The Psychology of Overspending

Almost everybody overspends, and if you do it, too, then you’re just part of the crowd. However, from a logical perspective, overspending makes no sense.

First, it’s not easy to earn enough to beat the rising cost of living. Since we live in inflationary times, it means that the purchasing power of our money is declining over time.
Second, we spend a lot of time and effort to acquire our money. We may even have invested years in college acquiring our earning level ability.
Third, we often run into financial problems, racking up credit card debt, making late payments on our car and mortgage payments, and creating all other sorts of problems for ourselves.
There are many things that we overspend on. A few examples might make this point clear.

How We Overspend

1. We overspend on entertainment.

A dinner and a movie night sound like fun, but we could easily spend $25 a person, $50 for a couple, or $75-$100 for a family. We also have to factor in gas, parking fees, and any other incidental expenses. On the other hand, we could just as easily stay at home, cook our own dinner, and have a blast enjoying streaming movies or playing Internet-based video games with other players around the world because we took the time to snag DIRECTV bundle deals.

2. Weddings.

No one is disputing spending money on a wedding. After all, it’s a special day, and the money is well-spent. The problem arises when we throw our budget out of the window and overspend on everything to make the day memorable. The excessive amount of money would have been better used paying for a great honeymoon or a down payment on a house.

3. Consumer shopping.

It’s fine to shop for the things that we need, and it’s wonderful to get the luxuries that sweeten the quality of our life. What’s more, there is no need to buy inferior quality when we like nice things. Overspending creeps in when we buy things without doing a price comparison check. It’s amazing how it’s possible to buy exactly the same thing if we take the time to do a Google search. Often, too, a retailer will match the lower price if we can show that it is available elsewhere.

Why We Overspend

So if overspending makes no sense, then why do we do even do it? It’s because there are many psychological reasons at play.
Here are five reasons why we find it difficult to control our spending behavior:
1. We’re trying to buy happiness. Life is often difficult, stressful, and many events and life situations make us feel angry and frustrated. As a result, we buy things to make us feel better. We buy comfort foods because we feel lonely, and we buy beautiful clothes because we want to feel special. We use hedonism to mask our emotional emptiness.
2. We’re impatient. Advertisers have taught us to get what we want when we want it. We are pounded by hundreds of messages each day promising us goods or services that provide instant gratification. We can’t even stand to wait a short amount of time until we have a better cash flow to get the things that we want.
3. We feel guilty. Since we can’t spend as much time with our loved ones, our spouse or children, as we’d like, we tend to feel guilty. We overdo the gifts and treats.
4. We’re trying to look more successful than we are. Few of us like to admit how much we struggle to make ends meet, that we earn less than others think we do. As a result, we purchase the illusion of a lifestyle that we can’t afford.
5. We have never taken the time to evaluate how much money we have in our bank accounts. Instead of balancing our checkbooks and keeping track of our incoming and outgoing cash situation, we choose to go unconscious. We don’t want to admit to ourselves how poorly we are managing our lives.
Understanding the logical reasons why overspending is a bad idea is not enough for us to change and get our budgets under control. We overspend for psychological reasons and until we resolve our emotional pain, then no amount of logic is going to help us get a handle on spending and living within a sensible budget.

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