Mind Your Money: The Psychology of Spending
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The Psychology of Spending Video Transcript

0:09
Hi everyone, welcome to Mind Your Money, the Psychology of Spending. My name is Catherine, I’m a financial education specialist with the Credit Counselling Society, and I’m so glad you’re here with me. Today, we’re diving into something all of us experience, how our emotions, habits, and environment drive the spending decisions we make every single day.

0:31
Now, a quick word on who we are. The Credit Counselling Society is a nonprofit serving Canadians from BC through Ontario and across the territories. Our motto is we help, we educate, and we give hope. We offer no cost credit counselling appointments and lots of free education, including webinars like this and tools on our website, nomoredebts.org. People often tell us that even one conversation brings a sense of relief and hope, and that’s exactly why we do this work.

1:01
What do you think are the most common reasons people run into money trouble? Here’s what we see most often. Job loss or underemployment, rely on credit for daily living expenses, unexpected illness or injury, and not having a workable budget.

1:18
All of these can happen to anyone at anytime.

1:23
Let’s move into the content for today, Psychology of Spending. Here’s our plan. We’re going to look at how marketing influences us, what’s happening underneath the surface when spending feels automatic, and how to protect ourselves online and offline. You’ll also get some simple homework. Notice how companies try to sell to you, how technology is used to sell to you, and what you learn about your own behavior.

1:47
By the end, my aim is that you’ll recognize how marketers play with emotions, understand how technology nudges us to overspend, and feel ready to use simple strategies to protect yourself. Awareness is the goal.

2:01
Did you know that the marketing research industry is the business of figuring out what will buy and why? This is valued around $1.7 trillion. Yes, it’s a lot of money. Nearly half of millennials also report spending because of social media use. One in four adults will experience FOMO from social media, the Fear of Missing Out, and when someone wins the lottery, their neighbours are more likely to go bankrupt. That keeping up pressure is real.

2:31
Most people think marketing equals ads, but the real strategy is hitting your emotions. Marketers sell us feelings. That’s more than products, and there’s a lot to juggle. We juggle external pressures like ads, social media, even other people, and internal pressures like emotions, comparisons and the feeling of belonging. Emotions often drive the decisions and logic explains it afterwards. Retailers know that if you feel something,

3:02
you’re more likely to buy it. Things like belonging, importance, attractiveness, intelligence, fear, uniqueness and pleasure. They’re all extremely powerful triggers and retailers know that. Think of nostalgic commercials or family centred car ads. All of this is driven to get our attention.

3:26
We often buy the identity a product represents. The healthy person, a successful person, the tech savvy person. When something feels tied to our identity, we justify it more easily.

3:39
What about liking? We buy from people we like. When a celebrity or influencer promotes something or a product, our trust in them spills onto the product itself

3:50
and commitment and consistency. If marketers get you to take one small step, join an e-mail list, accept a free sample, try a product at home, you’re more likely to continue with a purchase. Even opening a package creates a sense of commitment.

4:07
We just so big questions we should be asking ourselves before we move forward with the purchase. Is am I being sold a product or a feeling?

4:17
What emotion is being tapped?

4:20
Could I meet this emotional need without spending?

4:25
And does a joy match the cost?

4:29
The purchase itself is completely up to you. The thing we’re trying to avoid and promote today is not feeling guilty about the purchase afterwards.

4:38
Let’s move into the next piece about social media. And this is something that we absolutely have to talk about because it’s completely changed the way that we shop. Apps like Instagram, TikTok, Facebook, they’re all intentionally designed to keep us scrolling. And the longer we scroll, the more ads we see and the more tempted we’ve become. Every time we get a like or a comment, our brain gives us a tiny dopamine reward and it feels good. And because it feels good, we keep coming back for more. It was designed that way.

5:08
And when we’re scrolling, the platform is quietly tracking everything. What we look at, how long we pause on an image we follow, what we buy, what we search. All of this allows tart advertisers to target us with remarkable accuracy. You may have had this movement. You casually search for running shoes one time, just casually looking around, and suddenly your phone turns into a running shoe catalogue for three days straight. That’s not a coincidence. This is data-driven,

5:39
targeted advertising. This matters because the shapes are emotions. Social media often shows us people who seem to have more, who seem to have a healthier life, a wealthier life, a fitter lifestyle or more being more stylish. And without actively trying to, we start comparing ourselves to these people. We don’t even know who these people are, but we start comparing ourselves. And when we compare ourselves, our spending tends to increase. We buy to keep up, we buy to feel better, and

6:09
you buy to feel like we belong. All of those things we just talked about. Technology has made it even easier than ever for advertisers to influence our spending without us realizing it. Companies purchase detailed data about us, our browsing habits, our demographics, our location, our purchase history, and they use that information to show as that few personal to us that apply to each and every single one of us. Have you ever thought to yourself, wow, is this ad directly speaking to me?

6:41
How did it know what I was thinking? Well, it kind of is based off of your historical behaviour. And The thing is, these ads, they’re not random. They’re chosen because your behaviour suggests that you are likely to buy it. Not someone else, not your neighbour, but you. You have essentially been sorted out into a category called a warm lead. Even the design of online shopping platforms is intentional. Bright colours on the Buy now button, Time limited countdowns. Free shipping thresholds.

7:12
I mean, who hasn’t added one extra item to get free shipping? I know I have. These are psychological triggers crafted to guide your decisions. This is why protecting your data matters. Unsubscribing from e-mail lists. Clearing your cookies, not saving your credit card online. Using Incognito mode when you’re browsing online. All of these help you step out of the spotlight of targeted advertising.

7:38
Now let’s talk about a little something closer to home. The influence of other people. Humans like us, we’re all social creatures. We naturally mimic the behaviours of the group we identify with. It’s kind of innate in us to do that, to want to belong to a certain group. So if our friends are taking trips, upgrading their homes, eating out frequently, wearing certain brands without even thinking about it, we may feel the urge to keep up. Not because anyone told us to, not because we want the same things, because sometimes we do these things and

8:08
with guilty about it afterwards, but it’s basically because our brains are wired to belong and culture plays a role too. Holidays, celebrations, weddings, gifts, all of these come with unspoken financial expectations. Now we’ll often spend more than plans simply because it’s what people do. But when we stop and ask, is this product or is this thing meaningful to me personally, most of the time the answer is no. Awareness is going to give you the permission to create

8:40
your own financial boundaries, create your own traditions, and produce your own limits. So make sure that you get some time to think about those powerful questions. Is this product meaningful to me?

8:53
Now let’s shift into the real strategies marketers use to actually get us to open our wallets. We’ve talked about emotions and social pressures. Now we’re looking at the techniques that push us over the edge. Social proofing is one of those things, and it’s extremely powerful because it tells us what other people are doing. It’s not what the retailers are doing, what other people like you, your age and your demographic are doing. And of course, just like the sense of belonging, it allows us to think, is this what everyone else is buying? Should I be buying it too? And our brains, they love

9:24
shortcuts. They don’t want to work really harder than it has to. So seeing these reviews, having the social proofing right in front of us convinces us to spend. If something is labelled bestseller’s most popular rate of five stars, again, it’s our peers that are doing it. Our brain immediately thinks, well, if all these other people like it, it must be good. But here’s the secret. Sometimes these labels are completely manufactured. They may not even be real. Sometimes the best seller tag is based on sales

9:54
from our one weekend. Sometimes five stars is based on 12 reviews from people who receive the product for free. Sometimes the retailers will actually give promotions or free products to people for providing a good review. We don’t really know what’s real. Social proofing works because it taps into a very old survival instinct, safety in numbers. If a crowd is running in One Direction, our brain says don’t stand here alone, run with them. So marketers use that instinct to guide us towards certain purchases.

10:25
What about brands and logos? Brands are more than their logos, their identities. And a brand can make us feel stylish, strong, healthy or sophisticated, depending on what the retailer structured it to be. When you buy a product, you’re not just buying the item, you’re buying the story that the brand is telling. Even the packaging is part of the experience. Companies invest millions of dollars into how the unboxing feels because it creates an emotional connection. Can you imagine millions of dollars

10:55
or just the packaging of a product? Those fancy stickers, the tissue paper, the unique box, the smells? All of these things release dopamine, and dopamine reinforces behaviour. That’s why people become loyal to certain brands. The emotional trigger and connection is so strong that rational thought about price or practicality goes out the window.

11:18
Let’s move into scarcity. Scarcity is one of these strongest psychological triggers. When we believe something is limited, we value it more.

11:27
Only three left limited edition sale ends in two hours are brains panic. We have this false sense of security thinking if we don’t get our hands on it now, we may never get our hands on it and we’re afraid of missing out. But here’s the truth. Most scarcity online is fake. Some websites will randomly generate scarcity messages like ending soon timers all to trigger us to spend and click the buy now button. Some artificially reduce visible stock to get you to check out faster. Only 10 left. This item is selling extremely popular today. Scarcity works because the fear of missing out can be more powerful than the joy of getting the item.

12:08
Reciprocity. Reciprocity is the idea that when someone gives us something, even something small, we feel obligated to give something back. Free samples, like at Costco? That’s reciprocity. Trying on a free trial? Reciprocity. A free downloadable guide from a website? Reciprocity. All of this is structured because our brain doesn’t really know how to differentiate between small gifts and big gifts. They just register that we receive something again, that dopamine hit, and we want to return the favor. And marketers know this.

12:39
Let’s talk about the power of nine and pricing psychology. Have you ever wondered why everything ends or a sale item might end in .99? Why $19.99 feel so much cheaper than $20? It’s because our brains read numbers from left to right. We see 19 and our brain anchors on that number, even though logically the difference is literally only one penny. Studies show that changing a price from $40 to $39 can increase sales more than dropping it all the way down to $34. It’s not about saving money, it’s about the perception of saving. That’s why retailers almost never use whole numbers. Whole numbers feel more expensive, even when they’re not.

13:24
Gender pricing. This is a big one. It really means that the products marketed to women often cost more than similar products marketed to men’s. Razors, deodorant, shampoo, basic grooming products. Sometimes the only difference is the colour pink, but the price difference can add up to over $1,000 per year. This isn’t about better quality, it’s about marketing assumptions. Companies know women are targeted more heavily with beauty, Wellness and self-care products and they price it accordingly.

13:54
Being aware of this makes you smarter with swapping different products like choosing gender neutral products or buying from the men’s aisle if it’s cheaper and ultimately it’s probably the same product.

14:07
So we talked about a lot today and a lot of it has to do with self reflection. So I want to go over with you some powerful questions you should keep in mind the next time you go out and purchase something online or even in the store when you’re about to buy something. Some things to ask yourself could be what emotion am I feeling right now,

14:27
What emotion are they trying to sell me, and what problem do I think this will solve?

14:33
Am I buying the item or am I buying the fantasy of who I could be with the item?

14:41
Will this matter to me in a week, a month, a year?

14:45
So take a moment to pause and question the purchase. Give your future self the ability to make choices and decisions with you in your current moment.

14:55
By doing this, you interrupt an automatic emotional response and most impulse buys don’t survive even a 10 second pause.

15:06
Lastly, online shopping. Online shopping combines everything we’ve talked about. Emotion, dopamine, branding, social proofing, scarcity, and convenience. And here’s something fascinating. Online shopping gives us two dopamine hits: one when we place the order and one when the package arrives. So it becomes a vicious cycle, not of buying things we need, but just of chasing that dopamine hit and chasing that reward. That’s why leaving things in your car for 24 hours is so effective. If you wait, the emotional dopamine rush fades and what’s left is a more rational thought. “Do I really want this” and ask those powerful questions that we just talked about? Many times the answer is no. And that’s exactly what you’re trying to do is put a pause in that impulse spending cycle. Think of purchases in terms of hours, and hours worked is another great tool. If something costs you $200 and you earn $20 an hour, that’s 10 hours of your life. When you frame it that way, the decision becomes clear and you can ask yourself, is this product or this thing I’m buying worth 10 hours of my life?

16:16
To sum things up for today, remember, before you buy, take a pause. Even 10 seconds can be a big difference maker. Paused long enough to understand what’s happening inside. Recognize your emotions. Is it excitement? Is it insecurity, boredom, stress, loneliness, pressure to keep up? Remember, marketing placed emotions, not logic, and the product is often secondary. They’re selling you belonging, identity, comfort, confidence,

16:46
beauty, love, acceptance, none of which can be really purchased. And your power comes from recognizing the tactic the moment that you feel it and putting a pause and putting a hammer in that cycle. And when you do, you get to decide and you get to control the situation. You get to choose your money and not the other way around.

17:08
I want to thank you so much for joining me today for Psychology of Spending. I’m hoping you were able to take a few key tips away today with you. And remember, if any of you are considering giving us a call for a free and confidential appointment, don’t ever hesitate. We’re here to help.