The Causes of Overspending

With ATMs around every corner and credit cards being sent to your mailbox there is no question why our society is over-consuming. Even if you don't really have money to spend, you overspend because you are encouraged to do so. Yet, by overspending, not only you create a huge debt that hinders you from building wealth and being financially independent, but you also contribute to the increase of consumer spending to such high levels that eventually hurt the economy.

To control overspending, you have to know the factors that drive you to spend more than you earn. Below are the leading causes of overspending that can give you an idea on how you may be excessively spending your money.

1) Credit Offering

For most people, credit is the most important reason for overspending. Every day, you are practically bombarded with credit card, mortgage, auto loan, and refinancing offers. It seems so easy for you to get that amount of money by simply filling out an application form to obtain a new line of credit. The problem is that with credit cards you will definitely overspend because this is the exact function of credit: you are given credit to spend at a later time in installments the money you cannot spend today in cash.

Keep in mind that easiness to obtain a credit card is totally different than being charged with excessive credit card fees. Make sure to pay your credit card balance in full every month to avoid high interest rates from carrying over monthly balances.

2) Sales & Discounts

Think about how many times you have purchased an item that you didn't really need only because it was on sale and you will realize a fundamental cause of overspending. Many people getting swept away by sales offers and huge discounts in retail and department stores and shop just for shopping. This is a typical excuse to justify unnecessary purchases that only lead to the increase of your financial liabilities.

3) Emotional Instability

Many times, especially when you feel sad and disappointed with our daily routine, shopping makes you feel better. Buying things for yourself, more to satisfy your wants rather than your needs, makes you feel good and it balances your emotional instability. The problem is that you feel good about your purchases the moment you do it, but it doesn't feel good at all when debt accumulates and you realize how much money you have spent. So, basically, the net value of overspending out of emotional instability is zero because whatever positive feelings you have when you do the shopping get written off by the negative feelings you have when the credit card bill arrives.

4) Greed

Besides being one of the seven sins, greed is also a key cause of overspending. In an over-consuming society, people want more and more and the more they get, the more they want. This inevitably leads to excessive overspending that is mostly related to psychological factors that drive consumer behavior.

5) Impulse

Some products are so nicely marketed with a specific brand or attractive packaging that consumers cannot really resist. Impulse purchases are a key cause of overspending, mainly reflecting the power of advertising and how it can determine consumer behavior.

In conclusion, overspending drives our society. Some people may overspend out of hobby or just to show off. There are many shopping frenzy individuals around us, who are only satisfied with spending their money and free time on shopping. Regardless of why you do it - if you do - make sure to know what drives your spending habits.

Sources:

http://financialplan.about.com/b/2008/01/29/beat-overspending-knowing-what-causes-it-is-the-first-step.htm

http://www.associatedcontent.com/article/1418727/the_leading_causes_of_overspending.html

http://www.yousaytoo.com/five-causes-of-over-spending/399899