An important aspect of leading a happy, fulfilled life is learning to be disciplined with your finances. If you are like most people, you face a constant temptation to overspend. For me, it's always just a little hard to say no to the tricked-out $5,000 computer when the $700 model will get the job done just fine. You may face different temptations, but the principle is the same. By understanding the reasons people spend too much, the effects this can have, and how to live within your means without feeling constantly deprived, you can avoid many of the most common financial pitfalls that snare individuals of all ages and backgrounds.
It sometimes seems that the modern world has grown more and more materialistic by the decade, and Americans are at the forefront of this trend. An article from National Public Radio entitled "Why Americans Spend Too Much" states, "You can look at consumption levels and control for purchasing power over the last several decades, and America is simply in a league of its own…Americans spend like no one else." You will find it difficult to break the habit of overspending when people all around you are spending money like crazy as well. The desire to "keep up with the Joneses" can drag you into a tremendous amount of debt without you even realizing it.
Spending money also makes people feel good on a physiological level, which means it can become a way to distract yourself from worries and stresses. In an article entitled "The Causes of Overspending," Simon Wright states, "In the same way that some people overeat when faced with stress or depression, others turn to spending to provide a short-term distraction from their worries." Of course, this overspending eventually leads to more stress and unhappiness because of accumulating debt, causing a never-ending cycle of financial woes.
No matter what your particular reason for wanting to overspend, the credit industry has made it easy to spend money -- often money that you do not have. The ease of simply swiping a credit card removes much of the impact of writing a check or handing over cash. Even individuals with no credit or poor credit can find many companies that will still offer them credit -- at an astronomical interest rate, of course. A recent study by Credit.com found that 58 percent of Americans carry credit card debt. Many people have started to see their credit limit as an extension of their monthly income, focusing on the minimum monthly payment, rather than the overall balance.
Of course, you likely already know that spending more than you make leads to debt, and debt leads to mounting worry and stress. What you may not have considered is the impact this stress can have on other areas of your life. This debt and the stress it causes can become a huge burden, and will often lead to depression. Additionally, debt is one of the top reasons for divorce in America. Issues about money can cause arguments and separations that otherwise would not have occurred. Overspending is a root cause of an incredible amount of unhappiness in many different areas of life. Fortunately, you can avoid it with a few simple strategies.
The most important such strategy is to always ensure that your total income each week or each month exceeds the amount you spend during that period. If you have difficulty sticking to this rule, you may need to forgo all use of credit and stick to a cash-only system. If you are used to the treats and luxuries that credit can provide, you may find yourself feeling deprived if you suddenly start living within your means. A little creativity, however, can help the cash you do have go a lot farther. For example, one of the biggest expense categories for many families is food. Taking steps to reduce the amount you spend in this category can significantly increase the cash you have available for other things. First, always make sure to eat breakfast. Healthy breakfast foods like granola are fairly inexpensive and can help you feel full throughout the day -- a bonus to your waistline as well as your wallet. Lunch can become a huge drain on your expenses if you buy fast food or other restaurant fare every day. Instead, pack a healthy lunch for yourself the night before. Make sure you include foods you actually look forward to eating so you do not feel deprived of your usual lunches. Additionally, going out for dinner and drinks with friends every weekend can quickly become very expensive. Instead, hosting a dinner party or barbecue will still provide you with a fun evening, but will not leave you broke the next day.
Another significant drain on your finances can be your home's energy costs. You can greatly reduce the money you spend on electricity by simply unplugging electronic devices like computers and cell phone chargers when you are not using them. Even when electronics are turned off or in standby mode, if they are plugged in, they are still consuming electricity. Try taking shorter showers and only washing full loads in the clothes washer and dishwasher in order to save money on heating hot water. If there is no one in a room, turn the lights off. All of these tips can help cut your monthly spending without you having to deprive yourself of things you enjoy.
One of the biggest culprits that can drag you into debt is impulse buying. It is easy to walk into a store just to look around or to pick up one thing, but walk out with multiple items you did not originally plan to purchase. To help manage this tendency, make a commitment to wait a week, two weeks or a month before buying anything that costs more than a certain dollar amount. If you still want the item after that time period, then make sure you have the money in the bank to pay for it before you actually make the purchase. This waiting period will also allow you to compares prices to make sure you find the best possible deal.
Regaining control of your finances can seem impossible if you have already built an overspending habit. However, by taking the time to understand exactly where your money goes each month, and by cutting back on miscellaneous, unconscious expenses, you can begin reducing the stress and worry overspending creates while still enjoying your everyday life.
image: http://www.flickr.com/photos/ripplemdk/
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