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Manage Debt
The Cause of Spending and Debt |
Psychology of Spending
There are a number of emotional factors that contribute to our spending habits. A
pattern of frequent spending binges, for example, might be the result of a feeling of low
self esteem. The immediate gratification of a big purchase and the re-gained power that
comes with it, temporary fill the void of a person with this emotion.
The act of spending may be due to a feeling of deprivation or a negative money situation
experienced earlier in life -- growing up in a lower income household, etc. The lack of
active money management or basics of personal finance at an earlier age could also be the
culprit.
Bargain Shopping
How many times have you gone into a store to buy a specific item only to get sidetracked
by a "50% off" sale? You end up buying items you'll never use -- you couldn't
miss that golden opportunity to save, could you? Your purchases are justified and you may
even believe your spending habits are frugal or somewhat conservative. This cycle happens
again and again. As your credit limit continues to absorb the knick knacks you've bought,
additional purchases become trivial. Collectively, you're in over your head.
What you don't realize is that a series of small impulse purchases or splurges, as minor
as they may seem, will eventually add up to a high level of debt. This common
characteristic of overspending may become problematic if not addressed.
Lure of Credit
Spending problems can be attributed to the lure and availability of credit that comes with
today's debt-heavy society. It's hard to imagine life without credit. After all, credit is
the "American Way", right?
How many times per week are you bombarded with credit offers in the mail? They entice you
with "low introductory rates", tempting credit limits, or even frequent flier
miles. The temptations are always there. They make you vulnerable. And all this sudden
vulnerability leads to further misuse of credit and increased debt.
Creditors will continue to solicit you with innovative marketing and credit card deals.
They hope you add a new card to your collection. They hope you act irresponsibly. They
want you to charge your life away because increasing your debts means increasing their
profits. Don't fall into their trap.
To make matters worse, there are an increasing number of convenient ways to use your
credit card. Your credit is now welcome at the following places:
- Movie theaters
- Grocery stores
- Fast food restaurants
- Taxi Cabs
- Online Purchases
- The IRS
- Car Dealerships
- Funeral Homes
- Pizza Delivery
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"Keeping up with the
Joneses"
We live in a compulsive society. The social pressures alone to keep up with friends,
peers, or neighbors is enough to do considerable damage to our financial lives. And how do
we survive? Through material possession -- buying new cars, boats, clothing, or jewelry --
things we clearly can't afford. Obsessions with material goods give us short-term
pleasures but make it extremely difficult to resist pressures to consume and keep up with
society.
Gaining Control
Spending is more than a monetary transaction. Emotional factors often lead to compulsive
spending habits and living beyond your means. If you take the time to understand the
psychology of spending and learn to resist the social pressures that come with it, you'll
be able to gain better control. Your life will become more manageable.
Credit and Debt Calculators:
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• Should I pay off debt or
invest in savings?
• What will it take to pay off my balance?
• Should I consolidate my
debts?
• How Much Am I Spending? |
