Overspending is a form of financial indiscipline .When people use a huge chunk of their earnings to acquire goods and services that they can otherwise do without and in the end leave little for their immediate expenses or nothing for future investments, this is akin to doing injustice to their hard earned incomes. Overspending is a hindrance to personal financial growth and development.
Over spending can not be attributed to human nature. There are factors that induce people to behave in a certain manner, some of which are psychosomatic but most of which are expected in the absence of proper financial planning. However, this behavior can be curtailed and reversed. The important thing is to find out what leads to spending more than what is necessary.
Lack of long term financial planning is therefore, a major cause of overspending. For instance, when bills accumulate they can become a burden. This leads you to concentrate on short term solutions such as borrowing in order to meet the bills. Such a short term solution will definitely breed long term problems because the debts will have to be paid. One might be misled into overlooking the future problem due to the cash made available by creditors and so they go into a spending spree.
Readily available credit in the form of credit cards has increased consumer spending across the globe. You don’t need cash; all you have to do is swipe a plastic card (credit or debt card) at a check-out counter and purchase anything you want but within your credit limit. The fact that you will repay the credit at a future date, with interests, does not seem to frighten people from acquiring through credit. Furthermore, it gives people the power to use what they don’t have. This is indeed a bad habit that shields the consumer population from planning for the little that they have.
It seems like holidays are created with the aim of enticing people to keep on spending. Some holiday events that were almost un heard of in some parts of the world a decade a go such as Father’s day and Mother’s day have really caught up in most parts of the globe now. People buy expensive gifts for their parents on these days and the impact on spending levels is huge. It goes without saying those traditional holidays; such as Christmas, Thanks giving day and Easter are associated with increased spending.
Marketing refers to the deliberate efforts that sellers of goods and services make in order to increase sales. Most marketing activities are known to lead to impulse buying. Companies are artful in creating attractive packages that scream “Buy me”. Other marketing gimmicks include the employ of promotional offers, discounts and refinancing plans. Of course people would like to buy when it seems like they have everything to gain by doing so. This eventually increases spending.
Ignorance on the part of consumers does lead to increased spending. Most people do not even understand the importance of planning for the future let alone having basic level financial knowledge. To them, shopping is a hobby and so they think that they really don’t require any concrete plans to substitute the urge for spending today.
Investment in capital goods that help us increase our productive capacity can also lead to increased spending in the long term. With increased production comes the need to get the products out for consumption. The supply of such products into the market has an effect of increasing consumption because greater supply means that the prices will decline hence making them more affordable
Other factors that increase spending include health concerns and the need for more. It seems like everyone wants to remain young or even reverse aging. Anything that promises to help us achieve this is worth spending an extra dollar on. Similarly, we (human beings) can not have enough. The more we have the more we want. It is partly due to the greed inherent in us but this has an effect on short term spending.
In conclusion, anyone can overcome the urge to overspend. The most important thing is to budget for your income and let your budget be your daily guide, use cash instead of plastic money and make a habit of saving for the future. This is the first step towards spending less.