How and Why We Rationalize Spending

Millions of Americans find themselves in credit card debt, and many of them complain that they don’t know how the debt got so unmanageable.

While there may be reasons for accruing debt such as a medical ailment or job loss, often it is just the result of poor judgement and overspending.

Yet many people rationalize their spending and do not see themselves as the problem.

How We Rationalize Spending

I have a friend, Lisa, who lives on a small income.

She is constantly complaining about her low per hour wage.  She compares herself to others and always thinks others make more than her (which they often do), and that they are more financially stable than her (which may or may not be true).

What she doesn’t see is that while the person she is comparing herself to may make more money, they also support a family of six on their salary, while she has no dependents.

In her mind, everyone is better off than her.

She sees her own expenses and applies them to everyone else, not taking into account how much they much spend monthly for basic expenses.  She lies to herself about how financially well off others are.

This same friend recently showed me her clothes from her $250 shopping trip.  Keep in mind she had been trying to save money for a roof repair and was complaining that she didn’t have money to pay for it.  Although I shouldn’t have, I asked her if the clothes, while nice, were the best purchase when she desperately needs a roof repair before winter sets in.

She scolded me and said, “How often do I buy new clothes?”  And she is right, she only buys new clothes a few times a year.

But that line comes out frequently. 

She recently spent $50 gambling and quickly said, “How often do I gamble?”  (Actually, that one is more frequent—maybe once every month or two.)

I began to notice a pattern — every time she spent money, whether I asked about it or not, she defensively says, “How often do I . . .”   While she may not do each individual behavior frequently, together they add up to significant recreational spending which hampers her ability to get ahead financially.

Yet she doesn’t see this because she compartmentalizes her spending in her mind.

I use my friend as an example, but most of us are guilty of lying to ourselves financially.

I used to go out to lunch when I was employed full-time and say to myself, “I only spent $7; that’s not too bad.”  However, over the course of a month, if I ate out for lunch 3 times a week, that $7 each time turns into $84 a month and $1008 over a year.

“Just $7” quickly turns into over $1000! 

rationalize spending

We often rationalize our spending without realizing the damage it may be doing.

I would have been appalled if I had done the calculations, but I never did.  I just saw it as $7.

My husband used to spend some time on the weekend buying music CDs.

He went to discount CD stores and bought about one a week.  He rationalized that he wasn’t spending that much money because the CDs were usually $10 or less.  However, over a year, that is $520!  Between my lunch out habit and his CD buying habit, we were “just” spending $1,600 a year.

All the little purchases that we tell ourselves are “just” a few dollars can add up dramatically.

Why We Rationalize Spending

Why do we lie to ourselves about our finances?

We do so for several reasons.

Ramit Sethi, in his article, “In Defense of $500 Shoes”, argues that “even if we tried to rationally critique our own spending, we would encounter an almost insurmountable number of psychological barriers that prevent us from honest self-examination.” (NY Times).

In addition to the psychological barriers, we lie to ourselves because then we don’t have to change.

It benefits us to do so, not in the long run financially, but in the short-term because we can continue to indulge in the things we enjoy.  In my friend’s case, she can lie to herself about how much more others are making than her and ignore their expenses, which makes her feel better about how she is doing financially.  By justifying her spending by saying she doesn’t do it often, she can allow herself to continue to spend freely.

My husband and I used to think it was okay to spend on weekly CDs and lunches out because we never added up how much we were spending over the course of a year.

To get ahead financially, it is imperative to be honest about your spending and your financial habits.  If you have the money to spend or if you cut other areas of spending, there is no reason why you shouldn’t enjoy certain financial pleasures.

Just be honest with yourself about how much you are truly spending and why.

Do you find yourself rationalizing your spending?  How?

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Published or updated October 25, 2012.


  1. Well, I don’t know that I rationalize spending but I do end up spending a few dollars here and there at lunch. I guess it does add up quite easily so it is one area where cut backs could be useful.

  2. Jenna, Adaptu Community Manager says:

    I think I rationalize not spending more than actual spending. But I do use “well it’s for a good cause” or “I’ll make up for it later” a couple of times a year.

  3. If you think long term, all those small things cost a great deal! Some time ago, I wrote an article of 10 small changes can make you a multi-millionaire.

  4. I rationalized my $315 after tax Tod’s shoe purchase over Thanksgiving weekend b/c I said I needed new work shoes, and it was originally $465. But then, I gave myself a challenge to make online income in order to spend on stuff, and that’s what I did.

    That said, I haven’t worn em yet, and am thinking of returning them b/c I feel guilty.


  5. Kevin Mzansi says:

    In behavioural finance gobbledygook this phenomenon is called “framing”: We look at situations in a certain way to rationalize our decisions. The trick is to always pick the same “frame” when you are trying to reach for a goal, for example, the “frame” of the minimizing total spending ($1008 per year), rather than “ooh: delicious lunch at only $7” when making every spending decision.
    Admittedly, this “trick” is a lot harder to follow than it sounds 🙂

  6. Jessica, The Debt Princess says:

    your friend sounds exactly like me. While I’ve made many changes in recent years, I still make mistakes. I have rationalized myself into so many purchases over the years that it makes me sick.

    I hope your friend eventually realizes how much harm she is doing to herself and her finances.

  7. I have made rationalizations at many times in life, but I think they have been good learning for me. Without some of those mistakes early on I dont think I would have gotten to where I am at now.

  8. Money and Matrimony says:

    Rationalizing detrimental spending patterns is something my wife and I are constantly trying to avoid. One of our biggest guards against this is actually each other. This only works because we both have a say so on any major purchase. We both have the same goals and when one is weak often times the other is strong. It is rare that we both are trying to rationalize why we should make a particular purchase. Normally it is one or the other.

    One thing we do to help keep us from making purchase decisions we may regret later is sleep on it. Any significant purchase one of us is thinking about we agree to talk it over and sleep on it at least one night. Many times this does wonders on lowering the emotional high one gets when they are about to make an emotional purchase.

    Great post!

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