loan that still has about $3,000 left on it that’s at 4.25%. I currently live in a house that I rent with two other adult single women. None of us are in relationships or are even dating that much. None of us drink or smoke and our parties are usually movie nights. Mostly, we’re all pretty career focused and we figure we can date and get married and move into a house in the suburbs and have 1.8 kids later on if we want to.

I don’t carry any credit card debt and I am making double payments on my highest interest student loan each month. When my car is paid off I’m going to bump that up to triple payments.

I have a 401(k) at work and I contribute 10% of my income to that and my employer matches with 6% so retirement savings are looking good.

So why am I writing to you? Well, I have big goals and I feel like I’m not really moving toward them and it’s because of my own dumb choices. I really want to start up an independent accounting firm, build it up, retire at 50 or so, and then start a small organic farm. That’s always been my dream.

To do all of this, I need to be saving money fast and I’m just not doing it. I’m not saving much of anything at all except my retirement savings.

I know the reason why. It’s “retail therapy.”

Most of the time when things are calm and normal, I’m really good about not spending much money. We make a lot of meals at the house and don’t go out very much. Most days, I just go to work, come home, make a meal, and watch a movie or something. It’s not an expensive lifestyle.

The problem comes in when something really good or really bad happens in my life or in the lives of one of my friends. When something really good happens someone always suggests “celebrating,” which usually ends up with an expensive night out on the town and some shopping for clothes or electronics. When something really bad happens someone always suggests “retail therapy,” which also ends up with an expensive night out on the town with dinner and drinks and shopping.

Most of those evenings see me coming home $200 or $300 lighter with three or four bags from stores somewhere. I collapse on the bed and then wake up the next morning and feel horribly guilty about all of it. I promise myself I won’t do it again. But within a week someone either has a crisis or a big day and I do it all over again.

My mom and my older sister tell me that this is what I should be doing when I am young and single and without worries and they talk about “living it up a little” and tell stories about what they did before they had kids.

Most of the time though I feel like it is a giant mistake. Whenever I think about it when I’m not out on the town it seems like a bad idea that is keeping me away from what I really want. But it’s like I lose some level of control when I have a great day or a horrible day or one of my friends does and when someone suggests going out or having some “retail therapy” I’m always on board without even thinking about it.

I need some help. I want to get on track with saving for seed money for my accounting firm. How can I break this cycle?

First of all, you deserve some applause. You have almost all of your financial ducks in a row, much better than most people your age. You have no credit card debt, for starters. You’re contributing 10% of your income to retirement. You’re also making double payments on your student loans. All of those are stronger moves than most people your age are making. So, no matter what else is said in this article, don’t sell yourself short. You’re doing well.

The real struggle you’re facing is one that I myself have struggled with in the past – “retail therapy.” I define it much like you do: it’s the use of shopping (and other avenues of spending money) as a response to emotional peaks and valleys.

For me, retail therapy was something I mostly relied on to deal with the low moments. I was mostly prone to spending money after difficult days at work. I would leave work mentally and sometimes emotionally drained (particularly in my first year or so of professional work) and would yearn for something that would easily make me feel happier about the state of my life.

As you’ve noticed, buying something that you want impulsively in the moment feels really good in that moment, but often feels really bad later on. At the time, it seems like there’s more benefits than drawbacks to making that purchase, but later on, the drawbacks seem to outweigh the benefits.

So, the real challenge of solving “retail therapy” is to change the game so that those impulsive moments never have quite enough positives to outweigh the drawbacks.

How do you do that? There are several strategies. I’ve used most of these over the years and they’ve all really helped at various times.

Keep Constant Reminders of Your Big Goals

I’ve had this picture of a house in the country for several years. It’s a photo of a peaceful country house with a big porch out in the middle of nowhere.

Right now, that image serves as my desktop wallpaper. It also serves as the background image on my phone (the “lock” image is of my daughter dancing in a spring dress). I also have a copy of it taped to the dashboard in our Honda Pilot. I sometimes even keep that image as a “wrap” around my credit cards.

Why do I have that image everywhere? It makes me think about my big goals almost constantly. The thought of financial independence and living in that country house (which would actually be less expensive than where we live now, I think) is a dream that I cherish. That image represents that dream. Seeing that image all the time makes me think again of financial independence.

This benefits me in two ways. For one, in the short term, the sight of it can sometimes keep me from spending money on something foolish. If I see it on my computer screen, it’ll make me think twice about an online purchase. If I see it on my dashboard, it’ll make me think twice about stopping at a book store or a game shop. If I see it around my credit cards, it’ll make me think twice about using them.

Second, by having the image of that goal pop up so frequently, it begins to take a very central spot in my mind. My big goal isn’t just something in the back of my mind that pops up every once in a while. It’s often mentally front and center. It’s so prevalent that it’s constantly sitting just under the surface of my mind, and that means it subconsciously has a big impact on almost everything that I do.

Automate Your Savings for Your Big Goals

If you know that you have big long term goals in your life and you’re not pushed up against the edge financially, you should start some automatic saving and investing for those goals.

This serves three purposes. First, by automating it, you don’t have to think about it any more. It just happens without any active thought involved. You don’t have to “decide” to save each time.

Second, you’re actually making positive progress toward your goal. Every time your money is transferred from your checking account to your investments, you’re taking a real tangible step towards your goals.

Third, by doing this, you leave less money in your checking account to spend on unnecessary things like “retail therapy.” If you put $100 a week into savings, for example, that’s $100 less per week that you have to spend on those big shopping sessions and nights out on the town. (This is, of course, assuming that you don’t just dive into credit card use, but it sounds like Mary has a good “no credit card balance” policy – she just needs to stick to that.)

As I discussed the other day, Sarah and I have an automatic investment plan with Vanguard. Each week, some of our money is moved into Vanguard and invested in a way that makes us comfortable and is pretty aggressive for the future. Not only does this mean we take a real step toward our goals each week, it also means we have less left over to spend on idle things.

Talk to Your Friends During Rational Moments

Sometimes, like in Mary’s case, “retail therapy” crops up due to the dynamics of your social circle. It’s encouraged by a group of friends because all of you participate in it together and thus it becomes a form of group bonding. It becomes part of the social fabric of your group.

The only way to change that is to be open about it and talk about new approaches. Your social group enjoys spending time together, but does it have to be time that involves spending a lot of money? Can’t you collectively seek out other forms of “group therapy” that don’t involve dropping $100 or more on a single night?

The first step in this journey is to talk to your friends about it during a non-crisis moment. State your case as simply as possible: you love spending time with your friends, but you wish it didn’t always have to come with a big price tag.

It can be a hard conversation, don’t get me wrong, but you might be surprised as to how many of your friends agree with you and also want to cut back on the spending. You might just find that a lot of your social circle is happy with actively toning down the “retail therapy.”

Focus More on the Parts of Your Social Circle That Don’t Use Retail Therapy

It’s likely that some of your good friends don’t actively participate in retail therapy, or do so on a very limited basis. One simple strategy you can try is to simply accentuate those friendships a little bit.

When you’re having a bad day or a really awesome day, don’t call on your circle of friends that handles things via “retail therapy.” Instead, sometimes, give your other friends a call instead. Have one of them come over and have dinner with you, or go over to their house. Invite a few other friends, too, if you’re a group-oriented person.

If you make that choice a few times, two things will happen. First, you’ll stop seeing “retail therapy” as the immediate solution to your lows and your highs, and you’ll also stop seeing it as the immediate response to your friends’ lows and highs.

Second, you’ll start to develop a stronger bond with friends who don’t practice retail therapy. Your friends have a pretty strong influence on you, especially your closest ones. Because you’ve strengthened a friendship or two that doesn’t use retail therapy, you’ll find that you don’t feel as naturally oriented toward retail therapy, either.

This doesn’t mean that you’re “giving up” on your usual retail therapy group at all. It just means you’re expanding and diversifying your social circle a little bit by strengthening your bonds with people who don’t practice retail therapy.

Make Your Tools for Spending Difficult to Access

When you make the choice to practice retail therapy, you need to have some sort of tool for spending money. Maybe you use cash. Maybe you use a debit card. Maybe you use a credit card.

Whatever it is that you actually use when spending, make it hard to access and use. The harder it is for you to access it and use it, the longer you’ll have to think about it and the more resistance there will be to getting it out and spending money.

So, how do you do that practically? One method I’ve used is to simply go without debit or credit cards. The only way I can spend money is if I go to the bank and make a cash withdrawal, and then I have to live off of that cash until the next time I stop by the bank. This means that I have to be very careful about impulse buys of any kind and I have to decide how much I want to have in my pocket during a more rational and less emotional moment.

This doesn’t mean that you don’t own a credit card or a debit card, but that you have them somewhere that’s difficult for you to access. Perhaps you have them frozen in a block of ice in your freezer. Perhaps you’re like one of my friends, who keeps his in a safe deposit box at his bank.

Another good strategy along these lines is to simply delete your credit card numbers from websites. Don’t allow Amazon or other sites to store your credit card number. That way, if you decide to buy something there, it’s going to take quite a process in order to be able to make that purchase, during which you’ll second-guess it and probably decide not to do it.

If you want the convenience of using a card, have a prepaid one with just a bit of cash on it that you know you can spend freely.

Actively Seek Non-Financial Outlets for Your Emotional Peaks and Valleys

The reason many people fall into a “retail therapy” routine is that, thanks to advertising and marketing, restaurants and bars and stores are among the first things people think of to “do” in a town.

Ask yourself a different question. Instead of just going to restaurants and stores, what could you do instead to collectively celebrate a great day or deal with a bad one? Maybe you could just get together and split a few bottles of wine at your house and watch a movie together. Maybe one of you could make supper for the whole group. Maybe you could have a clothes swap meet. Maybe you could see if there are any free community concerts or things like that going on.

This does not mean that such tings have to be a permanent replacement for shopping, but that they’re another option on the table that you can sometimes choose after a hard day or a great day. Sure, you can still practice retail therapy sometimes, but sometimes you choose other things instead.

I have a number of activities that I personally enjoy that take the edge off of a hard day or help celebrate a great one. I love making a great meal from scratch and seeing it all come together. I love playing board games with my family as well as stopping by one of the various community game groups in my area (yes, there are at least four distinct community board game groups within a 25 mile radius of my home.) I love just setting aside an hour or two and doing nothing but getting lost in a great book.

Those things are rewarding and fulfilling to me and they don’t involve spending money. I rarely feel guilty afterwards, either.

Mentally “Role Play” Situations Where You Avoid Retail Therapy

Another useful strategy that I’ve found is, during your spare time, simply play through situations in your mind that are financially problematic and envision better ways to handle them.

Again, this simple step serves multiple purposes. First of all, it allows me to use more rational moments to think about and figure out better specific ways to act during those key moments. I can think about the times when I make the decision to spend unnecessarily. I can think about those moments as I approach the cash register. More importantly, I can think about how I could simply choose a different path to follow during those key moments. Perhaps I just decide to go somewhere else besides the bookstore. Perhaps I just decide to put the items back instead of buying them.

Another purpose this serves is more subconscious: it trains the mind to react in better ways during those “retail therapy” moments. The more you think about better ways to respond during those moments when you’re considering spending your money, the more natural those responses will be when the time comes.

This ties a little bit into the whole “Think and Grow Rich” idea that’s sometimes shared in personal finance circles. I don’t believe that you merely have to think about it to become rich, but I do think that visualizing a successful way of doing things increases your chances of doing those things successfully in the future.

Final Thoughts

Retail therapy can be a challenging problem to overcome. It often has the power of habit behind it, and that habit is often coupled with social pressure to continue to spend money a bit recklessly.

The only way to break through is to take a number of conscious steps to halt the impact of retail therapy in your life. Some of the strategies above will work for you if you’re struggling to break through retail therapy. Use as many as you can, because the more diverse your approach, the more likely you are to break through and solve your retail therapy challenge.

Good luck!

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