The psychology behind spending big (2024)


(Image credit:

Getty Images


The psychology behind spending big (1)

By Tiffanie Wen9th October 2017

What drives people to spend thousands on products and experiences that could cost far less? Tiffanie Wen investigates.


Editor’s Note (December 21, 2017): Through to the end of the year, BBC Capital is bringing back some of your favourite stories from 2017.

If you could afford it, would you ever splurge $10,000 on a pair of headphones? What about some other indulgence? Would you?

Some of the most coveted sets, like Sennheiser's Orpheus or the Onkyo Diamond, can cost tens of thousands. But is the sound quality of a $10,000 pair of headphones really 10 times as good as the pair that costs $1,000?

People not only rate the same wine more highly when they’re told it is more expensive, brain scans taken while they were drinking the wine suggest they enjoyed the experience of drinking it more

Expensive items and experiences are often branded as higher quality, exclusive, bespoke, or offering greater amenities or services. But are the most expensive things in life always better? What really makes people part with their hard-earned cash?

The psychology behind spending big (2)

More expensive headphones marketed to DJs are tuned to moderate how much bass and treble they give out (Credit: Getty Images)

Research into how cost affects our perceptions shows that price matters so much to our understanding of value that we sometimes rate pricey things as superior or more effective, even if they are the exact same quality as the less expensive option.

In one study by The California Institute of Technology (Caltech) and Stanford University scholars, people not only rate the same wine more highly when they’re told it is more expensive, functional magnetic resonance imagingorfunctional MRI scans taken of their brains while they were drinking the wine suggest participants enjoyed the experience of drinking it more.

In another study using placebo pain killers, participants who took a fake pain-killing drug that they were told cost $2.50 per pill experienced more pain reduction during a series of shocks than participants who were told the pill cost only 10 cents.

The psychology behind spending big (3)

Bespoke luxury cars parked up in South West London (Credit: Getty Images)

Searching for ultimate experiences

But how does price and perception play into our purchasing decisions outside the laboratory? If an item is twice as expensive, do buyers assume it’s twice as good?

Michael Norton, a psychologist and professor of business administration at Harvard Business School says yes. In fact, we may consider the experience to be more than twice as good. We’re motivated to splurge because we’re seeking peak experiences, his research suggests.

We’re motivated to splurge because we’re seeking peak experiences

The restaurant, or dessert or film that’s rated three stars by everyone is the safe choice while the one that’s rated with one and five stars could be terrible or could be amazing, he says. So “in this case, we find that people will gamble and pick the one- and five-star rated one, because they’re trying to get to that totally amazing experience, even at the risk of getting a really bad one.”

Norton says the same logic can be used to think about why people buy very expensive products or experiences. “There’s an extra boost when you go up in the quality of experiences. So, it’s possible that a $10,000 bottle of whiskey would be more than twice as pleasurable than a $5,000 bottle of whiskey because it’s such a peak experience way out in the extreme.”

Some of us are searching for unique leisure experiences, even when they might be less pleasurable than other options, in order to build their “experiential CV.” “By collecting memorable experiences, consumers obtain a sense of accomplishment and progress, and enhance their self-worth,” Anat Keinan and Ran Kivetz write.

The psychology behind spending big (4)

'Buying Ferraris I get to be part of a community of very special, interesting people that have the same passion as I do.” (Credit: Instagram @jcartu)

Joshua Cartu is an amateur ‘gentleman’ racing car driver, entrepreneur and avid collector of Ferraris. He says he splurges on cars not just because he loves them, but because of other accompanying perks like access to special events and an exclusive social circle.

“The feeling of happiness that you get when you accumulate material things is fleeting. Like other types of things, it’s less and less rewarding each time,” he says. “By buying Ferraris I get be to part of a community of very special, interesting people that have the same passion as I do.”

By collecting memorable experiences, consumers obtain a sense of accomplishment and progress, and enhance their self-worth.

Cartu says one of the best things he ever splurged on was flying a MiG fighter jet in Russia. “We flew at twice the height of a passenger plane. So, in the middle of the day I saw stars in the sky and was able to observe the curvature of the earth. It was one of the best experiences of my entire life.”

While most of us will never be able to afford to fly a fighter jet or race a Ferrari, researchers suggest that desire to build ‘the experiential CV’ can account for more modest splurges, like staying at an ice hotel, or seeking out something strange to eat, like bacon-flavoured ice cream.

Flashing the cash

Some people are spending big purely to signal they’re successful. “You might feel like you need to show everyone you’ve ‘arrived’,” says Cartu. “It was a big deal for me because I didn’t come from money, and I had to show all these people that I was now rubbing shoulders with, that I was at their level. But after a while and a bit of reflection, the need to impress people faded away.”

Economic theory shows demand for some goods increases as their price drops. By contrast, a ‘Veblen good’ is more in demand as its price increases, because of its exclusive and coveted nature.

It was a big deal for me because I didn’t come from money - Cartu

“There’s a general principle that there’s a social comparison aspect of one-upping other people in our consumption. If I have a nicer bottle of wine (…) than you do then I win, and have shown how high status I am,” Norton says. But he adds people are polarised and often choose to be either extremely conspicuous or extremely inconspicuous to show high status.

The psychology behind spending big (5)

A pen for sale in Shanghai made with platinum and white gold, decorated with diamonds and worth renminbi 9 million ($1.4 million) (Credit: China Photos/Getty Images)

Elizabeth Currid-Halkett, a professor at USC and the author of The Sum of Small Things: A Theory of the Aspirational Class says that people among the top income groups in America are increasingly buying less conspicuous luxury goods like organic high-end groceries in place of more conspicuous things like designer handbags.

“Material goods are less of a signifier of social position today.The deluge of material goods means that they are not as rare or scarce or luxurious as in the past,” she says. “There is a greater value in experiences and the narrative around goods as justifying their cost and giving them status.”

The feel-good factor

And here’s the simplest reason of all: people splurge on luxury goods because they think it will make them happy. Norton, who co-authored Happy Money: The Science of Happier Spending, says that the amount of happiness you get from spending money will depend on how you spend it and not necessarily how much.

Norton says splurging on items for ourselves is finite and doesn’t add up to increases in happiness over time. Instead, he suggests spending money on experiences rather than things. “Most of us seem to be maxed out on the happiness we can get from stuff alone.”

Giving to others seems to add up to happiness over time.

But there might be an even better way to get your kicks. Norton’s research proves that giving to others can make us happier people.

“It’s not that when you buy things for yourself they don’t make you happy in the moment. Of course they do. That’s why we buy them. It just doesn’t seem to add up to much happiness over time,” he says. “Giving to others seems to add up to happiness over time.”

To comment on this story or anything else you have seen on BBC Capital, please head over to ourFacebook page or message us on Twitter.

If you liked this story, sign up for the weekly featuresnewslettercalled "If You Only Read 6 Things This Week". A handpicked selection of stories from BBC Future, Culture, Capital and Travel, delivered to your inbox every Friday.

The psychology behind spending big (2024)


What is the psychology behind spending money? ›

This is known as the “psychology of spending.” Spending money, as opposed to saving, provides an instant feeling of gratification and control. We may spend to fill perceived voids in our lives, to please others, feel “better than” others, or a whole host of other emotionally-driven reasons.

How does psychology affect spending behavior? ›

The Psychology of Spending: How Your Brain Affects Your Money Decisions. One of the key factors that drives our spending decisions is our emotions. When we're feeling happy or excited, we're more likely to make impulsive purchases, even if we know they might not be the best decision for our finances.

Why do I feel the need to spend money? ›

You might spend to make yourself feel better. Some people describe this as feeling like a temporary high. If you experience symptoms like mania or hypomania, you might spend more money or make impulsive financial decisions. You might have an addiction or dependency which makes you spend money.

Why am I attracted to expensive things? ›

One of the most common reasons people buy luxury goods is because they believe that they are getting something authentic. In a world where so much is mass-produced, people increasingly crave items that are unique and special.

What mental illness causes overspending? ›

One of the hallmarks of bipolar disorder is spontaneity and impulsivity. A person with bipolar disorder may do impulsive, uncharacteristic, or risky things like spending a lot of money.

Is spending money a trauma response? ›

Something as banal as spending money can be a trauma response for some of us. This type of behaviour is often seen as a coping mechanism for those who have experienced trauma in their past, such as abuse, neglect, or other traumatic events. When we experience trauma, it can affect the way we think, feel, and behave.

What triggers spending? ›

A 'spending trigger' is a feeling or situation that makes it easy for you to break your spending rules. For some people, it can be feeling stressed or bored, while others want to buy things their friends have got. Make a list to help you understand what triggers your impulse to spend.

What do your spending habits say about your personality? ›

Your spending habits can say a lot about your values, priorities, and emotional state. By understanding what your spending habits say about you, you can gain valuable insights into your relationship with money and make more informed decisions about your finances.

What is the psychology of money dysmorphia? ›

Money dysmorphia can also mean feeling insecure and unstable despite having plenty of money in savings, a padded emergency fund, and being in a really stable financial position. You might have everything you're supposed to have and still feel insecure about your money. That's money dysmorphia.

What are the 5 money personalities? ›

It may be useful to understand the various money personalities when finding the right approach to investing, spending, saving, and the overall management of your finances. Five common money personalities are investors, savers, big spenders, debtors, and shoppers.

Is spending money OCD? ›

Fears about spending money may also be involved in obsessive-compulsive disorder (OCD). A person with OCD focused on a fear of spending money will have unwanted intrusive thoughts, urges, or worries abouts spending money and any outcomes they may associate with it.

How do I stop obsessing over spending money? ›

Try these eight ways to stop stressing about money:
  1. Don't let money consume your thoughts.
  2. Get organized.
  3. Let go.
  4. Set up monthly auto payments.
  5. Talk to someone about your financial stress.
  6. Manage your health to build wealth.
  7. Focus on your financial goals.
  8. Live a little.

Do narcissists like expensive things? ›

Narcissists believe that they deserve the best, regardless of cost. Hence, they may recklessly purchase status items and indulge in expensive experiences to make them feel like VIPs. Narcissists may donate generously to a cause or to helping others out in order to reflect well on themselves.

What are people who like expensive things called? ›

Other forms: sybarites. If you know someone who's totally addicted to luxurious things and all of life's pleasures, call her a sybarite.

Why do the poor buy luxury items? ›

Their low position in the social hierarchy is more obvious and more consequential. In response, some poor people purchase the kinds of good that create the impression that they have social resources to spare, even when they are cash-strapped.

What is Gaslighting about spending money? ›

This could mean hiding or distorting the truth about their purchases, spending habits, job search, income, debt, the state of their finances, etc. When discrepancies are found between their words and actions, they will then turn the problem back on you.

Is spending money ADHD? ›

So yes, impulse spending can certainly be a sign of ADHD. However, there are a lot of other factors to consider. Just because you have ADHD doesn't mean you have problems with impulse spending. Likewise, just because you have difficulty with impulse spending doesn't mean you have ADHD.

What triggers people to spend money? ›

You might be triggered to spend by a range of emotions but here are a few examples:
  • Sadness. After a bad day, you decide to go shopping to make yourself feel better.
  • Boredom. A boring morning at the office leads you to splurge on snacks to make the afternoon feel less deadening.
  • Fear. ...
  • Insecurity.
Jun 9, 2023

What is a spender money personality? ›

Spenders are those who find pleasure in buying goods and services. This can lead to not following a budget because of their urge to spend. Spenders may also have the tendency to be too generous in buying things for others.

Top Articles
Latest Posts
Article information

Author: Rubie Ullrich

Last Updated:

Views: 5583

Rating: 4.1 / 5 (52 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Rubie Ullrich

Birthday: 1998-02-02

Address: 743 Stoltenberg Center, Genovevaville, NJ 59925-3119

Phone: +2202978377583

Job: Administration Engineer

Hobby: Surfing, Sailing, Listening to music, Web surfing, Kitesurfing, Geocaching, Backpacking

Introduction: My name is Rubie Ullrich, I am a enthusiastic, perfect, tender, vivacious, talented, famous, delightful person who loves writing and wants to share my knowledge and understanding with you.