4 Reasons Why You Spend More Than You Earn

The general rule to reach financial independence is simple: spend less than you earn. The bigger question is how can you execute it? The first step is examining the causes of overspending. Identifying these factors will lead to solutions on how you can save more and spend less.

  1. Readily available credit

How many offers do you receive in your mail daily? For most people, this is the most common cause of overspending. It is too easy to get a credit card, mortgage, auto loan, refinancing, and more. This creates the illusion of free money but it is not!

  1. Easy access to cash

In a few clicks, you can access your money through online banking apps and websites anytime, anywhere. It sounds convenient but it can be dangerous. When you have cash on your hands, you see the money leaving out of your hands. You have to balance your checkbooks, plan your purchases, and do simple math. Now everything is accessible with one swipe or one click and money is taken out of your account. The worst part is it does not feel like you are spending money at all.

  1. Failing to use credit cards responsibly

When used as intended, a credit card can be a powerful financial tool. You are able to make purchases without using your own cash then repay the full balance at the end of the month. This is essentially an interest-free short-term loan. The problem starts when you start carrying balances month after month. Once you are unable to pay your balance in full, it is a rough slide down and your credit card begins to hurt you.

  1. Emotional shopping

Getting new things creates a high – it makes you feel good. There is nothing wrong with this as long as you keep it in check. Ideally, you will have a budget for fun or emotional shopping when the need arises. The new purchase will make you feel good and you will feel better when you do not have to spend the next year paying interest.