How can I stop spending all my extra money on junk?

Welcome to Ask Amanda, Sherwood’s Financial Advice column. Have a thorny money matter you need help with? Get Amanda's insight by writing her at advice@sherwood.news

Dear Amanda,

I'm a 35-year-old single woman in a major city where the cost of living is very high. (It starts with "N" and ends in "ew York.") Though my salary is solidly middle-class, I recently took a small pay cut to pursue an exciting new work opportunity. Meanwhile, my rent has gone up considerably this year — and it feels like the price of just about everything else has, too.

In a lot of respects, I'm doing well and very lucky. I can afford to live on my own (for now, anyway), I have a healthy Roth IRA to plan for my very long-term future, I'm contributing to my 401(k), and I have about five months' worth of net income stashed in a separate savings account for emergencies.

The problem is that most of my monthly income — close to 70% — goes to necessary monthly expenses like rent, utilities, groceries, and pet costs. It's hard to avoid using whatever's left to treat myself to things that are, strictly speaking, unnecessary, but do a lot to improve my overall happiness day-to-day: clothes, little trips to visit friends, nice meals out, etc.

I would love to be able to set aside money in the hopes of one day buying an apartment. At the very least, I'd love to spend less on all the unnecessary consumable crap to grow my savings faster or fund more life-enriching extras like travel, continuing education, etc. But my life frequently feels pretty lonely, isolated, and boring, so it's hard to not want to give myself tiny little gifts.

Any advice on how to tighten my belt without feeling too deprived? I looked into it and I think I'm too old for the sugar-daddy demographic, so I'm out of ideas.

— I Deserve a Little Treat, Dammit

Dearest Deserving, 

Let me begin by saying I’m very pro-treat and tend to hold the definition of a “financial necessity” pretty loosely. Yes, there’s a difference between an IRA and an “investment” handbag, but as a framework, dividing your life into “Needs” vs. “Wants” complicates decision-making and sets the stage for a messy emotional conflict.

You gave a great example of this with your living situation. Most of us would confidently say that housing costs fall into the “Needs” bucket. But is living alone a need? In a city like New York where the majority of residents are considered housing-burdened (meaning they spend more than 30% of income on rent and related costs), decisions about neighborhood, proximity to public transportation, building amenities, and yes, whether or not we have a roommate, can blur the boundary of “Needs” and start to bring us more into “Wants” territory. 

Before the introverts come at me or I’m accused of insensitivity to the safety concerns of women or folks who have accessibility requirements, I want to validate that these are incredibly important factors that are not shared equally by all members of society. My intention isn’t to beat up on your decision to live alone, dear Deserving, but encourage you to step away from external labels that erase your agency in the matter. It’s time to stand in your own values, girl!

Do you know what you really want? 

When I read your story, certain values jump out right away, like independence, responsibility, and prudence. You’re building your net worth and doing all the “right” things. 

While I have no doubt that you hold these values sincerely, I do want to point out that these are socially sanctioned positions. When certain values are upheld and reinforced by the culture, it can be harder to tell when they’re intrinsically motivated (i.e. we get a feeling of goodness and safety from doing them in their own right) or extrinsically motivated (when feelings of goodness and safety come from others’ approval, or the internalized sense that we’re doing right according to the rules of our world). 

This matters because it directly impacts how much effort it takes to be “good.” When things are intrinsically motivated, it’s easy. But when we’re doing things just because we’re supposed to, then our main motivation is avoiding the pain (fear, shame, worry) that comes when we stray from the prescribed path. Because the effort itself is hard, we need to find other ways to reward ourselves, have fun, or self-soothe. Sound familiar?

I bring this up because there seems to be some confusion about why you want to review your spending allocations. On the one hand, you say it’s tough to squeeze all your day-to-day happiness spending into 30% of your budget. But you also want to eliminate the “unnecessary consumable crap” from that 30% so you can divert those dollars to more high-value choices like classes, travel, or a down payment for an apartment. So which is it? Are we trying to expand the 30% or cut it back? 

Your confusion is completely natural. Given that we’re constantly bombarded with contradictory messages about what we should and shouldn’t do with money, it can be tough to tune into that quiet inner voice that says, “Hey, here’s what really matters to me and I’m not going to be ashamed about it.” 

One exercise I like to do with clients is generate extreme spending plans that play with different values. For example, let’s take something you wish you had more of, like spontaneous fun. What would life look like if that was your No. 1 priority? You’d reduce all your committed expenses to the bare bones — goodbye maxed-out retirement savings, hello roommate. With that money freed up, what would you say yes to? Twice-weekly nights out with friends? A designer sweater every month? Never bringing lunch to work? Have fun with this! Come up with as much detail as you can, and tune into your body as you think about it. Do you feel excited? Powerful? A little naughty? 

Now consider the trade-offs. What do you imagine it’ll feel like when you come home and there’s another person there? When you put your reduced contributions into a retirement projection calculator, what do you see? What thoughts and sensations arise when you consider that future? 

You can repeat this with other potential priorities, like superfunding your retirement, saving for a down payment, or traveling the world. The idea is to give yourself permission to play, imagine, and be curious about other ways to exist in the world of money. We lose all that when we’re in problem-solving mode.  

Inner knowing, outer doing

Okay, so you’ve generated a bunch of scenarios and kicked up a hell of a lot of feelings to get to the heart of your spending values. I want to return to something else you mentioned that comes up in almost every case I see: self-regulation. 

You wrote, “My life frequently feels pretty lonely, isolated, and boring, so it's hard to not want to give myself tiny little gifts.” 

What you’re describing is the way we use retail experiences to change our mood state, known colloquially as retail therapy. To anyone who thinks this isn’t real, one recent global study of 114,000 people in 23 different countries showed that 80% of respondents reported making a purchase in the previous month with the intention of lifting their mood, even though only 42% said they could afford to do so. Whether you take a psychological view of this phenomenon (i.e. shopping helps us feel more in control) or a physiological view (it’s all about dopamine-reward systems), the fact is that even when we know exactly what our financial values are, we are still going to experience negative mood states in life. We are still going to have times when we want to throw our plan out the window and follow the impulse of the moment because it promises to make us feel better now. 

This is where I feel the “Needs” vs. “Wants” dichotomy fails us, because when we’re dysregulated, we do need to calm down. Buying something can seem like the quickest path to re-regulate and move on with life. There’s nothing inherently wrong with that, but it can be an expensive and rigid coping strategy that creates more long-term problems. 

In these situations it can be helpful to have non-retail alternatives ready to deploy when the urge to rebel against constraint comes up. Yes, you will feel better if you go to the gym or do some deep breathing or call a supportive friend. But choosing those healthy alternatives takes discipline, too, and sometimes what we need is to unburden ourselves from society’s rules and color outside the lines. In those cases, what’s something slightly transgressive but ultimately harmless that releases tension and reminds you that you’re not just a salary monkey who exists to pay bills until she dies? Something like jumping in the shower with your clothes on, going outside and whooping at the top of your lungs, or shout-singing the 10-minute Taylor’s Version of “All Too Well” around your apartment. These are real things I’ve recommended to clients, though the last one was 100% my personal go-to feelings mover of 2023.

Instead of “Needs” vs. “Wants,” a more neutral framework is to sort expenses into those that are Committed and those that are Discretionary. Committed simply means we’ve already decided to do it, and Discretionary means we’re still holding onto our options. 

Right now, you’ve committed 70% of your resources to things like housing, savings, utilities, and pet costs. Experiencing these commitments as choices as opposed to constraints can help reduce that tendency to rebel against them when we’re feeling stressed. Hopefully in the exercise above, you were able to tune into some intrinsic motivations and remembered why you committed to these choices in the first place. If not, the first task would be to identify what changing some of those commitments would involve.

To get the most efficient quality-of-life benefit out of the remaining 30%, I recommend making happiness the explicit intention for this money. 

Each week, review your numbers and think about the days ahead. How might you utilize your Discretionary funds to support your mental health and bring more joy, purpose, and connection to your life? Use this organizing time to set up plans with friends, or go over items on your shopping list. The more practiced you get at recognizing emotional needs, anticipating them, and allocating resources toward them, the less you’ll find yourself needing to avoid those feelings with a retail escape.

Amanda Clayman is a financial therapist who specializes in the cognitive, emotional, and behavioral aspects of our financial well-being. Her work has been featured in The Atlantic, The New York Times, and The Wall Street Journal, and her podcast, Emotional Investment, is available on Audible. If you have a money matter you need help with, write her at advice@sherwood.news