causes of overspending and how to avoid it

This is a guest post by Justin Toladro from Life Insurance Finder.

Overspending is a major problem in our society today, especially in Australia, where consumer debt levels are among the highest in the world. In the global economic recession, two different kinds of consumers emerged: the stingy shoppers and the over-spenders. The stingy shoppers are so frugal that oftentimes they would rather go without even basic quality goods, all in the name of saving a dollar or two. This is one extreme, and the others are the overspending individuals who can’t help but buy more, more, more! Even if they don’t need it, they get sucked into buying something anyway. Which type of consumer are you?

If you fall into the overspending category, you are not alone. Millions of Australians are currently struggling to pay off credit card debts because of their poor spending habits. But what exactly causes this?

One major problem is the overabundance of credit card offers and loan “deals” being offered by various companies. Desperate for customers, they begin undercutting each other by offering the lowest introductory rates to encourage more people to flock to their business model. However, once you get sucked in, it’s hard to get out. These companies are in business to make a profit, not to benefit you on all fronts. As such, even though the application process is quick and simple and the credit limit is more generous than your budget would have been, keep in mind that it’s going to cost you later on. Even if you “qualify” for a greater line of credit doesn’t always mean you should automatically start spending at that level, because that could spell years of minimum balance payments wrought with interest tacked on top.

The term, “Live within your means” comes in handy here. This is the best way to avoid getting trapped in these seemingly harmless credit card and loan deals, even if that means you can’t buy everything you want now and wait until later to start paying it off.

And it’s not just the credit card or loan companies that are trapping customers these days. Stores are doing it too, albeit in a much more subtle and sneaky way. To encourage spending, many stores have been offering discounts and sales, especially “Buy One Get One Half Off” deals (or others like that). Why? Because psychologically speaking, customers usually can’t pass up a deal as good as this, even if they don’t need the second item. You may have only come in to buy one new pair of pants, but with the second pair of the more expensive brand 50% off, you’re statistically more likely to opt for the expensive brand in order to qualify for the deal. This is why companies market the deals and discounts they do, even if it seems like they’re losing money on the outset by offering such a favourable price on items.

How can you prevent the urge to give into these traps when going into a store? For one, bring a limited amount of cash and no credit cards. This will force you to stay within a set limit without the option of resorting to the plastic. Also limit the time you spend in a store. After all, the longer you have to mull over a purchasing decision, the more likely you’ll be to get it regardless of its negative financial implications. Finally, don’t shop while you need to be somewhere else or when you’re really hungry, because these factors alone can influence your decision when going to the check out line.

Another problem seen with the overspending crowd: emotional purchases. In a time of economic instability, many people have turned to using credit cards to buy things to cheer themselves up. Having a rough day? Just swipe the plastic and get that new phone upgrade you’ve been wanting. If you’re looking for long term financial solvency, then you need to nip this overspending habit in the bud now and avoid emotional purchases at all costs. When you are hooked on buying things in order to create a positive emotional response, then you are essentially treating shopping like a drug, and soon you’ll need buy more and more in order to maintain that level of euphoria you’re seeking. This is the number one problem of over-spenders and can be avoided by some rational shopping list planning and budgeting tactics.

Overspending doesn’t have to be a problem if you’re willing to put in the effort required to cut back on bad habits and limit yourself, even when your brain is begging you to pull out the credit card and make that impulse purchase “just this once.” Your financial situation will thank you for it and your credit score will be in much better shape than others around you who consistently give in to their overspending desires without any sort of restraint.

This article was written by Justin Toladro from Life Insurance Finder. An Australian owned comparison website the offers the best life insurance for you and your family.

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