Seven reasons why people overspend and how to break the habit | The National (2024)

FAQs

What are some of the reasons why people might overspend? ›

"Overspending is often more than just a lapse in financial judgment; it frequently signals underlying emotional or psychological triggers. For instance, some people may overspend as a form of escapism, temporarily distracting themselves from stress or emotional pain," Hathai says.

Overspending can happen for different reasons, such as: You might spend to make yourself feel better. Some people describe this as feeling like a temporary high. If you experience symptoms like mania or hypomania, you might spend more money or make impulsive financial decisions.

Not having a budget is one of the simplest causes of debt. By not being aware of how much money you have, you could be more likely to spend more than you have access to. By monitoring your finances, you can stay on top of payments and be more aware of how much money is left in your account.

We mistakenly look for confidence in the clothes that we wear or the car that we drive. We seek to recover from loss, loneliness, or heartache by purchasing unnecessary items. We seek fulfillment in material things. And we try to impress other people with the things that we own rather than the people that we are.

Emotional catalysts that trigger the most spending are celebratory moments (32%) and boredom (25%), while job-related stress has prompted 20% of Americans to open their wallets. Gen Z is most often triggered by boredom.

Emotional buyers love the rush of getting their hands on something new — the hottest new technology or trendy fashions, for example. Discount seekers buy things because they're on sale, whether they need them or not. Convenience cravers can't resist pop-up ads and websites that let them buy with a quick click or two.

Money disorders can lead to financial strain that affects a person's family and their day-to-day life and well-being. These disorders can wreak havoc on a person's mental and emotional health, possibly resulting in other unhealthy habits.

The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

Is overspending a mental disorder? ›

Brad Klontz, a doctor of Psychology at Kansas State University identifies eight different money disorder patterns: Pathological Gambling: reoccurring gambling behaviors. Overspending and Compulsive Buying Disorder: overbearing need to buy things.

Our spending habits, which directly impact our personal bottom line, are also affected by our emotions, values, and desires. This is known as the “psychology of spending.” Spending money, as opposed to saving, provides an instant feeling of gratification and control.

Many people develop an addiction as a way to cope with their emotions. This is the same for people with a shopping addiction. Compulsive shopping and spending may be a way for you to avoid or mask negative and uncomfortable feelings, such as sadness, boredom, stress and anxiety.

when you are emotionally stressed, the part of your brain that can make conscious decisions shuts down. If you're an overspender, maybe you soothe tough emotions or stress by impulse spending or just spending more than you wanted to. Once those frontal lobes come back online, you might find yourself regretting it.

Without a budget, many people make the mistake of eating out more than they can afford to or buying items that incrementally push their finances to the brink. Another reason people overspend is that they use credit too often.

Excessive spending in students can be caused by various factors. One common cause is a lack of financial capability, which can lead to indebtedness and overspending [1]. Another factor is financial attitude, as students with a less disciplined approach to money management tend to have higher spending habits [2].

Getting loans. Buying things they can't afford. Going into debt.

Another example of overspending is you are unable to save enough for your goals as you have too many expenses. The feeling of never having enough money, having a low balance in your bank account, and using too many credit cards, are all signs of overspending.

High credit utilization: Overspending may lead to using more money than you're receiving each month, often resulting in increased use of credit cards and more opportunity to go into debt.