I recently discovered a buzzword called “spaving,” which combines spending and saving. It sounds odd – spending money to save money? Yet, it has roots in how we think about and purchase as consumers.

Often, marketing messages are meant to make us believe we save money by spending more upfront, perhaps through Amazon Prime, bulk purchases, or even credit card rewards.

Retailers know how we think and use this to their advantage through behavioral approaches. They entice us to spend more with the promise of savings or rewards.

Understanding the psychology behind our spending habits is crucial if you want to make smarter financial decisions.

In this article, we’ll cover how:

• Spaving combines spending and saving.
• Retailers exploit our spending habits to their advantage.
• Understanding spending habits helps in making smarter financial choices.

Spave: The Idea of Spending to Save

Space is short for “spending to save.” This happens when we spend more money, thinking it will save us cash later.

For instance, imagine you’re shopping online on Amazon or another e-commerce site. Your item costs $130, but free shipping kicks in at $150. You might add things you don’t need just to justify saving shipping costs.

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Another example can be seen when buying cars. People often spend extra on features, believing it will raise the resale value.

Credit cards with points and cash back also encourage us to spend more just to earn rewards. But sometimes, the rewards don’t cover the extra money paid in fees unless used wisely.

How Consumer Psychology Shaped Behavioral Finance

Retailers have studied our spending habits for years. They know we often justify purchases by convincing ourselves we’re saving money. Incidentally, Sigmund Freud’s nephew is credited with the foundational work of consumer psychology. Famously, he helped Lucky Strike and removed the social stigma for women associated.

Fast forward to modern times with social media terms like “YOLO” (you only live once) from this generation or “girl math” and “boy math” popularized recently with memes and reels are examples of how younger consumers rationalize spending money.

Unsurprisingly, we’re at an all-time high in consumer credit card debt with this mentality in the zeitgeist. Putting those purchases on a credit card with interest rates of 20% or more will offset any potential savings. As a resident, I met many coworkers who wanted to enjoy the limited golden weekend or a bonus check.

High-quality items, like durable boots or bulk buys from places like Costco, sometimes make sense. Spending more initially can lead to savings over time.

So, while spaving has its pitfalls, it can sometimes make sense if done wisely, like buying a winter coat off-season while on sale.

What Does Spaving Look Like?

Spaving can often look appealing but costs you more if you’re not careful. Consumers are often trapped into spending more than they need to under the guise of limited editions and discount offers.

Online Shopping Strategy

Many retailers offer free shipping on orders over a certain amount when shopping online. For instance, suppose we need to buy an item priced at $130, but free shipping kicks in at $150. We might add extra items we don’t really need to our cart just to avoid the shipping fee. 

In the end, we spent $20 more to save on shipping, even though those items weren’t originally on our shopping list.

Car Upgrades for Resale Value

When car shopping, it’s common to consider adding features like a sunroof or upgraded interiors. We might think that these extras will boost the car’s resale value later on.

By spending more money now, we believe we’ll recoup the cost when it’s time to sell. The resale value often doesn’t increase as much as we anticipated, meaning we spent extra without a real financial benefit.

Use of Mileage Credit Cards

Credit cards that offer miles or cashback can be very tempting. We might charge all our expenses to these cards, aiming to rack up points for future travel or rewards. While this sounds smart, merchants often add a fee for using credit cards, usually around 3%.

If we are only getting 1-2% rewards back, we end up spending more money on fees than we gain in points. Additionally, these strategies sometimes lead us to spend more just to earn those extra points, which isn’t true saving.

Free Trials for Paid Subscription Apps

We’ve all been there: enticed by a free trial for a music streaming service or a productivity app. But beware of the trap of spawning! Signing up for a subscription with the best intention of canceling before the trial ends can quickly turn into a recurring charge.

Remember, free trials are meant to hook you. Set a calendar reminder for the cancellation date before you even start the trial. Don’t fall victim to spawning – enjoy the free perks without the surprise bill!

The Problem with Credit Cards

Credit cards can seem like an excellent tool for financial management, but they come with their own set of problems. While they offer convenience and rewards, these perks often hide bigger issues.

Unseen Costs of Rewards Programs

Rewards programs, like points or cash back, might seem appealing. However, they come with hidden costs. Many merchants charge an additional fee, often about 3%, for credit card payments.

This fee can outweigh the benefits of the rewards. For instance, if you are receiving only 1% or 2% cashback but paying a 3% fee, you end up losing money.

Another recent example I saw is Starbucks’ CEO saying outright that they’d use their digital star programs to incent customers to buy more drinks. The next day my wife conveniently was trying a spicy strawberry drink (?!).

Using credit cards to earn miles or points can also lead to spending more money than planned. The promise of rewards can push us to make unnecessary purchases. This is money that could be better saved or invested.

Risks in Business Use

Business owners sometimes use credit cards to earn rewards for business expenses. On the surface, this seems like an intelligent strategy. However, it can get complicated and risky.

If a business owner uses points or cashback for personal reasons, it can create tax issues. The IRS might view this as tax fraud or evasion if the rewards are not reported correctly. Imagine getting fined or investigated for tax fraud while trying to run your business…not the best of decisions.

Using credit cards for business expenses also encourages overspending. Business owners might buy more than necessary just to earn more points, increasing business costs.

Credit cards offer convenience and rewards, but they can hide costs and risks that outweigh their benefits.

The Effectiveness of Classic Saving Methods

Everybody wants a shortcut. With online content saturated with new tips and tricks and money “hacks,” it’s no surprise that an increasing number of people are confused about the best saving methods. Sometimes, it’s best to stick to the path more taken.

High-Yield Savings and Investments

When we talk about traditional ways of saving money, high-yield savings accounts and various types of investments often come up. These methods can really help grow our savings over time.

High-Yield Savings Accounts

These are bank accounts that offer a higher interest rate than regular savings accounts. We can earn more interest on the money we keep in these accounts.

For instance, if we had put the extra dollars we spent on credit card points into a high-yield savings account, we could be earning around 4 or 5% interest.

Investments in Stocks and Bonds

Another option is investing in the stock market or buying bonds. Over the long term, these can potentially earn us even more than high-yield savings accounts. By investing wisely, we can make our money work harder for us.

Considering these traditional saving methods as powerful tools in our financial planning is important. They offer a more reliable way to grow our wealth compared to some of the spending-to-save tactics that we might fall into.

Understanding the Buyer Mindset

Retailers have spent a long time figuring out our shopping habits. They know we often try to justify our purchases, feeling like we’re saving money when maybe we’re not. For example, who hasn’t added a few extra items to reach that free shipping minimum?

It’s a clever trick to get us to spend more than we planned. Another example is the allure of mileage or points credit cards. While we think we’re getting great rewards, sometimes we end up paying extra fees that outweigh the benefits.

Retailers also use our desires against us. They create deals that make us feel like we’re getting a bargain, even if we’re spending more in the end.

This tactic taps into our natural desire to rationalize our spending in a way that makes sense to us, often blurring the lines between need and want.

Generational Terminologies and Justifications

Different generations have their own sayings and ways to justify spending. Years ago, the popular term was YOLO (You Only Live Once). It encouraged people to take risks and treat themselves, even if it wasn’t the smartest financial move.

Today, you may have heard of terms like Girl Math and Boy Math circulating, especially on platforms like TikTok. These phrases describe how people rationalize their spending.

For instance, someone might buy an expensive outfit and justify it by calculating the cost per wear. If you wear it enough times, it feels like a smart investment.

Similarly, someone could spend a lot on items, return half of them later, and then feel like they “earned” that money back to spend elsewhere.

Another modern example is shopping at bulk stores like Costco. We might spend a lot upfront on items like toilet paper or mustard, but we justify it by thinking we’re saving in the long run. High-quality items that last a long time, like durable boots, fall into this category too.

That initial high cost is often worth it when considering how much use and value we get over time.

Rationalizing Expenses

We’ve noticed that pop culture has developed fun ways to make sense of spending. On platforms like TikTok, you’ve likely come across terms like “girl math” and “boy math.” These catchy phrases highlight common ways people justify their purchases.

Girl Math

Imagine buying an outfit and calculating the cost per wear. If you wear it 20 times and it costs $200, that’s just $10 per wear!

This method helps to see long-term value in quality purchases. For example, good quality work boots might be expensive initially but can last for years, making them a smart buy.

Boy Math

This is pretty similar. Think of buying something with the idea that it’s an investment. Whether it’s technology or outdoor gear, we’re often rationalizing higher initial costs by viewing them as investments, expecting long-term use or higher resale value down the line.

Using these mental tricks can help us feel better about spending, but it’s always important to stay grounded in what truly brings value and joy into our lives.

Making Smart Spending Choices

Smart is pretty subjective, but some things, if you get right once, can go from choices to healthy habits.

Focus on Quality Instead of Quantity

When it comes to spending, opting for quality items often pays off in the long run. For instance, buying durable work boots might cost more upfront but will last for years. The same goes for high-quality clothing that doesn’t wear out quickly and stays in good condition.

Consider some of our favorite high-quality items:

• Durable work boots
• High-quality clothing
• Reliable kitchen appliances

These purchases might be more expensive, but you end up saving money because you don’t have to replace them as often.

Evaluate the Cost Per Use

Another good way to make smart spending choices is to look at the cost per use. This means figuring out how much each use of an item will cost over its lifetime. For example, if you buy a pair of shoes for $100 and wear them 100 times, each use costs $1.

Here’s a simple example:

By thinking this way, we can prioritize spending on items that offer better value over time.

Smart spending is not about buying the cheapest option but finding the best value for our money. With these strategies, we can make purchases that are both satisfying and financially wise.

Buying in Bulk at Warehouse Stores

Shopping at Warehouse stores like Costco can be a great way to save money over time. Here are some tips to make the most of your Costco trips:

1. Create a Shopping List: Before heading out, make a list of what you really need. This helps avoid impulse buys.
2. Compare Prices Per Unit: Look at the cost per unit or per ounce to make sure you’re getting the best deal, not just the biggest package.
3. Focus on Non-Perishables: Buy items that won’t go bad quickly, such as paper goods, laundry detergent, and canned foods.
4. Meal Planning: When buying perishables, plan meals ahead of time. This makes sure you use everything before it spoils.
5. Split Costs with Friends: Team up with friends or family members. Share large quantities and split the costs.
6. Watch for Coupons: Keep an eye out for Costco’s coupons and sales, which can save you even more money.
7. Use the Membership Wisely: Make sure you go often enough to justify the membership fee. Plan larger shopping trips to get the most out of your annual fee.
8. Store Properly: Make sure you have the right storage space for bulk items. Invest in airtight containers for things like pasta and flour to keep them fresh longer.

By shopping smart at Costco, we can really stretch our dollars while still enjoying quality products.

The Verdict

Spaving has its pitfalls, but the idea remains tempting across all generations of consumers. Credit card cashback and rewards, paid subscriptions, and limited editions are clever traps to ensnare you in a never-ending loop of irresponsible spending.

But if you’re careful about how you spave – make decisions based on quality as opposed to quantity – you might yet survive the marketing ploys devised to empty your wallets.

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