5 Habits That Lead To Overspending
Spending beyond one’s means seems to be an American tradition. It is quite common for US households to hold thousands of dollars worth of credit card debt. In fact, the average US household carries $17,000 in combined credit card balances – the equivalent of nearly one-third of their annual earnings.
How did Americans come to owe so much? While the cost of living has been outpacing income for more than a decade, zoom in on a personal level and you might find that habits could be to blame.
To see if you have destructive tendencies that could put your financial independence in jeopardy, keep reading to learn about 5 habits that could potentially lead to overspending and credit card debt.
- Winging it. Do you frequently make purchasing decisions on a whim? For example, grocery shopping without a list, eating out without consulting your budget, or making important financial decisions such as taking on a mortgage without due diligence. When it comes to your finances, planning is always better than improvisation for both short-term and long-term economic decisions.
- Living paycheck to paycheck. When your paycheck finally hits your bank account, you might be tempted to treat yourself with a night out or some new merchandise. But the amount in your account isn’t the amount you actually have – your available balance so to speak. You must first cover your bills. While this might seem obvious, the majority of Americans (about 60 percent) don’t use a budget, instead myopically allocating financial resources on weekly basis. This habit can quickly lead to debt as you’re more likely to run into unexpected cash flow problems.
- Letting your impulses control you. If you consistently give in to urges and desires, you might have an issue with impulse control. There are two main features of impulsivity: spontaneity and disregard for consequences. To overcome impulsive behavior, try making a plan for, or simply avoiding, situations where you feel you are most vulnerable to temptation and reminding yourself how you will feel if you give in to your urges.
- Going draconian. The flipside of impulse control is being overly strict with yourself. When we completely ignore our desires, we are more likely to overindulge or binge later, whether that means overeating, going on a shopping spree, drinking to excess, etc. As far as your finances are concerned, one of the best ways to ensure you stick to your budget is to also make room for fun or experiences. You should set aside a portion of your disposable income each month specifically for entertainment or pleasure.
- Constantly stressing. Letting our mind run away with our anxieties is, in a way, a habit. While short-term stress can induce life-saving action, i.e. the fight-or-flight response, chronic stress can have detrimental effects on our cognitive abilities. Consistently high levels of cortisol, a stress hormone, can shrink the prefrontal cortex, the area of the brain responsible for intellectual functions including decision-making, planning, and judgment and, hence, impulse control. To reduce stress, commit yourself to regularly practicing stress-relieving techniques or remove yourself from stressful situations whenever possible.
Any of these sound familiar? It is never too late to change bad habits. The same goes for your financial situation. If your bad habits have enabled you to rack up more debt than you can handle, New Era Debt Solutions may be able to help. New Era is a debt settlement company that helps people dramatically reduce their debt obligation to secure their financial independence. Since 1999, we have settled over $200 million in debt for our clients.
To see if debt settlement is right for you, contact us or fill out the form on this page for your free debt analysis.