Detoxify Your Life: Eliminating Bad Habits Effectively
	Overcoming Overspending: Getting Over Poor Money Management Habits <  Previous Contents Next  >

More people all over the world are finding themselves in dire financial situations, not because of the effects of poverty or sudden calamities, but because of rising debt. In the United States, in particular, where 70% of the annual gross domestic product is driven by consumer spending activity, people have been found to spend around 10% more than what they actually earn. Credit card related liabilities are also averaging at $8,500 per person. Now, isn’t that a hefty number?

To think that people nowadays seem to be spending more money than usual and are easily attracted to impulse purchases, you would wonder where they get all their funds.

According to studies that have looked into the mind work of people with personal financing problems, people get into debt because of their propensity to overspend. This is particularly evident given today’s credit crazy world, where individuals tend to overlook the impact of their spending habits because credit card bills come late and, therefore, delay the thought and feeling linked with the possible consequences of owing money. The lure of having the power to delay responsibility is what most overspenders live off from.

In fact, there are some consumers who take on more than two kinds of credit cards possible, to make instant purchases and make them feel in control of their funds, without really realizing that they could end up paying for these for the rest of their lives. People with this habit only work to pay off their debts, instead of working to earn enough to enjoy life’s simple pleasures. Overspenders are also referred to as compulsive debtors.

Overspending is a big problem because not only does it have the power to ruin your reputation and credit history, it can also prevent you from maintaining healthy relationships with family and friends, especially with those you constantly borrow from to pay your debts. Consider the following to determine whether or not you have a spending problem.

• You are using one credit card to pay your debt in another.

• Spending gives you a certain kind of ‘high’.

• You don’t have an idea where exactly your money goes.

• You don’t know a thing about balancing your accounts and budgeting.

• You often find yourself short of funds and always borrowing from other people.

• You buy anything that attracts your fancy, even if you’ve already told yourself that you’d be spending for just one item.

• You feel better when you purchase items on credit than with cash.

Overspending is a bad habit that isn’t really unique to a few. In fact, all of us are guilty of poor money management choices at some point. This happens, for instance, when we go to the mall thinking that we’d just get that one shirt we need for our office sports fest and find ourselves walking out the doors with more than two bags in hand. Or buying things we don’t really need now but “might be able to use at some occasion in the future.” Or making purchases “just because the salesgirl was following me around all day and I had to shut her up.” All these fall under the category of compulsive spending.

However, doing this every time can be disastrous. What if after making those purchases, we twist our ankles and need to rush to the doctor all of a sudden? Will we have enough money to pay for the bill? Or worse, will we even have money to get ourselves to the emergency room and head back home when we’re done? Just think about it.

Psychologists say that people turn to money to ease or boost a certain human emotion. For example, we buy ourselves new shoes when we get promoted, as a reward. Or we go to the salon and get ourselves fully made up when we get upset at someone. Or we go on a drinking spree with our friends and order the most expensive bottle of wine on stack, just because we feel a little vengeful and rebellious.

There are many reasons why we make compulsive decisions with money. But, studies have shown that one thing is common to all these – they are linked to how we feel about our surroundings and ourselves at that particular time.

These are the most popular rationalizations to overspending.

• To overcome feelings of inadequacy. Let’s say you want to purchase a second hand vehicle just so you can get to and from work without being too tired from commuting. You are already eyeing that functional blue Toyota on the line up and are ready to call it a day. However, you suddenly remember that the parking space near your office is usually flanked with fancy cars. You also suddenly remember that your workmate just recently bought himself a Mercedes. The next thing you know, you prioritise being cool over being practical and functional and go get yourself a Jaguar (even if it means working your butt off to pay for the monthly bills for the next five years). You made that regrettable purchase all because you want to fit in.

• To relieve stress and guilt. We often make impulsive buys because we want to take our feelings out on something. And since things don’t really have emotions and are unable to fight back and tell you what to do, you take your frustration out on your wallet and buy everything on sight. This usually happens with women who have just gone out of a bad relationship. They tend to go on a shopping spree or take a long vacation to ease their tantrums.

• To feel important. We buy because we have the capacity to do so. Or we think we do. People who live on credit fall into this trap easily, because they can make purchases without having to worry about the consequences now. We overspend to make ourselves feel we are better than the next person on the cashier’s line. We overspend because we want to show that judging salesgirl that we do have money and can buy. It’s all a matter of pride really. However, at the end of the day, pride will not be able to pay the bills.

• To go with the flow. Promotional offers like zero-percent interest on the first six months are tempting, especially to a person who keeps a full-time job and expects to receive money at regular times every month. While such offers are helpful, they still do not erase the fact that they will be putting us in debt for a significant amount of time. And it is never good to be in debt, no matter how small the bill is.

The word ‘no’ is a very powerful tool in making sure that we live within our means and do not overspend. Sure, certain offers are quite attractive, such as a credit card company calling to have to increase your credit limit and the like; but if you are already living fine with what you currently have, then stick with it. While it does not hurt to be ambitious, being overly optimistic about our capacity to control our finances and pay off our bills could be destructive. A lot of people have declared bankruptcy just because they couldn’t say ‘no’.

Most of the reasons why people overspend are not related to satisfying basic needs, like food, water, shelter, etc. In fact, they have more to do with how we think and react to situations. This is why most advertisements try to appeal to our sympathies, instead of simply presenting us with facts on how functional and practical their products are. So, if you really want to kick the habit of overspending, you need to rein in your emotions and control them, before they control you.

• Learn to budget. Most people think that budgeting is a way to curtail the satisfaction that comes with being able to purchase something. Erase this thought. A good budget plan is a lifesaver.

• Reduce discretionary expenses. This means try not to spend on things that are not really necessary. Why don’t you stop eating out everyday and start preparing your own food from home? Or why don’t you try making less international calls and try using email, especially if what you’re discussing is not really that important to shoulder the high charges?

• Use cash. Stop relying on your credit cards and pay your transactions in cash. If you don’t have cash to pay for it, then don’t get it at all. And avoid having to borrow, not even from family and friends. Most relationships have turned awry because of people’s failure to pay their debts.

• Keep just one credit card. Holding more than one will only tempt you to purchase more things. Use this one credit card for emergencies only.

• Be a wise spender. Watch out for sales and clearance offers. Scour flea markets and bargain bins for great finds. Not only will you be able to save significantly, you’ll also be able to get that much needed exercise. You never know what treasures you will find from such sales.

• Talk to your creditors about your payment options. Most creditors would prefer working out a repayment plan that is comfortable for both parties. This will save both of you from the hassle of having to go through credit collection agencies.

• Live within your means. If you don’t have the extra money, don’t buy. And if you have something left over, save it. Live simply. People who live less extravagantly have been found to be less depressed than those who have too many things on their plate. If you really want something, look for extra ways to earn funds. This way, you won’t have to touch your basic salary.

People often cringe upon hearing the word “budgeting” because they consider it a financial diet, or as a deprivation tactic. Most would argue, “Hey, I’m working to enjoy the fruits of my labour. Why do I need to starve my happiness by budgeting?” This is a common pitfall. As said earlier, most of us associate happiness with the ability to dispense money. We must change this mindset by thinking that a budget is not a means to control us, but a tool to help us manage our funds more effectively.

There is a big difference between controlling our spending habits and managing our spending habits. And a budget is actually more of the latter – it aids us in better understanding what is truly important to us. It keeps us within range of our spending capacity and, ultimately, out of financial trouble.

You can come up with a budget plan by yourself or you could hire a professional to help you iron out your options. The latter involves some amount of spending, though, so unless you’re running a crucial multi-million dollar venture, it would be most prudent to take charge of your own activities.

There are many resources available, such as books and Internet articles, to help you get started. Information is everywhere so you won’t really have trouble finding them. All you have to do is first acknowledge that you need help. Once this is out of the way, things should follow smoothly.

For the tech-savvy and those who are always glued to the computer, you can find money management software available to aid you in your budgeting needs. The advantages of using budgeting software are:

• you are constantly updated of every transaction you make,

• you learn to manage financial situations depending on the time frames,

• you are able to track where you’ve overspent,

• you will be able to more effectively manage your debt and allocate earnings, and

• you will be introduced to alternatives to making money and areas where you can still reduce your expenses.

Popular personal budgeting software include Moneydance, Microsoft Money and Intuit Quicken Premier. All three are easy to understand and use. They may also be customized to fit your lifestyle. Once you begin using them, you will be able get a more detailed account of your weekly, monthly and even annual transactions. They come with a fee, though, so unless you truly need the shake-up, DIY budgeting is still the way to go (if your organization skills are above-par, that is, otherwise, you’ll just be wasting paper and time).

Knowing what triggers your uncontrollable spending bouts is the key to overcoming this bad habit. The next time you have the urge to make a purchase, pause for a while and ask yourself why you feel compelled to buy something. Is it a necessity, or are you simply trying to pad an emotion?

If your answer is the latter, then the next thing you must do is take a step back and ask yourself again: What emotion am I trying to shield? What else can I do to address it? Continuously asking such existentialist questions, no matter how corny they made sound to you, will guarantee freedom from the lure of spending. Once you’ve mastered your spending habit’s weaknesses, the easier it will be for you to fight it.