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WHEN WE SPEND MONEY, we’re looking to get something in return. But what? Forget classic budgeting categories like housing, food, utilities, insurance and entertainment. Instead, suppose we used a completely different classification system—one that reflected the physical, social and emotional benefits we garner.
The list below is, I suspect, far from complete, especially when I compare it to the 16 basic desires developed by psychologist Steven Reiss. Moreover, as you’ll see, while an expenditure might fall predominantly into one category, it often touches on other categories as well.
Still, I find this an interesting exercise. Why do we spend as we do? Here are 11 possible motivations:
1. To satisfy basic needs. This is the biggest driver of spending in less affluent nations. Even in the U.S., many folks will claim their spending is driven largely by their needs and those of their family.
But do our needs really determine the bulk of our spending? Count me among the skeptics. If we’re talking basic needs—satisfying hunger and thirst, protecting ourselves from heat and cold, getting from one place to another—such spending likely accounts for a relatively modest portion of most U.S. households’ monthly expenditures.
2. To feel more secure today. This is the reason we stash dollars in our emergency fund, pay those insurance premiums and plan our estate. It also shows up in other expenditures, such as the safety features of the cars we buy, the purified water we purchase and the home alarm systems we install. How much do each of us value a sense of safety? All we need do is look at where our dollars go.
3. To give us hope. We all want a better future for ourselves and for those we love. This drives the education costs we incur and the causes we choose to support. But its greatest manifestation is the money we save each month for long-term goals, notably retirement.
4. To forge stronger social bonds. Much discretionary spending is devoted to building social connections, whether it’s taking the family on vacation, going out to dinner with friends, flying across the country to see the grandchildren or picking up the tab on that first date.
5. To brighten our mood. We humans devote a surprising amount of time and money to trying to change how we feel. Some folks go on spending sprees to cheer themselves up. Others drink alcohol to relax after a hard day at the office. We might take a vacation to recharge after months of working long hours. Or play video games and watch TV to break the monotony of everyday life. Or go to amusement parks, visit casinos and day-trade stocks to make life more exciting.
6. To improve our health and beauty. I’m not just thinking about visiting the doctor or the hairdresser. Our desire to live a longer, healthier life—and look good along the way—drives spending on personal trainers, makeup, organic food, spinning classes, manicures, Weight Watchers and exercise equipment. Such spending is often accompanied by a large time commitment. Indeed, I figure exercising—bicycling in the morning, taking an afternoon walk and so on—probably devours at least 90 minutes of my day, and sometimes more.
7. To make us wiser. Many folks devote large sums to learning more about themselves and the world around them. These dollars might be lavished on education, books, therapy, museum visits, travel and more.
8. For the pleasure of helping others. When we give to charity or volunteer our time, are we acting solely out of altruism or are we trying to make ourselves feel more worthy? Whatever our motivation, giving is a large budget item for many folks, and for that we’re all better off.
Such giving extends to family and friends. Indeed, I expect my financial gifts to my children and grandchildren will easily rank as this year’s largest “expenditures.” The gifts will make them happier—but not, I suspect, as happy as the giving will make me.
9. To impress others. Arguably, there’s an element of signaling to every dollar we spend. With our purchases, we’re looking to tell the world who we are and what we value. Even frugality is a form of signaling, though the price tag is certainly smaller than for the conspicuous consumption that most HumbleDollar readers would disdain.
10. To enjoy a sense of accomplishment. If we have a job, we can have a pleasurable sense of progress and get paid at the same time. That sense of accomplishment can be so enjoyable that people will spend money to get a taste of it even during their non-work time.
Think about the folks who take hiking vacations, run marathons, volunteer, undertake home improvement projects, and spend hours on arts and crafts. Such activities feel like a worthy way to spend time and money—the sort of things we’ll gladly tell the neighbors about, rather than revealing that we spent the afternoon binge-watching Netflix. The good news: Among the budget items listed here, seeking a sense of accomplishment is typically one of life’s great bargains.
11. To honor earlier generations. Whether we realize it or not, a lot of our spending is influenced by our parents and grandparents. That’s undoubtedly true for me. It’s the reason I make cottage pie, own antiques, occasionally drink mojitos, order wiener schnitzel whenever it’s on the menu, and make a point of regularly visiting England.
To be sure, mojitos—which my father had a fondness for—are not so expensive, while a trip to England certainly is. But either way, such things have a meaning for me that goes far beyond their obvious attributes.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney, on Facebook and on Threads, and check out his earlier articles.
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Thank you. I wonder how advertising or marketing firms (or perhaps Google and Amazon and others) have mastered and applied such insights.
Great article. I agree with Honor Earlier Generations in a big way. My parents were financially responsible to the greatest level possible. My Dad worked two full time jobs for four years to pay off a house on the wrong side of town after WW II. Asked my mother after his passing if that was for the fear of a recession? She said he hated paying interest. If you had a bill in our family you paid the bill and paid it on time. I think if I would have done otherwise I may have had to change my name and move to another city. Years later we had to get a credit report and my hair was on fire with all the statements and score on the report. We had a score of 840 and I wanted to know why we were not higher, like maybe over 900. The bank officer told me that 850 was the highest score possible and said she had never seen an 840. That happened because I was fortunate to have my Mom and Dad.
Excellent article. The next step for me is to print this out, and then try to identify the categories of most significance for me, and how much I spend in these categories. (And then try to find where I might be able to dial it back, or direct it better…)
We have a hard time getting my mother-in-law to spend a little money. Occasionally something will come up that would benefit her, but she says it costs too much. Then I ask if she would buy it for her daughter and says, “Absolutely!” Then I point out the obvious.
I guess that’s a conflict between 6 and 8.
Thank you Jonathan for another great posting!
It’s articles like this that ensure that I am a daily visitor to this wonderful website.
Does thinking fall into the brighten mood category? For instance, buying information, especially non-fiction reading material. I can’t say that the reading I’ve been doing on the Middle East and specifically Israel/Palestine has brightened my mood, but it is an example of paying for material to think.
I would think it falls more under No. 7 — to make you wiser.
Ok, that’s embarrassing.
Great article Jonathan – 11, 8, 4 and 3 in order of priority resonates with me. I do have terrible conflicts between my heart and mind, rationalizing my decisions/conclusions.
Gee, I make cottage pie and bangers and mash, occasionally mushy peas and I like schnitzel. I have two antique chairs from 1890.
I love visiting England. In fact, when my wife wants to see a Broadway show I take her to London – believe it or not one show was Jersey Boys. I’ve even driven my friends canal boat outside of Edenfield.
Must be the Oliver in my family.
Jonathan, Excellent list! Number 10, to enjoy a sense of accomplishment, hit home for me. Spending money in this category often is done at the expense of earning dollars. This highlights an element of chosing time over money, even when there is a price associated with that choice.
Great article. #2, security, resonated with me. I have ADT security at my house and never use it. I pay for identity protection just in case. I insured a new ring I bought my wife, and insured another ring after the center diamond was lost. I buy a $1mil personal liability policy every year just in case. I have flood insurance and don’t live in a flood zone simply because people that have never experienced a flood flood all the time. It’s happened to friends. I bought earthquake insurance when I lived in coastal Oregon after I understood the Cascadia Subduction Zone can produce devastating earthquakes. For $160 a year I bought peace of mind. Yep, I’ll spend on security.
This is a really thought-provoking article. Our recent home purchase was all about #4. We had dinner with a retired couple last night who had recently moved to the Boston area to be close to children and grandchildren. It can be a very large expenditure, but worth it.
The sad part can be when a couple does that and not long after the children move for any number of reasons.
I hadn’t thought about it until I read your comment, but my move to Philadelphia was also about forging stronger social bonds — and it was also mighty expensive!
This list is either fun or frightening, depending on whether spending is pathological or not. Regarding number one, this past Thursday I overheard a couple of co-workers discussing the finer points of bottled water, in intricate detail. I commented that I now finally understood the multi-billion dollar bottled water industry. It goes beyond providing basic nutrition.
Looking deeper, it’s useful to understand our own list, because advertisers certainly do. They know how to tap into these various reasons so we pour our money into their hands.