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Overspending can be a pretty tough habit to break.
We might have the best intentions and really want to get our finances in order, but if we don’t address our spending habits then even with those best intentions, things won’t change.
And that’s because overspending happens for so many different reasons, half the time we don’t even realise we’re doing it.
We think that those little spends here and there are affordable and justifiable but they really can add up.
And it’s not until you really commit to addressing your spending habits that you truly see the impact of overspending.
Of course, many people never address their spending habits and as a result, stay stuck in a never-ending cycle of overspending.
But unfortunately that comes with risks that impact much more than just your monthly budget.
So what are the dangers of overspending?
The Dangers of Overspending
Getting into Debt
The first and most obvious danger of overspending is getting into debt. If you’ve got more going out than you have coming in then it just isn’t sustainable and inevitably you will rely on credit methods to get you through the month.
And this is how people end up living in their overdrafts or relying on a credit card for day to day necessities such as fuel and food shopping.
Damage to Your Credit Worthiness
The more debt you accumulate, the harder it’ll become to obtain debt.
And the harder it becomes to obtain debt, the more financial burden you will put on yourself – which is when people start applying for ‘bad credit’ credit cards with huge APRs… and let’s not even talk about the possibility of payday loans.
But not only does it make credit that you’ve become reliant on harder to access, it means that when you come to apply for ‘good credit’ – like for instance, applying for a mortgage to buy your own home – chances are your application will be rejected because your use of credit is unmanageable which makes you extremely risky to a mortgage lender.
You Can’t Make Progress to Longer Term Financial Goals
Living payday to payday and getting deeper into the red each month means that you are constantly chasing your tail and dealing with past money mistakes – instead of having an amount of disposable income each month to put towards bigger, longer term financial goals.
I’m not saying that you should only think of the future and not enjoy your money here and now.
But you shouldn’t be focusing your hard earned monthly wage on paying off debt that you’ve incurred previously – in this case, you’re just focusing on the past.
A good balance would be to have enough money to ensure your essentials are paid, a bit of fun money each month and then still some money leftover to put into investments, savings or towards a large purchase such as a house, car or holiday.
Until you get a grip on your overspending, you’ll never be able to fully appreciate any of these things – instead you’ll be wondering how you’ll afford the monthly repayments.
You’re Not Prepared for Emergencies…
If you can’t afford to set money aside, you probably won’t have an emergency fund.
I asked the question on social media, “If you don’t have an emergency fund, why not?”.
Lots of people answered that they don’t have the spare money to start one, but a few people simply answered, “I live for the here and now, not the what ifs”.
And in some ways I applaud that take on life, but personally I don’t think you need to sacrifice your present happiness to prepare for the future. If you got yourself out of the overspending cycle you’d be able to comfortably save towards emergencies and still enjoy the present.
But also, ’emergencies’ do happen.
And what you use your emergency fund for might be different to how I use mine but in the past 3 months I have dipped into my emergency savings for the following reasons:
- Unexpected car repairs – £330
- Leaking roof repair – £300
- New cooker – £300
- New TV – £400
Sure some people might not see a TV as an emergency – but let’s be honest, they are the centre of most households.
Had I not had any emergency savings these purchases could’ve easily gone onto a credit card – and how long would this debt of over £1,300 be around my neck if I could only manage minimum payments?
It Could Impact Your Mental and Physical Health
Finally and in my opinion most importantly, the biggest danger of overspending is the impact on your health.
All of the above situations though not ideal – can be resolved.
It’s just money. We can always earn more. We can always find a way out of a bad situation. We can always access help.
But you can’t put a price on good health. And once your overspending becomes such an issue that your health begins to suffer, it’s well and truly time to do something about it.
All of the aforementioned dangers of overspending can result in unnecessary stress. And with stress comes not only mental health conditions such as depression and anxiety, but it can manifest itself physically.
You might stop eating, you might stop sleeping, your concentration may be affected, you might lose weight and stop taking care of yourself.
Help is Available
If any of this sounds familiar then please seek help. It is there and it is accessible. You just need to ask.
There are so many free tools and resources that can help you manage your money better and address your money mindset blocks.
Is your situation a bit more serious?
There are also charities which can help you if you feel you’re in too deep.
This is particularly important if your health is suffering as a result.
StepChange Debt Charity offer free impartial debt advice over the phone.
Mind is a mental health charity and this article has lots of tools and resource for different situations surrounding money and mental health.
To summarise, many people don’t view overspending as a big deal, in fact you might even tell yourself, ‘everyone’s doing it’. But it can easily spiral out of control and lead to bigger issues.