We all like to judge the football players who make a ton of money but then go bankrupt within 5 years after playing football. How about the lottery winners who go insane and crazy, buying all sorts of stuff to please their deprived hearts. But what is the root problem behind their personal finance choices? Why are they and the average person so bad managing money? Well I have a theory aka as I witnessed a few while experiencing some and now I can talk about why people spend out of control.
STOP SPENDING SO MUCH MONEY!
I have gotten a few windfalls in my lifetime, which includes bonus dollars from past employers and a small work related settlement. Now the amount I received is nowhere near the millions of dollars I hear athletes make, but for argument sake it’s all relative. My spending level broken down by a percentage might be equal to theirs, give or take a few zeros at the end of the big fat check.
Why people spend out of control? See below for the 6 reasons I found plague most people with spending excessively. (Be open to reading the facts affecting most people because it can hopefully help folks with money, many people will shy away and only publish happy go lucky posts. I feel differently on this matter and I know this is real truthful writing that can change behaviors.)
Why People Spend out of Control:
- They never learned how to really manage money. – The sad state is that money lessons are not taught in school and some parents are doing a horrific job as well.
- Before any windfall they never hit the bottom of the bottom money wise. – The learning experience you get from hitting the bottom and seeing your bank account at $0 will change how you think about money.
- Their parents or others enabled them by giving them everything they desired. – That spoiled syndrome can take decades to repair if they ever come back from the dark side.
- When you have more you spend more. – This is a classic explanation to overspending, but it is partially true. Your risk meter is off when you have those dollars sitting idle in an account growing exponentially.
- They want to impress others by any means. – Imagine that young lady entering college, she can’t let her fans down, sporting all Kim Kardashian’s outfits, accessories, and handbags.
- Emotional Issues – People not happy with relationships seek ways to cope, which includes people currently divorced or recently separated. This is one of the biggest drains on someone’s finances and mental state of mind.
I hope you can agree that most people who admit to having money issues fall within these 6 examples. Now what can they do to begin to turn things around for their sake? It could take a long time to effectively be on the good side of the personal finance battle. I am going to go through each step and give a brief tip on how to improve spending behaviors. I have made mistakes and this is why I am open to helping others avoid them.
- Track expenses for 3 months diligently and attempt to spend less than earned. If you can effectively cut costs while handling income responsibly. Then month after month you will gain a surplus this is the first step toward learning the basics behind managing money.
- If you get a windfall, do not spend immediately. Wait a few months and think things through. Ask yourself what was important to your life before you got this money? Divide it by percentages into different categories.
- Accept Maturity and avoid, “I can have anything I want”, mentality. Understand that it’s impossible to have everything in life. Hold back on certain costly desires until you can effectively say no to impulse spending. Getting on track is the priority.
- Decide now that no matter how much is earned you will not increase expenses above a specific level. Set it today and stick to it. Add up all expenses for the last 12 months and divide by 12, this figure is a good place to start.
- Ask yourself, who will provide for me if unemployed? If the answer is no one then stop impressing others. Focus on a solid financial foundation before getting fancy clothes and fancy things. Use the surplus to save and invest, before buying wants.
- I know times can be hard and filling a void by overspending is financial trickery. Just remember excessive spending will not fix emotional issues. When you are in this state you might need to speak to someone you trust to get to the root of the issue.
The end result I want to share with you today is to provide a simple plan to help alleviate people spending out of control. I know everybody might not be in the same page financially or maybe they are not mature yet to welcome this advice, I feel the advise still should be mentioned. I once bought an SUV that cost over 60% of my then annual income. Do you think if I had some financial guidance to tell me, hey the financially smart thing is never buy a car that costs over 20% annual income, I could have avoided that mistake. If I can provide specific examples how someone can overcome financial issues it will help them see the benefits to living life in financial straights.
WHY Do People Spend Out Of Control? – It includes the various reasons mentioned above and only You can take control to guide the money in the right direction.