There are many reasons why people get into debts — gambling, falling sick, getting retrenched, etc. But in this age of consumerism, one common reason why people get into debt is overspending.
Companies has gotten so good at tempting us into spending our money that we only realised we have spent too much when we looked at our bank account at the end of the month. Here are some of the common reasons why we tend to overspend.
The Environment We Are in Makes Us Spend
Have you ever step into the supermarket with the goal of purchasing one thing but end up leaving with a whole basket of food and groceries? Don’t worry, you are not alone. In fact, supermarket are designed specifically to get you to spend more.
Here’s an interesting observation:
“So, why is the dairy at the deepest part of the stores, anyway? Underhill says it’s because almost everyone who walks into a supermarket has some sort of dairy on their shopping list, and if it’s in the deepest part of the store, you have to walk past a lot of tantalising goods to get to it.”
But layout is just one of the weapon they have under their arsenal. Music is another common strategy used, especially so during festive periods such as Christmas.
Dr Alan Bradshaw of Royal Holloway, University of London, said: “Festive jingles are force-fed to Christmas shoppers in a bid to change their mood, influence their sense of time and what sort of products they buy. In other words, this is an attempt to manipulate your shopping habits in a way that you might barely be aware of.
So, the next time you are shopping in the supermarket, one of the best way to prevent this from happening is to walk in with a shopping list in hand. This way, you can keep yourself on task, get the necessary stuff only and walk to the checkout counter.
Our Friends and Peers May Make Us Spend More
Humans have an innate desire to be similar to the people that we hang out with, it’s our nature survival instinct to want to “fit-in”.
This is what caused us to overspend at time. Some of your friends may be more well-off than you so when you are out, they may tend to choose dining or partying places that are way out of your budget.
And in your effort to continue hanging out of the group, you may choose to overspend your budget.
One way to prevent this from happening is to be upfront with your friends about your situation, and if they are true friends, they will understand your situation and choose to hang out at a place that’s within your budget.
Credit Cards Makes Us Spend More
Credit cards are both a powerful saving tool and a powerful spending tool. It really depends on how one choose to use it to their advantage… or disadvantage.
Psychology studies have shown that people are often willing to pay more for the same product when using credit than when using cash.
If you realise that you have been maxing out your cards and only paying the minimum interest rate each month, then you should probably look at getting out of the credit card game entirely as this will lead you into a debt freefall.
Rely on cold hard cash and you will have lesser margin for error.
How to Stop Getting into Debt
Take a look at these two equations:
1st equation: Salary – Spending = Savings
2nd equation: Salary – Savings = Spending
These two may look the same mathematically. But look at it from a financial planning standpoint and you will realise that one will more likely lead you down the path of debt and overspending than the other.
If you were to follow the first equation, you will end up with unstable savings each month. Sometimes maybe even negative savings (e.g. credit cards spending).
But if you were to follow the second equation, you can be assured of a guaranteed amount of savings each month, and you will have to budget your spending according, effectively controlling your spending.
So, if you are hoping for a comfortable retirement in the future, go for the 2nd equation and start planning your savings, and not leaving it all the way till the end of the month.