One of the easiest concepts of budgeting and creating financial wealth is that you need to make more than you spend. That concept, however, is one of the most difficult to follow for many people. The reason is that they don’t know the real factors that encourage their spending and, because of this, they overspend and create debt.
Overspending is not a good habit, to be sure, and so knowing what the factors are that cause this negative habit can be the key to controlling them so that you indeed start spending less than you make and start building wealth.
One of the biggest reasons that people overspend is that they have easy access to credit and credit cards. If, for example, your credit history is good getting and using a new line of credit is incredibly simple. The problem here is that credit cards mask the debt that they create with small monthly payments. It’s like getting free money but not earning it, and the penalty comes when you get in over your head and start having to pay exorbitant credit card fees and overdraft charges.
Having easy access to your cash is also a dangerous proposition and can lead to overspending of an even worse type. It used to be that when you got paid you had to go to the bank, deposit your check, get some cash out and then pay for everything else with checks. Today with debit cards and direct deposit you can have access to everything you have in the bank from practically anywhere at any time, and this can lead to temptations that few people can handle.
Two others that are a budget killer are temptations (and giving in to them) and spending to feel good. Both of these are seemingly innocuous but can have a hugely detrimental impact on your budget. For example, going out to the bar with your buds after work and spending $50.00 on your credit card is easy and fun but, when the bill comes due and it’s more than you have, you’re not going to remember the fun you had just the debt that you created.
If you want to stay on budget and create wealth you need to curb overspending at all costs (no pun intended). It’s the one sure way to stay on track or, if you can’t control it, get derailed quickly.