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paper money on a scale

 

"Getting money is like digging with a needle;
spending it is like water soaking into sand."

Japanese Proverb





 

Three Reasons People Overspend

As a person who has always been extremely frugal, over the years I've had opportunities to help some of my friends, neighbors and and coworkers develop budgets and get their finances back on track. As a result, I've noticed that people who tend to overspend easily often share some common traits. Three of the common reasons I have noticed that cause people to overspend are listed below.

1. Shopping Out of Boredom - For some people shopping is a hobby as well as a social activity to do with friends. For people in financial difficulties due to overspending, it may be a good idea to simply stay out of stores, except to shop for budgeted essentials. I know some people think they are saving money by continually bargain shopping, but in my experience that is generally not true. Shopping is something of a numbers game. The more hours people spend shopping, the more bargains they are going to find and the more chances they have to spend money. It is hard to spend too much money when you spend your day at places like the library, the park or the beach. (See my section on saving money on entertainment expenses for more on this topic.)

People who are in financial trouble and shop out of boredom may benefit by finding something else to do with their time, like joining the Y or an inexpensive gym, getting a job, planting a garden, developing friendships based on interests other than shopping together, starting their own business, developing an inexpensive hobby, or doing volunteer work. The best choices, of course, would be to get a job or start a business with low start up costs because then they would be spending their time generating income instead of shopping it away on unplanned purchases. (See my section on Ways to Make Money When you Don't have a Job for more on this topic).

Related Link: Nine Ways to Stop a Spouse from Spending Too Much

Economy does not lie in sparing money but in spending it wisely. ~ T. H. Huxley

2. Poor Record Keeping - Some people overspend simply because they don't have a good handle on what they make compared to what they spend. It is difficult to stay within a budget if you don't have a written budget to follow. Most people who do not track their spending usually end up spending much more than they realize. That $3 cup of specialty coffee each morning can add up to a cost of $10,950 over ten years.

If someone gave you $10,950 in a lump sum today would you say. "Great, I'm going to spend it all at Starbucks!" You probably would not make a conscious choice to do this, but many people end up making this choice by default because they don't have a set budget to limit their expenditures on restaurant food, they don't track their expenditures and they don't realize how little expenses can add up.

People with these types of spending issues may be able to help themselves just by working with a financial planner, frugal friend or relative or reading financial planning books and web sites to help them create and stick to a household budget.

 

3. They Never Learned How to Manage Money - Due to eclectic school district boundaries, some of the friends I had growing up came from fairly wealthy families. One person in particular had unlimited use of her parents charge cards to spend on items like clothes, shoes and accessories. She had this access to unlimited credit even into young adulthood. As a result, as an adult when she wanted to move out on her own she was never really emotionally or financially prepared to live on a modest budget based on only her own personal income. Many of my friends from less prosperous families actually had an easier time moving out, becoming independent and getting ahead in life, because they always expected to have to work for a living and had a better grasp of how to manage money.

This type of problem illustrates the importance of teaching children about money at an early age. For more on this topic see my section on The Importance of Teaching Chidren About Money Management.

 

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