Why You Spend More Than You Make (and What To Do About It)

16 July 2009

Why You Spend More Than You Make (and What To Do About It)

Everyone knows what you need to do if you want to get out of debt and create a savings account; you have to make more money than you spend. So if we all know this, then why are so many of us still in debt? If you’re still spending more money than you’re earning then it’s probably because of one of the following reasons:

You don’t know how much you spend. It is shocking how many people there are who don’t track their spending. If you don’t know what you spend, you can’t be sure you’re spending less than you’re earning. Tracking your spending is the best way to avoid this problem. In rare cases, people don’t even know what they earn; tracking your income is also necessary.
You don’t budget. Some people know what they’re spending. They know it’s more than they can afford. But they don’t budget so they only see the problem after the fact. Create a budget that relies on spending less than you earn. Then learn how to stick to that budget.
You justify “emergency” expenses. The problem is that there are “emergency” expenses every month. You justify over-spending because you “need” to take the cat to the vet, get your home cleaned since your parents are visiting, buy a birthday present for the party that your child was just invited to, etc. Stick to your budget unless there’s a true emergency.
You expect instant gratification. You want what you want when you want it. You’re willing to spend money to get it. If you want more than your income allows for then you’re in trouble. Learning to delay gratification until you have the money in hand to pay for what you desire can go a long way towards getting you out of debt. It’s also a great sign of maturity!

You don’t know what you really want from life. People who know what their goals are can live in a way that allows them to achieve those goals within their income. If you don’t know what you want then you may spend money willy-nilly to try to find happiness in life.
You haven’t dealt with your money issues. People spend money for a lot of reasons. They want people to like them. They want to show off. They want to buy whatever the neighbors have. They feel an emotional high when they spend money. If you haven’t dealt with your emotions around money then you might be overspending because you don’t understand why you spend. Deal with the real issues and the debt may disappear.
You don’t earn enough. This is the biggest excuse that people use to explain why they’re still in debt. The truth is that you need to adjust your spending to your income. However, there may be times that you face this problem anyway such as during a bout of unemployment. Creating passive income streams, taking on second jobs or earning extra money by consulting or teaching are ways that you can help combat this problem.
You’re just used to it. You may complain about your debt but if you’re not doing anything to change your spending then it may be that you’re just used to being in debt. Ask yourself if you want to maintain this habit forever.

You already know what you need to do to get out of debt. What problem is causing you to still spend more than you earn?

Guest post by Kathryn Vercillo. Kathryn is a writer for Promotionalcodes.org.uk which gives away online codes (like this La Senza promotional code) and also publishes a save money blog.

Personal Finance And Investing

16 July 2009