It’s harder to control spending in our modern world than it was 20 years ago.
Advertising pressures are high. Social media amplifies pressures to compare. Debt is easily accessible. And technology enables one-click ordering with next-day delivery.
Controlling spending requires more self-discipline than ever before.
In this post, I explore 7 ways that our modern world makes it harder for you to control spending. Then I look at methods you can apply to combat these pressures.
This post is mainly for those who are natural spenders, but it applies to the savers out there too.
I want you to grow wealth. But you can’t grow wealth without the ability to control spending. This applies even if you have a massive income.
Table of Contents
1. Advertising Pressures Are Higher Than Ever
Advertisers in North America spent $297.5B in 2021, or about $810 per person (source).
Ads are designed to be powerful. Smart people are paid big bucks to apply human psychology to design Ads to play on your emotions.
For example, a commercial of a sports car on a windy road with beautiful people can trigger a fear of missing out (FOMO).
Recently I saw an Ad of a healthy smiling family socializing at McDonald’s. Somehow, this associated warm and close relationships with a Big Mac.
Add to this the powerful algorithms that collect your data like search history, location, and knowing who you spend time with. Now the Ads are custom delivered to you based on your unique desires.
Finally, we have the intensity of Ad exposure. It’s higher than ever before. I don’t have data for this, but it’s obvious that screen time has exploded since little devices found themselves in your pocket. Ads swarm on Facebook, Instagram, YouTube, and free Apps.
Advertising pressures are stronger than ever due to our modern environment for a few reasons:
- Smart people design Ads to produce emotional responses that get you to spend.
- Your data is used to customize Ads to your unique desires.
- You have more exposure to Ads than ever before.
How to Control Spending In the Face of Advertising Pressure
You have two choices to reduce vulnerability to advertising pressure. Either you increase your self-discipline, or you reduce Ad exposure.
I like the second option. I find it easier to control my environment than to rely on self-discipline.
Here are some ways to reduce exposure to advertisements:
- Avoid shopping malls.
- Watch less TV.
- Limit time on social media.
- Unsubscribe from Ad-Based email newsletters.
- Use AdBlock.
- Disallow cookies. This prevents data collection to personalize ads.
2. Easily Accessible Debt Motivates Theft From "Future You"
Debt is theft from “future you”.
Our brains have a hard time thinking about the future. Therefore, debt incentivizes us to spend more now. Put another way, easily accessible debt makes it harder to control spending.
I see 3 things that make it hard to avoid debt:
- Financing options are everywhere.
- Credit card “reward” systems are aggressively marketed.
- Interest rates are low.
Easy Financing Options
The option to finance a new couch, bed, car or TV is tempting. Instead of a one-time expense, you can absorb a series of small expenses in the future.
You may not buy that $3,000 couch if you had to save ahead of time and pay upfront. But an $83 monthly expense for 36 months hits different.
Smaller payments cause us to spend more. This is true even with 0% interest rates.
Credit Card Incentives
Credit card point systems can be great. But benefits from these reward programs are erased if you overspend and pay 20% interest on credit card debt.
The point systems are marketed for a reason. They get people to spend more. They are a trap for all but the ultra-disciplined.
Now combine credit card use with low purchase barriers such as contactless payment and one-click ordering. Layer advertising pressure on top. I see a recipe for overspending and high-interest payments that drain your future wealth.
Low Interest Rates Fuel Bad Habits
Interest rates have been declining, dropping from over 5% in 2007 to 0.6% in 2020.
These lower rates made it cheaper to borrow. People borrowed more. This develops and reinforces bad. Habits are hard to break once developed.
Now interest rates have changed, but habits remain. The habits will result in debt, but now the debt is more expensive. This is why I don’t like 0% financing, even though it is a “smart” financial decision when only looking at the numbers.
Cheap debt has fuelled home price growth. Home Equity Loans (HELOCs) have grown in popularity in response. In 2019, 13% of Canadians had a HELOC with an outstanding loan amount of $30,000 (FCAC Survey).
This money is taken from home equity and often used to buy assets or services that decline in value, like cars, boats or vacations.
The HELOC transfers money that was stored in an appreciating asset (good) and puts it into assets that decline in value (bad).
Of course, my good/bad assessment is subjective. It’s based on a value system where growing net worth and limiting financial stress are “good”.
How To Avoid Debt To Control Spending
A Rule: Only Use Debt for Investment Assets
I have a personal rule regarding debt. I will only take on debt to buy real estate. That’s it.
That means no vehicle loans, no payment plans, no credit card debt, no financing, and no student loan debt.
In some rare cases, it can make sense to use debt to buy equities (stocks). I don’t do this. My risk tolerance is not high enough.
Student loans and vehicle purchases may be impossible without taking on debt. I understand that. This debt should be minimized as much as possible through part-time work or via the purchase of a low-cost economy vehicle.
I buy used Hondas with cash and was lucky enough to have the military pay for my school.
Throw Out The Credit Card To Control Spending
There is a simple solution if you struggle with credit card spending.
Throw it out or burn it. Don’t sign up for a new one.
Use a debit only, or a pre-loaded credit card for online purchases. It’s the cold turkey method of cutting spending. It works.
Use Sinking Funds To Control Spending
A sinking fund is an account where you put cash away monthly for a specific future expense.
When the expense comes up, like a wedding, all the money is in the sinking fund. There is no need for debt.
You can read my post on Sinking Funds to learn how to save for upcoming expenses ahead of time.
The best part about sinking funds is that they promote good habits.
Debt is theft from a future you to pay for a present expense. A sinking fund allows you to do the opposite. Instead, you sacrifice present spending to fund future expenses.
3. Low Barriers to Purchase
It’s crazy to think that a product will arrive at your door the day after a single Amazon click. Or that you can get food delivered to your door without getting out of bed.
With payment and address information saved, you are one click away from acting on your impulses.
A tap of a credit or debit card (in Canada) is another issue. All it takes is a few taps while downtown for a day, and you’ve spent $227. At the end of the month, you may realize you are over budget and did not meet your savings goals.
The modern environment makes it so easy to spend money. Even the best of us have a hard time controlling a large number of small expenses in this environment.
Add Purchase Barriers To Control Spending
The solution is to add barriers that make it harder to make impulse purchases.
Engineer your environment to protect yourself from yourself. Limit demands on your self-discipline. See a theme here?
- Turn off one-click ordering on Amazon. HowToGeek has this good post that shows you how to do this.
- Uninstall those apps that incentivize impulse purchases. No more Skip the Dishes.
- Wait 7 days before buying anything non-essential that costs over $100. Once 7 days pass, buy the item if you still desire it, and if you can afford it.
- Eliminate Automatic payments and review your bills. This prevents sneaky charges and helps you manage unused subscriptions.
4. Social Media Amplifies Pressure to Compare
Do you wonder how some friends can afford the nice cars and vacations posted on social media?
If so, you are not alone. Most Millennials and Zoomers wonder the same thing.
Social media is a poor reflection of a person’s financial state. But it still amplifies pressure to compare.
You (and I) have a natural urge to compare ourselves to others. We are inherently social creatures. Our brains try to figure out where we lie in the hierarchy.
Observing others flash nicer things or experiences can produce a Fear of Missing Out (FOMO). This FOMO is rooted in loss aversion. This makes it harder to control spending.
Data in my infographic is from the Highland Solutions Survey of 2,000 Americans in 2020.
Social media amplifies pressure to compare in two ways:
- It shows the “best” aspects of someone’s life. The messy complications of someone’s life are not on display.
- It increases the pool of comparison beyond what you’d ever see in real life. We are biologically designed to compare to groups of around 100 people. You are more likely to compare yourself to a small number of high-net-worth individuals.
Pressure to compare with others makes it harder to control spending. Therefore, social media makes it harder to control spending.
How to Reduce Social Media Comparison Pressure
I believe the natural desire to compare can be short-circuited. I see two main ways to do this.
The first is to take in reality. Most people are broke, including many who have nice things. They may even be high earners living paycheck to paycheck.
People can buy goods and experiences with debt. Or, they can be living paycheck to paycheck. You don’t see any of these complexities on social media. In extreme cases, people can rent fake jets and rent supercars for the Instagram feed.
You can check out my post on 30 Money Statistics For Millennials for a picture of reality. It is far different from that portrayed on social media.
Except for high earners making over $200k/year, material goods are often a terrible indicator of wealth.
Finally, a debt-fueled luxury lifestyle is no formula for growing wealth. Wealth is built by saving and investing. Money spent on nice things is money that doesn’t go towards wealth-generating assets like rental properties, stocks, and bonds.
5. The Modern World Is A Dopamine Nation
You can get calorie-dense food delivered to our door with the click of a button. You can binge-watch Netflix with a beer in your hand. Or you can receive perfectly timed dopamine hits on TikTok for hours.
Or you can play video games, tediously designed to keep you chasing rewards. While traveling to work, you may even have a heater that keeps your hands and butt toasty.
Our modern world is one of instant gratification. Pleasure. Life is easy in this “dopamine nation”.
But there is a problem. Your brain adapts to pleasure to maintain a pleasure-pain balance.
The fact that you adapt to pleasure means you will never have enough. You need even more to feel the same amount of pleasure.
Plus, a increased exposure to pleasure reduces your ability to tolerate pain. After enough pleasurable activities, the things that were once pleasurable can become neutral, or even painful.
Constant exposure to pleasure makes you less resilient. It makes you less able to endure pain.
How does this relate to spending? Well, it is painful to suppress our impulses, and pleasurable to spend. Becuase you adapt to pleasure, you may need to spend even more to satisfy your desires. With less tolerance for pain, you are less able to control spending.
This section is inspired by the book Dopamine Nation by Anna Lembke. The author Anna Lembke is an addiction psychologist. She clearly understands how excessive pleasure impacts the brain.
Control Spending By Increasing Resilience
It’s hard to control spending. You need to suppress impulses and delay gratification. By restoring your pleasure-pain balance, you will be better able to endure hardship.
There are two ways to restore a normal pleasure-pain balance. You must do hard things and regulate dopamine-intense activities.
My hard things include fitness and meditation. When I fail to meditate or work out consistently, I have a hard time writing and working well. My self-discipline suffers.
Doing hard things increases your pain tolerance and reduces your tolerance for pleasure. That means you can experience pleasure in more simple (and natural) ways.
After doing something hard, things that were once neutral become pleasurable. After biking up a huge hill, it feels nice to be biking on flat land.
In addition, you can attack the pleasure side by removing access to high dopamine activities. I attempt to do the following activities to tackle the pleasure side:
- Limiting time on social media (I get stuck in Insta Reels).
- Eating healthy and avoiding high-sugar foods.
- Getting rid of my video games.
6. We Have Low Financial Literacy Rates
The personal finance data shows that most people are not doing well with money management. Over 50% live paycheck to paycheck and most can’t afford a $500 emergency expense.
I believe much of this problem can be resolved through individual ownership to learn about money, manage money and grow money.
I don’t remember learning about money in school, nor did I learn from my parents. But I was lucky to have parents who made me fend for myself financially as a kid.
Self-sufficiency taught me frugal living habits. It also made me a natural saver rather than a natural spender. This article covers the difference between spenders and savers.
I had to self-teach topics like budgeting, investing, debt, mortgages, insurance, and taxes. These topics are super boring. But we are lucky in that there are many free resources to learn, as I provide in my free resource bundle.
Lack of competence in certain financial areas makes it hard to control spending:
- Budgeting: You need to know how to make a spending plan and monitor spending. With no spending targets, natural spenders are bound to have out-of-control spending.
- Credit Card Debt: It’s easy to overspend if you don’t have super-human self-discipline and a strong knowledge of how interest on debt works.
- Emergency Fund: Without one, you will take on expensive debt to cover emergencies.
Financial literacy rates are low. But I would be wrong to say that financial literacy is the main cause of financial stress for millennials. Median wage growth has been pretty flat. Recently inflation has been outpacing wage growth. Finally, all the factors in this post make it harder than ever to control spending.
The Solution: Increase Financial Literacy
Access to a computer and self-discipline are all you need to increase financial literacy and control spending. For example, you can make a spending plan for free with the Google Sheets Expense and Income Tracker.
The data is promising too. An FCAC survey in 2019 showed that 56% of Canadians aged 18-34 have aimed to increase financial knowledge via the online study of learning at work/school.
I love books for general knowledge, and blogs a for specifics, such as what to do when you max out the TFSA.
Resources are great, but learning about money is super boring. I see two main ways to make learning less boring:
- Goal Setting. Goals give you a reason to learn. A “Why”. Big goals can be broken into manageable small goals. Then you can learn what you need to meet these small goals.
- Skin In The Game. This is when you position yourself to have something to lose if you don’t learn. When you have skin in the game, where failure is your teacher.
You can increase your financial literacy by setting financial goals and putting your money on the line to meet these goals. With a clear “why” behind your financial actions, you will be more likely to control spending.
7. Material Wealth As a Cultural Success Measure
You and I both live in a culture that uses material goods to measure status and success. This has been the case in most human cultures.
This societal value system makes it hard to control spending. I think it’s hardest when you place your identity on the goods you own. It can cause an endless cycle of chasing “more”, where you never have “enough”.
Assume Fred has the most excellent house and the best car in the neighborhood. Now his neighbour gets a promotion or a new job and buys a nicer car. Fred suddenly doesn’t feel so good.
Fred feels deep urges to spend more to “one-up” his neighbour. Not only is it harder for Fred to control spending, but external factors can shatter his identity.
This would be less of a problem if the items that signal wealth retained value. But they don’t. Vehicles, boats, and the structure of your home depreciate. They decline in value and reduce net worth.
Control Spending By Going Against The Grain
It’s far easier to control spending when you don’t care about what everyone else is doing.
This is easier said than done. Comparison to others is natural. Here I find it helpful to recall that material goods are often poor indicators of wealth. Debt can fuel the purchase of assets like cars, boats, watches, and vacations. Therefore, these are poor measures of material wealth.
You will never know the financial state of an individual without looking at their net-worth statement. They could look wealthy but have a negative net worth.
Reducing the importance of material status symbols may require a shift in values. That’s hard to do.
This is where Stoic philosophy comes in, where you root your identity in internal factors that cannot be taken away. Examples include your self-discipline, integrity, ambition, knowledge and abilities.
Conclusion
The modern world makes it hard to control spending.
You are exposed to sky-high advertising pressures, easy debt, and low barriers to purchases. Then layer on top a strong pressure to “keep up” thanks to social media.
This interesting cocktail of factors makes it hard to control spending.
In addition, our modern “dopamine nation” has made many less resilient and more likely to act on impulses. Financial literacy rates are also low.
How To Control Spending
Self-discipline alone is no match for the spending pressures we face in today’s world.
Instead, you must engineer your environment to reduce spending pressure. This can include limiting time on social media, turning off one-click ordering, removing Apps like skip the dishes, and creating rules for taking on debt.
Second, you can become stronger by doing hard things and reducing exposure to high-dopamine activities.
Third, you can reduce the pressure to compare by remembering the fact that over 60% of people in North America are struggling financially. Many of these people are going broke trying to one-up other broke people.
I also find it helpful to learn about how to spend money to improve well-being. I cover this in my Ultimate Guide on Money, Happiness, and Wellbeing.
I hope this helps you control spending.
Jake out.
