Overspending is one of the reasons why individuals seek debt relief through a bankruptcy filing. Most individuals are guilty of overspending at some point during their adult lives. Below are eight causes of overspending and suggestions for how you can stop overspending.
- Failing to Budget
Many people view personal budgets as denying themselves what they want to purchase. They overspend to maintain the lifestyle they desire without thinking about the future. Unfortunately, once you become accustomed to a specific lifestyle, you may borrow money and incur debt to continue the lifestyle even though you cannot afford the payments in your budget. At some point, the overspending will catch up with your budget.
The best way to avoid overspending is to create and live within a budget. Budgeting does not need to mean you have to give up what you desire. Budgeting allows you to reduce expenses so you can save money for the things you desire. Budgeting can also help you identify the difference between a “need” and a “desire.” You can make budgeting easy and less stressful by using an online budget tool such as Mint, Acorns, or YNAB.
- Stress and Emotional Overspending
Some individuals deal with stress or emotional situations by shopping. Often referred to as “retail therapy,” shopping can help you focus on something other than stressful situations or unhappy emotions. It can be difficult to recognize that you use shopping to deal with emotional issues and stress. In many cases, a family member or friend may say something.
According to John Scura from the Scura Bankruptcy Law Firm, many times due to uncontrolled stress, people tend to overburden themselves with more debt than they can handle.
If you find yourself purchasing items you do not need when you are stressed or sad, you may need to find ways to curb that spending, such as creating a budget, getting rid of credit card accounts, and finding another healthy outlet for stress and emotions.
- Peer Pressure
Peer pressure is a common reason for overspending. You are out with friends, and your friends are spending money, finding great deals, and having fun. It can be difficult not to want to join in the fun by purchasing items that you cannot afford and that you do not need.
If you are trying to save money or living within a strict budget, do not feel shy about sharing this information with your friends. You may be surprised to discover your friends need to save money too. Try to find other activities to do with friends that do not involve shopping or spending money.
- The Holidays and Special Occasions
The holidays and special occasions can trigger overspending, especially when you are trying to please or impress someone. For example, you are attending the wedding of a college friend, and you think you need a new wardrobe, or the wedding is a destination wedding that you really cannot afford to attend. For Christmas or birthdays, you tend to purchase gifts that are extravagant and far more expensive than anyone else purchases for the occasion.
If you find yourself overspending during the holidays or for special occasions, you may want to try the envelope method of budgeting. Place money in an envelope with each person’s name. The money in the envelope is the maximum you may spend on that person or occasion.
- Opening Multiple Credit Card Accounts
Too many credit card accounts may cause overspending. Credit card companies entice consumers into opening new accounts with specific perks and benefits, such as no interest for an introductory period or rewards. Store cards are notorious for offering a percentage off your entire purchase the day you open and use your credit card.
You can limit your credit card debt by using one or two major credit cards with low credit limits. If you max out the card, you cannot charge anything else until you pay down the debt.
- Spending Has Become an Addiction
Some people cannot control their urges to purchase items. They purchase items they do not need, and they cannot afford. They may have multiple duplicates of items they purchase. In this instance, a person should consult a counselor or therapist to inquire about professional help with an addiction disorder.
- Spending at Specific Times of Day
Do you notice that you spend more money in the evenings when you are relaxed and shopping online or when watching shopping networks on television? Maybe you shop on the way home from work or on the way to work when you are rushed and less likely to pay attention to how much money you spend?
Some individuals create a habit of shopping at certain times of the day. If you notice that you shop or spend more money during certain times of the day or days of the week, you may want to make a conscious effort to cut spending on those days and at those times unless it is absolutely necessary.
- Poor Money Management Skills
In some cases, overspending stems from the lack of or poor money management skills. Managing money wisely is not something that humans instinctively know. Many of us learn our money management skills from our parents. Some individuals who overspend did not have positive role models for wise money management. However, you can learn how to manage your money wisely. You can take an online course to learn about personal budgeting, the wise use of credit, retirement savings, and managing debt.
Written by John J Scura III, Esq.
Partner, Scura, Wigfield, Heyer, Stevens & Cammarota, LLP
John has been Certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or other type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.
