There are many reasons that cause Americans to overspend. A common problem for most, approximately 6 out of 10 individuals lives from paycheck to paycheck. Experts argue that overspending is more than an inability to properly allocate and plan the utilization of financial and monetary resources. Addressing overspending from merely a financial perspective is inadequate and insufficient. There are psychological aspects that result in overspending.
These psychological aspects include, but are not limited to, social pressure, lifestyle creep, impulsive spending, a misunderstanding of inflation, and a misconception regarding credit. Yielding to the temptation to purchase similar cars, clothing, homes, and jewelry as others to demonstrate your buying capacity is commensurate with theirs is a daunting reality that leads to overspending. This notion of keeping up with the “Joneses” causes many to portray a lifestyle that appears to be prosperous and successful. Lifestyle creep is a phenomenon when your lifestyle expenses increase disproportionately with increases in income and wages. Retail therapy is a disguise to justify emotional and impulsive purchases. However, retail therapy really creates trauma for your finances and money management. While inflation has slowed, there are still many of life’s necessities, like gas and groceries, that remain priced above pre-pandemic levels. When an individual does not plan for inflation, overspending is certain to occur. Many individuals utilize credit as an extension of their income. Credit is a temporary solution as credit card purchases have to be repaid in a timely manner to avoid the incurrence of high interest payments.
Do not allow the urge to compete socially to cause you to overspend. Focus on what matters to you, not others. Be honest with yourself about your financial and monetary resources and their allocation to financial expenses and obligations. Realize the emotional triggers that lead to impulsive spending. Identify alternative coping mechanisms for these triggers. Replace the desire to use credit cards with the financial habit of using cash or debit cards. Know that overspending can be overcome with awareness and discipline.
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Nicole Michelle
Finance and Money Wiz
November 28, 2022
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