Why We Spend More Than We Earn, And How To Stop

Money. We all need it. We all use it. We all could use more of it. But not a whole lot of us like to talk about it mostly because we don’t know how to manage it very well. The ability to manage our money should feel like a privilege, not a daily battle we have to fight. And sometimes just because it feels like a daily battle, we feel like we can give ourselves the gift of spending whatever we have on whatever we want at whatever time we choose.

Having financial goals and spending within your means doesn’t mean you don’t have fun within reason. In this day and age, minimum wage means something completely different than what it did 100 years ago. That’s the way it should be, but that shouldn’t create such a drastic difference between having fun and living life. When you’re running into your senior year of college with 3 part-time jobs, but are still skipping meals and searching for pennies under the car seat to meet your rent payments, take some notes because there is hope out there for you.

It may seem like an impossible and even an overwhelming task right now, but keep reading to learn more about why we spend more than we earn, and how we can stop.

Spending on impulse

It’s human nature to have the fear of missing out on the latest fashions, handbags, gadgets, or phone accessories. There’s always the temptation that there is something better or bigger than we need. Unfortunately, when we believe those messages, that translates to habits of overspending. We ultimately buy what we want and not what we need in order to avoid the feeling of, well, void when we think we are about to miss out on the latest sale, or the latest “must-have” item.

We talk ourselves into getting the things we want by telling ourselves, I will be getting paid this Friday, anyway, even though it’s still only Sunday morning. These thoughts discount the important concept of saving. And before you know it, you’re over your spending budget and have to struggle for the next two weeks.

Future thinking = Epic fail

Has anyone ever told you that your perspective changes everything? That’s probably not always true, but certainly, the case when it comes to money. If you take the time to think about the future, even if it is within the next 12 months, and consciously assess the pros and cons of spending on certain purchases, you may be less likely to overspending on immediate wants and even some needs.

One of the reasons why budgeting is super challenging for some people is because there is a dichotomy between the present and the future. For example, I want to purchase a car all cash within the next 6 months but right within the next 7 days, I want to go to the Bahamas. The problem with this polarity is that the idea of getting something immediately looks more attractive than saving for something at a future date.

Cash is still king

We live in a world that values credit and chides those who don’t have it. Here is what you should understand, credit does not equal credibility. Cash is very much still king, and for those of us who go buck wild when we have a card in our hand, cash is much better for our peace of mind and our personal self-control. Cash forces us to be in control because if we don’t have it, we can’t use it.

A study was done in 2008 and published in the Journal of Experimental Psychology: Applied found that people are most likely to spend more money when they are using a card than they are when using cash. Here’s the interesting thing: the reason is that when we have a card, we can’t actually see the dollars trickling down. When we have cash, we can visually see the money leave our hands and our pockets. Cash makes purchases more real, and sometimes, more painful.

The temptation toward instant gratification

Many of us lack any sense of patience. We’re used to having things when we want them as soon as possible. It’s the idea behind fast food restaurants, microwaves, and blow dryers. The constant demand to take shortcuts, causes us to skip out on the practice and discipline of patience. Poor impulse control added to the need for instant gratification can lead to a whole lot of poor spending decisions. Whatever you need, believe me, there is probably nearly a 100% chance that you can wait for it.

Think differently

Often, when we talk about spending, saving, and budgeting, we tend to think of it in terms of how much we have to give up and/or how much we can’t have. It begins to feel more like a prison than a pathway to financial self-control and peace. Instead of framing it in terms of what we can’t have, start thinking about your finances in terms of what you really want.

If you want to stop worrying about money and get your spending habits under control, stop believing that your wants or needs, stop using credit on every purchase, develop a solid budget and don’t deviate from it, keep reasonable cash in your pocket or purse, and mentally make conscious efforts to be in control of your money.

Trust me, you’re not a martyr for saving and budgeting. These are tools that we all have to consciously develop in our lives so we can be prepared for emergencies, have the means to help others who are truly in need, and afford life overall the way we want, when we want, and how we want.

And if you have managed to just get your financial house in order, please don’t reward yourself with a $10K spending spree or a $25K trip to some foreign land. Patting yourself on the back and telling yourself “you’re a boss” is all you really need.

Collaboration with Cassandra Vella and Luiza Benisano

Featured Image via Pexels


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