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When the going gets tough, the tough go shopping’ is true for many because retail therapy, other than the distractions it brings, also improves the buyer’s mood. And when it comes to retail therapy, the Generation X and baby boomers are equally guilty as the millennial. Even if what each generation generally spends on may be different, the fact remains that they derive some kind of happiness linked to using the plastic.

Retail therapy may bring happiness but depending too much on it may actually do more harm than good. It is important to understand the signs of being overdependent and break free. We bring you some help.

Retail therapy

Overspending is a big problem for many. “They buy things they don’t need with money they don’t have to impress people they don’t like. Not passing a judgement here, but money does buy some kind of happiness for many," said Rachit Chawla, chief executive officer, Finway, a registered non-banking financial company (NBFC). The reason behind overspending lies in a number of factors—ranging from behavioural issues to socio-cultural environment and technology. There is a very strong relation between money and happiness, but happiness that is derived from instant gratification does not last long. “Retail therapy is mostly a pop psychology thing. There is no psychology construct called retail therapy. It is what we would call as avoidant coping. When you don’t really have the inclination or resources to face whatever life is throwing at you, you indulge in avoidant coping," said Paras Sharma, founder and head,, a company which provides individual and organizational well-being services, and counselling service. “Those who have financial resources and the privilege to do it get short- lived dopamine hit or short- lived pleasure from buying something."

Another reason why retail therapy is becoming popular and many are racking up huge amounts of debt because of it is due to FOMO or the fear of missing out. “The world has become a smaller place today. An educated 22-year-old in Mumbai today, can see the lifestyle a person his age in New York has. He makes a comparison and aspires to have the same things and live the same lifestyle," said Raj Khosla, founder and managing director, MyMoneyMantra, a loan aggregator. And FOMO is doused by the ease of credit available even for fairly young people and first-time borrowers. Payday loans, digital lending platforms, and P2P lending have evolved, so has the penetration of credit card, personal loans, and the like. At a behavioural level, de-linking debt with shame has also made it easy for people to borrow. According to Khosla, the young generation today is more confident because they are more empowered with information.

Gaining satisfaction

Shopping brings happiness, but going overboard doesn’t. Especially when in doing so, you are raking up huge bills, piling up debt and sacrificing other financial goals to feed your need for instant gratification. According to Sharma, shopping may give momentary pleasure and may seem helpful. A study done by Sandra C. Matz, Joe J. Gladstone, and David Stillwell, at University of Cambridge shows that money buys happiness when spending fits our personality. “Money can indeed increase happiness if it is spent the ‘right way’. Individual differences play a central role in determining the ‘right’ type of spending to increase well being. We found that when people spend on products or experiences that match their personality, they report higher levels of life satisfaction," said Sandra Matz, assistant professor, management and organizational behaviour, Columbia Business School, New York. In other words, when you decide that you are in the mood to spend on yourself, make sure that you go after what fits your personality, and don’t give into the FOMO or peer pressure.

Tipping point

Spending on yourself is healthy as long as you are firmly in charge, but the minute you make a habit of it, your financial life could spiral out of control.

According to Sharma, there is no criteria to say that beyond this point, it is taking form of a compulsion, because it is not a diagnosable condition. But if you keep track of your financial situations, you will be able to see signs of going overboard.

“Splurging on yourself once in a while and staying within the budget is normal, but when you find yourself frequently shopping, you maybe going overboard. It is not the big ticket spends, but frequent shopping for things like clothes or shoes that can snowball and throw your financial life off-track," said Parag Paranjape, a Nagpur-based certified financial planner. “If you find yourself maxing out your credit cards, struggling with the household budget or liquidating your investments for spends, you know you are going overboard," he added.

It is true that spending can bring happiness, but make sure that it is not the only source of happiness and desist your dependence on it. In order to ensure that, Khosla gives a rule of thumb that one can follow. “There are needs, wants and aspirational spends. And, you should abide by the 50-30-20 rule—50% is for needs, 30% is for wants and 20% is for aspirational spends," he said. Aspirational spends should be the tiniest and as per Khosla, if you find yourself straying away from this rule, you might want to ask yourself why that is the case.

There are a few practical things you can do to avoid reaching the stage of going overboard. “Make a play account, which is a certain percent of your monthly budget and spend the whole amount," said Chawla. And if you exceed, then ask yourself why. “When habits turn into addictions, you don’t gain any pleasure out of it. You do it because you feel the urge to do it. So, if you really want to buy something, buy it and enjoy it. If you can afford it, it is perfectly fine, but if you find that you are shopping just for the sake of it, or for that matter, binge-eat just because food is available, or something similar, there might be a larger problem you need to address," said Sharma. Indulge in shopping once in a while and pamper yourself, but never at the cost of your financial health.

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