4 Reasons People Spend Too Much

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Even if you understand the basic financial concepts of budgeting, saving and monitoring your money, you may not be in control of your spending. The following reasons might help explain why you sometimes break your budget.

  1. Failing to think about the future

Thinking about the future is a key component of financial responsibility. If you have a tendency to focus on the “here and now” without taking the future into account, you might find this leads you to overspend.

Maybe you feel you’re acting responsibly simply because you’ve started an emergency savings account. You might feel it will help you with future expenses, but in reality it may create a false sense of security that leads you to spend more than you can afford.

Remember the purpose of your emergency savings account is to be a safety net in times of financial crisis. If you’re constantly tapping it for unnecessary purchases, you aren’t using it correctly.

Change this behavior by keeping the big picture in perspective. Create room in your budget for discretionary money and use your emergency savings only for true emergencies.

  1. Rewarding yourself

Are you a savvy shopper who rarely splurges, or do you spend too frequently because you want to reward yourself? If you fall in the latter category, your sense of willpower may be to blame. People who see willpower as a limited resource often trick themselves into thinking they deserve a reward when they are able to demonstrate a degree of willpower. They may develop an unhealthy habit of overspending in order to fulfill the desire for a reward.

Develop healthier habits by rewarding yourself in ways that don’t cost money, such as spending time outdoors, reading, or meditating.

If you decide to splurge on a reward from time to time, plan your purchase. Figure out how much it will cost ahead of time and save accordingly instead of tapping your savings.

  1. Mixing mood with money

Your emotional state can be an integral part of your ability to make sensible financial decisions. When you’re happy, you might not be thinking clearly, and saving is probably not your first priority. Boredom or stress also makes it easy to overspend because shopping serves as a fast and easy distraction from your feelings.

Waiting to spend when you’re happy and thinking more positively could help shift your focus back to your long-term financial goals.

  1. Getting caught up in home equity habits

Do you tend to spend more money when the value of your assets — particularly your property — increases? You might think that appreciating assets add to your spending power, thus making you feel both wealthier and more financially secure.

Instead of using your home as a piggy bank, remember it’s where you live. Be smart with your home equity loan or line of credit — don’t borrow more than is absolutely necessary.

“Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.”

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