I recently ran across an interesting article over on CardRatings.com about whether or not credit cards are addictive. The article highlighted a recent academic study by Marsha Richins of the University of Missouri that focused on the relationship between materialism and overspending.
The study was based on a survey of 400 consumers of various ages and income levels, and the central thesis was that “transformation expectations” – the idea that consumers expect products to have transformative powers on their life – are the mechanism through which materialism drives credit card abuse. Unfortunately, these transformations (assuming that they occur) are short-lived, leaving the consumer looking for another fix.
Richins was able to identify four major types of transformations that are especially prevalent in people with debt problems:
Self improvement: Over-spenders often believe that their purchase will make them a better person – like the woman who thought cosmetic dental surgery would make her more confident and successful.
Improved relationships: Over-spenders often believe that their purchase will make it easier for them to connect with others – like the man who thought installing a swimming pool would improve his relationship with his daughter.
Sense of fun/adventure: Over-spenders often believe that their purchase will make them more fun and/or fulfilled – like the expectation of fun that might come from an ATV or boat purchase.
Greater effectiveness: Over-spenders often believe that their purchase will make them more effective/efficient – like the idea that a new car will make you more self-reliant, or than an iPad will make you more efficient.
In other words, certain consumers (typically those with mountains of debt) have a tendency to think that the products make the person – as if a purchase will help to re-define you, or change your standing in society. This isn’t to say that the rest of the world doesn’t fall prey to these expectations. It’s just that these tendencies are far less prevalent in “average” consumers.
Richins also believes that people are “hard-wired” to want new things that promise to make your life better. She chalks this up to the fact that primitive people who had better tools were more likely to survive, and thus passed on an innate sense of attraction to things that make survival (or life in general) easier.
The good news is that most people realize (sooner or later) that, while some tools are important, others are a waste of money. Unfortunately, others don’t make that realization, and wind up on the hedonic treadmill.
So… The next time that you’re considering a purchase, stop and think. Ask yourself why you’re interested in making the purchase, and take a very critical look at your answer. Are you looking for a quick fix? Are you expectations too high? Or is this something that you truly want or need?
The United States has always been a credit-based society in more ways than just the financial. Our people learn from an early age that they can have anything they want so long as they are willing to pay for it….eventually. The easier it is to borrow money the more expensive things become because the pain of purchase is less, bringing more buyers into markets where they really don’t belong.
The American dream itself is a form of credit. “All of you work your tails off for 40 years and you can have all the nice things.” The house, the car, the family. Immigrants were promised these things and they built the infrastructure of this country for less than anyone else would have.
There are certain advantages to a system like this. We built an empire in record time in comparison to many other great societies in history. We also created many debts along the way. Now too much of the country thinks they are owed a living for nothing because they can get it.
My father was in the “improved relationships” category. He thought he could buy people’s affections. And for most people, sadly, it works. Not with me. We don’t have a very good relationship, and no amount of jewelry or nice dinners out could help that. My brother, on the other hand, thinks nothing of letting my father pay for everything.
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