Investigating spending behaviour using a mental accounting approach

Abstract

Overspending is a serious issue that causes high indebtedness and financial instability, especially among Muslims. One way to control this undesirable behaviour is through a mental accounting approach by grouping financial activities into different accounts. The wasatiyyah trait can strengthen this relationship. Finding out how Muslim demographic factors affect overspending, how mental accounts help control overspending, and how wasatiyyah affects the link between mental accounts and overspending are the main goals of this study. This study uses primary data collection through survey questions. We selected 500 Muslims, and 201 of them participated in the survey. This study uses SMARTPLS 3 to analyse the data. The contribution of this study comes from exploring how overspending behaviours are affected by mental accounting and wasatiyyah traits; to our knowledge, no previous studies have investigated these relationships. The findings confirmed the significant impact of age, income level, and mental accounting on certain overspending behaviours but not for a wasatiyyah. This study recommended that future research contemplate wasatiyyah as a direct indicator of spending behaviour. Understanding overspending behaviour provides an insightful approach to controlling the bad behaviour among Muslims.