Today, Victoria joins me again in tackling a personal subject. We talk about emotional spending, what it means, and how it presents itself in your personal life, as well as in your business.
There are ways to recognize when you may be emotionally spending through looking at your numbers, and learning to recognize when you’re doing it is the first step in scaling down on it.
In this episode Victoria and I also discuss:
- Defining emotional spending and what qualifies as emotional spending | 2:30
- The five categories of emotional spending | 5:10
- How the 48-hour rule can help prevent emotional spending | 15:41
- How budgets reduce impulse spending and aid financial decisions | 17:03
- How emotional spending includes underspending and how to recognize it | 18:39
- Emotional spending in your personal life and its effect | 20:09
- Analyzing and tracking your numbers to understand when you’re emotionally spending | 25:19
Things mentioned in the episode:
- Episode 82 – How to Prepare for a Recession or Downturn in Your Business by Taking These Financial Steps | https://kickstartaccountinginc.com/ep-82-how-to-prepare-for-a-recession-or-downturn-in-your-business-by-taking-these-financial-steps/
- EXPENSE REPORT WORKSHEET
Need help understanding your numbers to track metrics? Join our Finance Framework Program and be a part of a community for business owners who want to take control of their financials! Enroll today!
The Finance Framework | https://www.kickstartaccountinginc.com/framework
Connect with Danielle:
Website | https://www.kickstartaccountinginc.net/
Instagram | https://www.instagram.com/kickstartaccounting
Twitter | https://twitter.com/KickstartAcct
Book your FREE Discovery call: https://kickstartaccountinginc.com/book-a-call/
Test your Financial Health: https://kickstartaccountinginc.com/checkmyfinancialhealth/
Learn how to pay yourself as a CEO – https://www.kickstartaccountinginc.com/getpaid
Full Episode Transcript:
Welcome to Entrepreneur Money Stories, the podcast for women entrepreneurs who want to dig into their money stories so they can break free from limiting beliefs around money once and for all. Hosted by Daniel Hayden, owner of kickstart accounting geek this podcast is a series of real conversations about money mindset with valuable and action packed takeaways for the entrepreneur is building your abundant empire. Danielle is a reformed corporate CFO who’s on a mission to help rule breaking female entrepreneurs understand their numbers and gain the confidence to create sustainable profits. And now here’s your host, Danielle Hayden.
Danielle Hayden 00:42
Hello and welcome to entrepreneur money stories episode 85. Today we’re talking about a subject close to the chest emotional spending. We all do this from time to time you may not even really be aware that you’re doing it or you may be really ashamed to admit it when you do it. But we all do it. I know that we do. And I have a lot of personal stories around this and we have worked with hundreds of clients throughout the year. So we’ve seen this come through our clients and businesses over the year. So today I have Victoria Hughes, our Operations Coordinator to join me to talk about this really tough topic. Victoria, thank you for being here.
Victoria Hughes 01:21
Thank you for having me. I’m so excited to be back for the audience to hear your voice again. Yeah, I’m excited to dive into this topic because like you mentioned, it’s hard to discussed.
Danielle Hayden 01:34
It is and Victoria has had the opportunity to hear us as the client service team. Talk about all the experiences that we’ve gone through with our clients and overspending and under spending and the emotions that are tied to that. So I think Victoria will really bring a unique perspective from you the audience, right so what are you hearing as audience and if sometimes I can talk accounting talk. Pillai, this guy that material will will bring it back down to the real world for you. Yeah, and
Victoria Hughes 02:09
this shouldn’t come as a surprise to anyone but you know, as a team at kickstart, we all experience share on not only plants but also our personal life. So I’m excited to share more of that side with the audience. Absolutely. So Danny, I really want to define emotional spending. What exactly qualifies as emotional spending? And does emotional spending look different? As an individual and as a business owner
Danielle Hayden 02:41
Good question there. So I like to define emotional spending at when we make a purchase or purchases to ease our emotions. And this doesn’t always mean it’s stress or sadness. This can also be happiness and celebration. So emotional spending might be impulse spending these these might be purchases that you’re making in the moment to buy something that you don’t really need or that is out of your budget. So I think of emotional spending as something that we’re doing almost reactionary, because we are not willing to sit with our emotions. And we’re actually trying to spend money in order to compensate for whatever emotion that we’re feeling, either in our business or in personal so if you have this problem personally in your personal life, then you’re most likely to have it in your business as well, right? Because we bring a lot of our spending habits that we have personally into our business so it’s not like we have this brick wall that is keeping us from carrying our personal habits into our business. Now you might have some better structures around your business where you are meeting with your money team. You are more in tune with your your spending and your money because you look at your financials at the end of each month. You might have a board of directors or somebody an investor or partner and what you are reporting to and so therefore you might have some additional controls around your business financials that you might not have in place for you personally. However, we have seen it with our most of our clients who have emotional spending tendencies in their business. They also have them in their personal lives.
Victoria Hughes 04:33
I really like the way that you clarify that and you know, we are a part of our clients money team. So you know, we can help them recognize those signs and also help them put parameters around it. Is there anything that you see or can advise on as far as running personal expenses through their business? And if that, you know, how I’ll be emotional spending typically affect more of those personal expenses, or is it like they’re spending on business expenses, or is it more like dross?
Danielle Hayden 05:15
Yeah, interesting. So when we think about emotional spending, these are usually impulse purchases. So we’re not usually say, Okay, I’m gonna go to my payroll system or make or go online and make a transfer my business account to my personal account and then spend money personally, right, so it’s not usually that thought out, so you might be more inclined to commingle. Your funds during this. This is emotional spending. However, let’s just isolate in business spending, right so I like to break down emotional spending into five different categories. So I think we have stress slash failure spending. We have excitement, spending, sadness, fear and jealousy. So when we’re stressed out in our business for we feel like something is not working right. We become overwhelmed in our business. We feel like everything needs to be done or that some initiative in our business has failed. And we’re we’re scared and we’re trying to spend money to either cope with that stress, or to throw dollars to save this piece of our business that we are fearful or we’re stressed about right that’s not working. So there’s that stress fear base by like and then we have excitement spending and excitement spending. Isn’t does it mean? I hit you know, I have my highest revenue month this year. Let me go get a pedicure, or let me go reward myself in some way. Excitement spending might look like I have a desire to be included. I have an excitement around an opportunity. Or I set a goal and I’m really excited to hit and achieve that goal. And so therefore, I’m spending money because I’m really excited. The longtime listeners have heard we call this a shiny object syndrome. So when we get some shiny object syndrome, we get really excited about the goal, or the opportunity or we want to be included we don’t want to lose out and so we spend out of excitement. And if you think of this, like flip this around from a marketing strategy, right, we’ve all learned as we were learning how to market our business, to create a sense of excitement, right to create a sense of scarcity, where if you don’t sign up now, you might get left out and so our own marketing turns on us. And we then emotionally spend so that we’re not left out right and because we’re so excited about that opportunity. Does that make
Victoria Hughes 07:56
sense? That definitely makes sense. And I know I am very guilty of shiny object syndrome of always wanting to move on to the next best thing and not necessarily move on but you just you always want all of the things I think, you know, personally, sometimes I’m guilty of thinking that if I can just buy the next best thing that it’ll fix all my problems. And, you know, plot twist, it doesn’t. It’s not going to fix all of your problems. So I think that shiny object syndrome is is not what you normally think of as emotional spending. So I really liked the way that you put that.
Danielle Hayden 08:40
So I think you make a good point that what we normally think of as emotional spending is I feel down in the dumps, right? I’m, I’m sad and I want to spend money to try to solve my problem or boost my mood. So that’s kind of point number three right that our third category is that we’re spending money out of sadness, right? Something we’ve maybe lost a key employee or contractor or vendor, we’re sad, professionally, or maybe something’s happened personally, right. So things that are happening in our personal life can really contribute to things professionally. So if there’s something that’s going on, maybe you’re struggling with your kids struggling with your spouse going through a divorce, you’re trying to change a personal habit that’s not working, maybe loss within your family. This is going to create sadness, and it’s not like you show up to your business and shut that off. So you could have a general sense of sadness in which you are emotional spending to get through that that type of mood as well. That we have fear, fears when we we throw money at the problem and we use purchases as a distraction. So rather than acknowledging the fact that we are fearful, and that we need to map out what specifically we need to do in order to overcome that fear. And I see this a lot right now, this year specifically as there’s talk about a recession or an economic downturn. We did a whole episode on on what to do during an economic downturn that we’ll link in the show notes. And one of the main things that we talked about was working on your money mindset, right? Because if you start feeling fear, you might start spending money out of fear, right? Because you aren’t sure what you need in your business. And so you’re spending in order to cope with that emotion. Whereas if you can take a step back and understand, what am I afraid of? Why am I afraid of this and how, what is the best decision for me to react? What specifically do I need need to spend? And I say don’t spend right so as we walk through these categories, I’m not saying don’t spend the money. But let’s understand is this emotional spending? Or are we mapping this out, and it actually maps to our intention right? It actually coordinates with our intention for the year. And the last one that I just don’t want to, I don’t want to skip over is jealousy. Yes. This comes in professionally too, right? It doesn’t, doesn’t stop personally. We’ve all heard Keeping Up with the Joneses. So this happens, especially in our social media world. And we had a client who sent a client call back in the fall. And she specifically talked about how she had to get off of Instagram because she was watching another planner, build their business and they had started their business at the same time. They had hired their first contractors at the same time. They had hired the first employees at the same time. But online it looked like she was growing so much faster, and that she was doing these big, great grand things and traveling to these grand places that have these high end clients. And so she wanted to spend money in order to keep up with her competitor, but you know, fierce competitor, competitor, people, it was somebody who she was doing business alongside of and so this was out of jealousy, and she was so thankful that she had a Money Team to process this least thoughts with and understand that she needed to hire for what her business needed. And she needed to spend money on what her business needed her to spend money on, not what her competitor needed or wanted. Because at the end of the day, when you see people spending money in that way, we don’t know what their savings account looks like. We don’t know what their personal situation looks like. We don’t know what they’re going through and what they mean. Allow hmm, when I started listeners, we would like to kindly interrupt your show to invite you to our first e Suite program. We finance framework. The finance Framework Program will give you direct access to weekly video training our exclusive resource library live q&a is with the kick started counting eight account managers and access to me your CFO box where to learn more and gain exclusive access visit Kickstarter county inc.com/framework This program will sell out we’re only offering a limited amount of seats so do not let this opportunity pass you by again. Kickstart accounting.com/freelance
Victoria Hughes 13:26
I always like to think of social media as you were saying you know, a highlight reel. You’re seeing the best parts of everyone’s life. Yeah, there are those influencers that share the more like real and more raw things, but that’s still curated. So they DM it that way. I haven’t really thought about how jealousy over social media could lead to emotional spending. Absolutely.
Danielle Hayden 13:53
And I watch it in my own family. I’m the kind of son of how I speak about money to my kids and we live really close to a very nice neighborhood. And will frequently drive through the neighborhood. And especially when they were growing up. The kids would say why don’t we live in one of those giant houses. And I always said to them, we choose not to live there. We could live there. However, we don’t know what that family has been saving. We don’t know how many vacations they got to go on last year. We don’t know how their relationships are within that home. How much are they working? How much work life balance do they have? And so it’s so unfair for us to say why don’t we work there when we don’t know the whole story or why don’t why is in our business there? Why don’t we have this really refocusing that so that we have control of our emotions, right? We’re not spending in order to be in a place that is not meant for us we’re spending in a place that’s that matches where we’re at in our business and our intention for this year. Yeah,
Victoria Hughes 15:00
I think, you know, we’ve put a lot of thought and time and training into emotional intelligence. So kind of what I’m getting from, you know, all of what you’re explaining is learning not to react and learning how to step away think through the situation. You know, something that I practice personally is because online shopping is so much easier to spend so much more money than shopping in stores. Like I don’t if I fill up my my online cart somewhere I don’t buy it right then you know, I’ll let it rest for for a day or two. And usually when I come back, I don’t want everything that I picked out the first time.
Danielle Hayden 15:43
That is so true. And that’s why we’ve implemented with our clients the 48 hour roll so I really truly believe in this role. When you see when you found a new opportunity, a perfect candidate that you want to hire, whatever it might look like whatever you feel like you need in your business wherever you’re going to spend money, waiting 48 hours so that you can process the emotion and then make that decision thoughtfully and Victoria has heard me say this quite a bit because I I’m actually a quickstart so we’ve taken Colby here at kickstart accounting and I am like as high on the Quickstart as it possibly can get. And so I what I find you know, a new employee who I just I fall in love with them on the interview. I want to hire them right now or when I find a new opportunity that I want to go to our conference that I want to go to I want to buy it yesterday and Victoria is actually really great. Reminding me to wait, right? So I I practice with my clients that 48 Hour Rule. Let’s think give ourselves some space and assess our emotion and really sit in it and understand it and then make our financial decision. budgets will help us with this. So we create with our clients a 12 month budget where we are actually mapping our year. So the first step is setting the intention for the year. Where do our clients want to see their businesses go? And the next step is mapping out where do we want to see our revenue goals? And then we map out our spending to leave the spending is the most important piece because it will create guardrails in order for our clients to spend within. And it gives clients who are under spenders an opportunity to be able to spend so your reaction emotional spending. When you experience that fear or sadness, you might withdraw and say I’m not hiring that person. I’m not signing up for the course. I’m not going to that conference because your reaction to fear is holding back money. Right? So it’s not that you’re not It’s not that you don’t have emotional spending. You have emotional underspending and you’re keeping that money in your in your bank account because you’re doing it out of fear of reinvesting back into your business. And so the budget process can help give you permission to spend. So the few strategies that you can implement right now is the 48 hour roll, stop. Assess your emotions. Then make sure that you’re creating a budget with an intention for a year so that you have permission and guardrails to spend within your business. And then I just want to stop and pause on underspending one more time, because I just want to acknowledge that that is just as much of emotional spending as overspending. And this is something that I didn’t realize until a few years ago, I thought everybody overspent this is something that surprised you Victoria.
Victoria Hughes 18:58
No, because this is actually something that I had to learn in my personal life is the scarcity mindset. And you know, getting really personal here like I didn’t grow up with a lot. So kind of, you know, taking my own personal finances, you know, under my control, I had to learn to live a little and you know, as had been been on the other side where then I lived a little too much and had to reel it back in. But you know, my husband sat me down one time and was like, I don’t want to wait and time retired to live. So I think it’s very impactful to realize the negative consequences of both sides of it.
Danielle Hayden 19:44
Yeah, thank you for sharing that. I really appreciate it and I’m glad that your husband was able to do that for you. I think it takes it can take a relationship with that. So Yin, Yin and Yang have to find the balance. I didn’t realize that there was underspending in my corporate days, we were always setting a budget so that we had guardrails around spending so it always rained. You know, it was always about how do we cut our spending, not spending more. And even growing up? My mom I laugh when she listens to this episode. So every single Saturday, well, it feels like every single Saturday, I don’t know that it really feels like we would get ready right? Like it was a whole production like we would go work out in the morning, go to the rock and then take a shower and get ready for the day. And we went shopping all the time. And I don’t know that my mom necessarily was buying us everything or that she even bought a lot because now when she she still wants to do this, she wants us to go shopping and I’m always the one spending money she’s not but it was something that she really enjoyed doing and she enjoyed gifting right so she enjoyed by us and caring for us in that way. And so that can also be a type of emotional spending, right? What fulfills her need of whatever was going on in her life at that time, was bringing her children into that environment and sharing in that experience with us, and then gifting us right so that made her feel really fulfilled and centered and that was her way of emotional spending. Wasn’t gifting that to us. Africa I actually spent a lot of time working in the mall. I have shared on the show I was I worked at a hair salon for a long time and it was in the mall. So I will actually avoid the mall and shopping like the black flag at this point. I took my son to the mall during Christmas time and I told him this is love cameras because I despise them all and this is actually like traumatic event for me this space right now because I can hear the Christmas music from out here and adding to start playing it. But when we go to the buy almost never spend money. So I don’t I don’t want that’s not my reaction. That’s not how I emotionally spent and I don’t really like to share in that experience with him or either one of my kids. So it’s just interesting that as you start to reflect on how your spending habits are today, and maybe what contributed to that. So I’m not saying you have to spend, you know, hours and hours journaling this but you can pause and reflect. So, the next time that you do go to spend money you can pause and reflect what emotion Am I feeling right now? Right like how am I feeling? Is anything about this reactionary? I’ve shown a good one. I don’t like to shop like at the mall or anything like that anymore at this point. But I love to go the scoop sounds so corny guys, so don’t judge me I love to go to like the grocery store or like a Walmart or we have a Meyers buy my house. And I love to buy like new, like healthy snacks and the trinkets to the trinkets section or like new towels for my kitchen. And for whatever reason that makes me feel really good. It makes me feel like I’m providing a safe space for my kids like a home. A house that feels like a home because they have nutritious snacks or cutout liquids something that that I can assign my emotions on why am I spending so I’m not sure about that. But I can pause and reflect on that. And no, I went to I didn’t even go to the grocery store the other day but I went on to the Myers app and what are like eight things. And when I was like why did you need those at like what was like about eating salad and we really actually think today but that was my version of impulse, impulse spending. And I just wanted to share that story with you guys. Because impulse spending it’s gonna look very different for all of us. Emotional spending is going to look very different for all of us. So for me, it was buying these weird healthy snacks and things for my home with my emotional spending, but not necessarily holding on to money right finding that scarcity. And Victoria shared a very different story, where hers is actually holding on her finding that balance between scarcity of living. So we all have a very different story. And our job as business owners is to evaluate our story, pause, feel our emotions, understand the impact, and then know our numbers so that we’re always tracking and we’re always understanding the impact on our on our financials.
Victoria Hughes 24:39
Now turning just a tiny bit Danielle, and I think it’s hilarious that you love grocery shopping so much. That is something I didn’t know about you. But I liked that you point out specifically the grocery store because I mean, what you’re buying is probably each individual item probably doesn’t cost that much like if you’re going and buying some snacks for your kids like it’s so easy to overlook that. But those little tiny purchases will add up in the long run. So being about your business. It’s very easy to say yeah, I’ll get this $20 subscription. But when you have so many $20 subscriptions, it’s really can eat into your bottom line.
Danielle Hayden 25:21
That’s a really good point. Yes, absolutely. And we don’t realize it until we’re actually tracking our numbers and talking to our Money Team. Looking at the details and then using the expense grading worksheet. If you haven’t heard that podcast, I’ll link that in the show notes as well. The expense grading worksheet is a way to evaluate where am I spending money presenting to yourself to I need this and why do I need it in my business and then if it’s not an A plus, removing that from your business, and you can do that from an emotional place, right? When you don’t when you’re not reacting and you’re removing the emotional. We can look at things, quantifiably, right we’re looking at the data and removing the emotion.
Victoria Hughes 26:06
Yeah, I love the expense grading worksheet. And I think that is a really good one to help you realize how much you’re actually spending on you know anything whether you are thinking something is really impactful or cost costly. And then it’s really not that big of a percentage. And then you know the other way around, maybe you think something is it costly at all. And really, it’s it’s a big chunk.
Danielle Hayden 26:36
Absolutely. Well, I think we unpack a lot today. And I think it helps to we’ll make a PDF in the show notes as well on the five categories of emotional spending. Because I don’t want you to forget that this isn’t just about sadness. This isn’t just about fear. There’s different categories of emotional spending. And you can use that to pause, reflect and then be able to analyze your data. If you enjoyed today’s episode, Metairie And I ask one thing in return for you to send this episode or any of our episodes to one other business owner. We will continue to show up and be a resource for you. But our mission is really to help other business owners know their numbers and overcome their money mindset so that they can build their wealth journey so that they become successful business owners. And we can only do that if we continue to grow. So if you got anything out of today’s episode, we just asked you that you share it with one other person and if you feel inclined like and subscribe so you don’t miss any of the other episodes. We already did our our calendar for this year our marketing calendar for this year. I’m really excited about all the really fun stuff that we have. We have coming up we have quarterly webinars, our finance framework 12 week program, or group coach coaching program launching. There’s so much fun stuff that is happening in yes I used to work fun with with finance, it can be fun, okay. We have so much fun stuff coming in that I do not want you to miss out. So please like and subscribe. And Victoria, thank you for so much for being here.
Victoria Hughes 28:19
Thank you so much for having me. And if there’s one thing I learned from you, Danielle is that finance can be fun.
Danielle Hayden 28:24
Oh, good. Good.