Facing a Financial Hangover in the New Year

Shopping and spending money, unfortunately, has become the defining feature of a “successful” holiday. The message we’ve been given is that unless the tree is surrounded by gifts, the holidays are unsatisfactory and incomplete. For some people, this message tells them their value as human beings depends on what they give and what they receive. This is an unhealthy and destructive message and one that causes many people to rack up unmanageable debt.

If you find yourself living through your credit cards by spending beyond your means, you might suffer from a condition known as compulsive over-spending. 

Compulsive over-spending is characterized by spending money to feel better about ourselves and to gain a sense of place in the world. We think that designer handbag, hot new jeans or celebrity perfume will give us status and value in the world. And while these purchases do make us feel great in the short run, in the long run, they leave us with the guilt, shame, anxiety and depression of a financial hangover.

If you can relate to this scenario, you’re not alone. The average American family has around $10,000 in credit card debt hanging over their head. Through it, they’ve placed themselves at the mercy of their creditors by acquiring a closet and house full of depreciating items they can’t afford.

It’s an unfortunate situation, but one you have the power to change. The first step, of course, is recognizing you have a problem. To start, ask yourself the following questions:

• Do you love to shop?
• Do you feel you are what you wear?
• Are you envious of other people’s possessions (meaning you want what they have)?
• Are you ever not completely honest about the amount of money you spend?
• Do you carry an unpaid balance on your credit cards that exceeds three months of your net income?
• Do you feel shopping is a “sport” (meaning that the hunt gives you a rush)?
• Is living on your cash flow impossible?

If you answered yes to at least three of these questions, you may be a compulsive over-spender. But,  you can take concrete steps to have an emotionally and financially healthier 2012. 

To do this, create a financial journal that will enable you to get a perspective on your spending. In this journal keep track of the following:

• Your monthly expenditures. Be very specific and inclusive. Yes, your barista coffee must be included.
• Track the amount of time you spend shopping or “just looking’ online and in stores.
• Pause before you buy. Before you pull out the credit card, write about why you need the good or service in your journal and wait 24 hours before you buy it.
• Declare shopping-free days. Saturday is the best one to make purchase-free. 

The ultimate goal here is to become more conscious of your shopping patterns and to understand how and why you spend money. Mental and emotional health is defined by freedom. Central to this is a freedom from financial enslavement to others. Make financial freedom, emotional and physical health your top priorities in 2012, and you’ll never have to face a new year with a financial hangover again.