Overspending: 4 Lies That Lead to Debt Problems

CBS MoneyWatch

Understanding financial concepts like credit and budgets is critical to long-term success with money. But equally important, it seems, is recognizing (and controlling) the impulses that lead you to buy things you don't need.

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People with debt problems tend to share a common costly trait: they have unrealistic expectations for how material things will make their life better. That is the chief finding of a new study, Materialism, Transformation Expectations, and Spending: Implications for Credit Use by Marsha Richins and Myron Watkins, marketing professors at the University of Missouri.

The authors found that people who wind up deep in debt often got there because they expected "unreasonable degrees of change in their lives from their purchases." The authors also concluded "these beliefs are fallacious for the most part, but nonetheless can be powerful motivators for people to spend."

Studies like this complicate what has become a global quest to raise personal financial literacy through programs in schools and communities and at work. We need to do more than simply lay out the nuts and bolts of saving and investing. We also must examine the psychology of why we buy all the stuff we buy. It's not a bad idea to ponder your own behavior in this regard.

The study identifies four types of unrealistic expectations common to overspenders. These expectations are much less evident in folks who do not have debt problems. Here, then, are four lies that people tell themselves when buying things they don't need:

It'll make me a better person: Many overspenders believe a purchase will literally change them into a better person. One woman in the study was certain that cosmetic dental surgery would improve her looks and quickly render her more confident and successful.

People will like me more: Overspenders may believe that a purchase will make it easier for them to connect with others. One woman in the study wanted to buy a house so that she could entertain and be more social, and thus find more friends.

I'll be more fun: Some believe that a purchase will make them more fun and fulfilled. A man in the study wanted a mountain bike because then, he figured, he'd become more adventuresome and interesting.

It'll make me more effective: The typical overspender believes that a purchase will make them better at a certain pursuit. Several in the study said that a new car would make them more independent and self-reliant.

See the pattern? Heavy users of credit have a greater tendency to believe that the product makes the person. Which, of course, is backwards. A cyclist may need a new bike; a new bike does not make a cyclist. You can't buy personal transformation in a store.

Sure, whiter teeth may give you a confidence boost and a new house might make you more social — for a while. But it won't last if that's not who you really are. It's far more likely that the guy with the new bike will never take it out of his garage than turn it into a passion.

You know people like that, right? They have tons of unused stuff in the attic, and they may still be paying for much of it. The more you believe that happiness is for sale the more likely you are to end up with debts you cannot repay.

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