Why We Overspend: How Behavioral Economics Explains Your Spending Habits

ave you ever bought something you didn’t really need—even when you knew better? Maybe you splurged on a brand-name Geek Bar Pulse Mexican Mango when a cheaper alternative would have been fine. Or perhaps you signed up for a “free” subscription trial and forgot to cancel, only to rack up months of unexpected charges.

You’re not alone. We like to believe we’re rational with money, but behavioral economics shows that’s not always true. Our financial decisions are influenced by emotions, mental shortcuts, biases, and social pressures—often leading us to spend more than we intend to.

In this guide, we’ll explore why your brain tricks you into overspending, the common money traps you face, and how to break the cycle using science-backed strategies.

🧠 What Is Behavioral Economics?

Traditional economics assumes we’re logical decision-makers who carefully weigh costs and benefits before spending money. But in reality, most of us:

• Make snap financial decisions based on gut feelings
• Value instant rewards over long-term benefits
• Follow the crowd instead of doing proper research

Behavioral economics blends psychology and economics to understand how we really behave with money. It explores:

• Cognitive biases – thinking errors that distort judgment
• Heuristics – mental shortcuts that save time but lead to mistakes
• Emotions – fear, excitement, guilt, and regret
• Social influence – peer pressure, marketing tactics, and trends

In short, behavioral economics explains why we spend emotionally, not logically.

💥 Common Money Biases That Mess With Your Brain

Here are four key biases that shape your spending decisions—often without you realizing it:

1. Loss Aversion

We hate losing money more than we enjoy gaining it.

• Losing ₹1,000 feels worse than the happiness of gaining ₹1,000.
• This bias makes us hold onto bad investments or avoid worthwhile risks.

For example, you might keep using an overpriced subscription because canceling feels like “losing” something—even when you’re wasting money.

2. Present Bias

We prefer immediate gratification over long-term rewards.

• Buying a Geek Bar Pulse Miami Mint today feels more rewarding than saving that ₹800 for the future.
• This mindset causes impulse purchases and poor saving habits.

Marketers exploit this bias with “buy now, pay later” offers and flash sales to encourage quick decisions.

3. Anchoring Effect

We get stuck on the first number we see—even when it’s irrelevant.

• If a vape is “discounted” from ₹8,000 to ₹5,500, it feels like a deal—even if ₹5,500 is still overpriced.
• Retailers inflate original prices to make discounts look better than they are.

Anchoring tricks your brain into perceiving value where there isn’t any.

4. Confirmation Bias

We look for information that confirms our existing beliefs and ignore anything that challenges them.

• If you believe one vape brand is “superior,” you’ll find reviews supporting that—even if competitors are cheaper and just as good.
• This can lead to brand loyalty that isn’t based on actual quality.

🛍 Real-World Examples of Irrational Spending

🔹 Brand Overload

Paying extra for a well-known vape brand when identical, cheaper alternatives exist.

• Why do we do this?
• Familiarity
• Social status
• The belief that “expensive = better”

Behavioral economists call this the “perceived value” trap.

🔹 Impulse Buying Madness

Whether it’s a new vape flavor, trendy sneakers, or tech gadgets, impulse purchases are often emotion-driven.

• Retailers trigger urgency with:
• “Limited-time offers”
• Flashy displays
• Free shipping thresholds
• You end up spending more just to “save” a little.

🔹 Subscription Traps

Ever forgotten to cancel a free trial? That’s by design.

• Companies auto-enroll users in recurring payments.
• Most people stick with default settings, which keeps revenue flowing.

Streaming platforms, app subscriptions, and meal kits all rely on this “set it and forget it” bias.

✅ How to Outsmart Your Brain (and Your Spending Habits)

Awareness is the first step—but action is what breaks the cycle. Here are science-backed strategies to help you spend smarter:

1. Set Specific, Visual Goals

Vague goals like “save more” don’t work. Try this instead:

• “Save ₹30,000 for a trip to Paris by December.”
• Use apps to track progress visually.
• Automate savings to remove temptation.

2. Use Positive Nudges

Set up systems that make good financial choices automatic:

• Enable auto-transfers to savings.
• Use apps that round up purchases and invest the spare change.
• Unsubscribe from marketing emails that trigger impulse buys.

3. Reframe Your Thinking

How a choice is framed impacts your decision:

• Instead of: “I might lose money if I invest.”
• Try: “I could gain significantly more in the long run.”

Reframing reduces the fear associated with loss aversion.

4. Fight Decision Fatigue

When you’re tired, you make worse financial choices.

• Set aside time weekly to manage money with a fresh mind.
• Use checklists or budgeting apps to simplify decisions.
• Avoid shopping online late at night when willpower is lowest.

5. Compare Prices—Don’t Anchor

Don’t get stuck on the “original price” narrative.

• Research multiple retailers before purchasing.
• Check unbiased reviews and comparison platforms.
• Ask yourself: “Is this really a good deal—or just framed as one?”

🧾 Final Thoughts: You’re Not Broken—You’re Human

Behavioral economics doesn’t shame you—it explains you. We all have cognitive biases, emotional triggers, and blind spots when it comes to money. But once you recognize these patterns, you can:

• Spend more intentionally
• Avoid financial traps
• Build habits that support your long-term goals

Whether you’re debating between two new Geek Bar Pulse Sour Gush  considering a subscription, or trying to stick to a savings plan, remember this:

You’re not just making financial choices—you’re navigating your own psychology.

The key is awareness + small, consistent actions. Once you understand how your brain works, you can take control of your spending—and your future.