OVERSPENDING: The DANGER!

Ever found yourself having more expenditure in your balance sheet as compared to your income generated? Well you are not alone; 1 out of every 5 people finds themselves in this situation on a regular basis. Research has proven it so. In the light of the present state of economy, there is need to look at this crucial social behaviour.

Over spending is the act of spending more than you can afford. It is spending above your means, spending more than necessary at any one given time, to spend more than is prudent or necessary.

To build wealth you have to create wealth; to create wealth means you need to spend less than you earn. When you keep spending all you have, there is nothing left to save. This is easy to understand but difficult for lots of people to practice. What is the problem? The problem is the underlying factors that drive our spending, these include: addiction, easy access to cash, easy access to credit, no record keeping, and the state of the mind.

Addiction: Urge to Shop/Buy

Buying yourself something feels good; we all enjoy getting something good. The problem is going overboard. It might shock you but there are people whose addiction is spending money, they want to shop from sun up till sun down.

When you find you going to the mall on whims, needing to buy everything you come across or see because it makes you feel good, there is a problem. Such individuals will get some kind of high; this means that endorphins and dopamine (the opiate receptor sites in the brain) gets switched on and the person feels good. Since it feels good, they more likely to do it again and again and again.

Easy Access to Cash

I remember a time when you needed to make a physical trip to your bank to get cash. There was nothing like ATM, credit cards, debit cards, on-line payments etc. Now you have access to your money 24/7/365. Easy access = easy spending.

These instruments (ATM, credit cards, debit cards, on-line payments) are for comfort-ability, but they need to be used prudently; always put the state of your finance into consideration.

No Record Keeping

There was a time you needed to actually plan your trips to the bank, You were prudent on what you had at hand because you did not know when your next trip to the bank would be. You kept track of everything you purchased and balanced your book at the end of the day. You were a record keeper.

Now most people do not keep tabs on what they spend. You just know you withdrew $100 and now you have $2. No stress about that either because the ATM is just a street or some blocks away.

Easy Access to Credit

This for most people is the biggest reason for over spending. We live in a time where you can buy now and pay later. It looks like a good bargain but it really is not. If you do not have the money you can get a loan. 

I have found myself in a situation where I was paying for something I got on credit for over 6 months. I did not have the cash ready, and it was something I wanted but which could wait till I could save to purchase it; there was no hurry. Now here I was with my shiny new purchase, and then I was landed with other bills.

Since I had signed to pay a particular amount monthly, I couldn't make excuses. I was trying to make this end meet up with that end, postponing the payment of one bill till the coming month, shifting things around and generally inconveniencing myself till I was through paying for this item 6 months later. The experience left me totally drained. It would have been easier if I had saved and bought what I wanted.

What to do about it?

What to do so you do not over spend is very simple

·         Knowing the state of your finance, don’t buy if you don’t have the ready cash.

·         Learn to budget.

·         Don’t give in to temptation.

·         Keep records of your income and expenditure; keep track so you do not go overboard.

·         If you prone to shopping, keep aside ‘extra fun money’ in your budget. Then limit the time you spend in the mall.

·         There should be a portion clearly marked ‘SAVINGS’ in your budget.

·         Be disciplined, practise restraint. You do not have to spend or buy, keep telling yourself that when you start feeling that high.