One of my favorite things to do is try and understand consumer psychology. Why do people spend more than they earn is so basic, yet so complex in nature. The same goes with why we eat so much bacon when we know it’s so bad for our health. I was going to publish this post on Financial Samurai, but I figure with so much blogging related feedback, it’s best to stay consistent.

About one week before the 2012 Presidential Election, my online affiliate income declined around 70%. Traffic was also down about 20% as Hurricane Sandy turned off the lights for some 30% of the working population.

Given I receive hundreds of thousands of pageviews a month, most of which come from search engines, my sample set is statistically significant. All things being equal, I should have seen a roughly 20% decline in affiliate income corresponding to a 20% decline in traffic rather than a 70% drop. So I got to thinking, what made for such a drastic drop?

There is no better real-time testing ground for social scientists than having their own highly trafficked website. Lucky for you, I’ve got the curiosity to make some analysis and share my findings. Damn, how I wished I had this site in college. Getting straight A’s would be a piece of cake!

To understand overspending, we must first understand why there is spending paralysis.


The main reason for spending paralysis is UNCERTAINTY. Readers from all over America were not willing to check their credit scores, refinance their mortgages, or find out if they can save on their car insurance because they were simply unsure who would win the Presidential Election. The fear of a single man affecting our financial lives was real.

Meanwhile, book sales for how to negotiate a severance package actually increased up by 50% a week before the Presidential election, despite a 20% decline in traffic. And unlike the free quotes, my book costs $48. Sure, I have a money back guarantee within 15 days of purchase. However, spending $48 still takes more will than spending $0 to check your latest credit score. The main reason for an uptick in book sales can be attributed to a DESIRE FOR MORE CERTAINTY!

Anybody who is considering quitting their job is facing a lot of fear. They don’t know whether leaving a paycheck in this economy is a good idea. They probably have other things they’d much rather do with their lives like watch their children grow up, travel the world, or enter some other occupation rather than the one they’re stuck in now. Meanwhile, the 4th quarter of the year is the most dangerous time for all employees. Be most afraid right before the holidays when managers use you to the max and tell you to pack your bags right before bonuses.

My book provides more certainty by educating people about their employee rights and suggesting effective strategies to amicably and profitably leave their employers. When it’s you vs. your manager plus her HR department and Legal & Compliance, it’s not a fair fight. My book arms the Davids of the world to fight the Goliaths and win.


Everyone is upset at companies for hoarding cash at record high levels. Politicians are doing everything possible to encourage companies to spend so they can invest in new technology, buy new equipment, and hire more people. Increasing employment trumps everything else. Yet, for some reason, politicians don’t realize their political bickering is one of the main reasons why companies don’t want to spend.

If you are the CEO of a cyclical company such as Intel, you are afraid of booms and busts. Technology evolves quickly and being nimble with a lot of financial fire power is important for survival. If you’re faced with huge uncertainty about taxes due to two very different ideologies, you’re going to be reluctant to spend. Instead, it’s rational to conserve money now to cover higher taxes in the future.

Now that President Obama has won again, at least companies have more certainty about the next four years. Companies can prepare for more of the same push to raise corporate taxes, dividend taxes, and long term capital gains taxes. At the margin, President Obama’s victory is good for the economy because companies will be spending again. They can’t hoard cash returning 0.2% forever because their competitors will invest in higher returning assets, which includes people.


On the flip side, the cure for people who consistently spend more than they should is to introduce uncertainty in their lives! It’s amazing why people continue to destroy their finances, and ultimately their lives by getting into suffocating consumer debt. You know it’s not for a lack of education because any dummy realizes spending more than you earn is unsustainable.

The reason for overspending is therefore because of too much certainty. Those who have the most credit card debt are too certain their credit cards will continue working forever. After all, so long as they pay the minimum back every month, the credit card company loves them for paying such high interest rates.

Those who live irresponsible lives are certain their parents, friends, spouses, or government will bail them out for making poor decisions. How many times do you see a child fail because their parents over-coddled them? How many times do you see a grown man continue to live at home with his parents because his parents never learned to say, “Get the hell out of my house junior!”?

Those who fail to see the benefits of good exercise and healthy eating are more certain future medical miracles will be there to cure unforeseen illnesses. I am concerned about the new certainty of so many Americans who might now indulge a little more because they no longer have to pay as big a price for unhealthy eating habits. I tried to argue our weight is mostly due to genetics, but I got a tongue lashing.

If you want to cure someone’s poor habits, send them pictures of blackened lungs, bed-ridden people who are morbidly obese, men in jail, mothers living on the streets, starving children, workers on strike, and so much more for the sake of scaring some uncertainty in their lives. Only then will people change. Maybe.


Now that the Presidential election is over, my affiliate income has normalized. In fact, a new year brings a surge in action. There will clearly be concerns about what goes on in CONgress and raising the debt ceiling, but at the margin, President Obama’s presence is a calming reassurance to at least 50% of Americans.

Being too certain ruins your potential. This is why it’s important to have an open dialogue about why we do what we do. The only thing we’re certain about is how hard we work. There is a strong correlation with luck, success, and work ethic. For everything else, we just hope for the best!

Readers, what do you think is the cure for overspending? Is being overconfident dangerous? Did you notice a decline in revenue during the Presidential election as well? Why do people spend more than they earn?



Note: The site is going through a juice cleanse over the next couple months. Apologies for the slow load times.