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10 Reasons Why People Spend More Than They Earn
One reason why millions of people have no margin in their lives is that they spend more than they earn.
You’d think it’s quite easy and common sense to spend within one’s means.
However, the forces at play are often greater than might seem obvious to the naked eye.
In the old world, when life was less complicated, one went out and gathered food.
One then ate what was gathered and enjoyed a simple and happy life.
Today, we all seek more and eye-up our neighbours.
Debt is easily accessible and social media is causing all kinds of unforeseen outcomes.
More people are more unhappy and yet acquiring ever more things.
We all want to travel the world because it is the thing to do. Even at all costs.
Add to that, we all want beautiful homes, cars, private education etc.
The list is endless. For many, the desire to keep up is greater than the reality of their bank accounts.
Below are 10 reasons why many spend more than they earn.
Knowing these will help us reflect upon our current situations and hopefully avoid or escape these pitfalls:
1. Your Money Blueprint
Your money blueprint is the view of money you have taken on from your parents.
Most of us are unaware that the way our parents managed money is also how we’re likely to do it.
If your parents were frugal, then you’re likely to be frugal also. If they were carefree spenders, then you’re also likely to do the same.
Spend a moment thinking about this.
Can you remember key moments in your childhood relating to money?
Did your parents live in abundance or in strife? And how did they deal with those situations?
Were they borrowers or lenders? Did they save or invest?
I’d highly recommend that you write down the answers to these questions and compare them to your current interaction with money.
For some, spending all they make and dipping into the red is almost second nature as a result of their upbringing.
Others never saw their parents save money, and as such saving money isn’t the natural reaction when they get paid.
If the above reveals that your money blueprint is working against you, now is a good time to start doing something about it.
2. Debt Hangover
The ‘debt hangover’ is my way of explaining what happens when people live with and rely on debt.
In fact, many people fund their lifestyles with debt and continue to dig deeper with no end in sight.
Debt is a like a drug because it is easy to acquire and has a potential to destroy one’s life.
As it’s mostly digital, it is easy for most people not to see how deep in debt they are.
Many borrow far more than their incomes can support, and as such end up in a debt double dip:
a) They cannot maintain and repay their debts on time
b) Their credit profiles get worse increasing the future cost of borrowing and decreasing trust.
I cannot overemphasize the importance of weaning yourself off personal debt.
Being in debt and a casual overdraft should not be accepted as the norm.
Before you know it, your actions become habits and you’re trapped in a cycle.
Getting out is achievable and I know it because I’ve had to crawl out of debt myself.
Achieving it begins with a choice followed by the necessary steps. Read more below.
7 Essential Habits For A Successful Debt Free Journey
10 Tried and Tested Tips To Help You Become Debt Free
3. Following Others
I’ve met so many unhappy people who are doing life on the terms of others.
Those earning little amounts of money and those earning stuff of dreams.
They are buying big houses, brand new cars, expensive holidays etc. All funded by credit.
This is a really sad state of affairs because following others is possibly one of the most dangerous things one can do.
Especially if the person you’re following or copying is being led by others too.
Instagram and Facebook have set this phenomenon alight and caused a massive spike of envy and desire.
Everybody wants to own everything and people don’t stop to realise that life is made up of real trade-offs.
You eye up your neighbour’s brand new car and suddenly want one too. Without even knowing how they bought it.
The decision to live above your means through a lifestyle of credit has a true cost.
For one, there will likely never be true freedom for anyone on this path. Nor will there ever be Financial Independence.
Are you being led by today’s culture to buy whatever you want? Or are you admiring the lifestyle of another friend?
My big tip? Ignore everyone. Even your closest friends! They too are trying to figure things out.
Do life according to your own self-conviction, being mindful of tomorrow.
Take counsel where necessary, but in the end, call the shots!
If you want to drive a 10-year-old car, do it! Do you want to move outside an expensive city to save money? Do it!
[redbar]Be polite but do not care what anyone thinks. You’ll achieve more in life this way.[/redbar]
When creditors are knocking on your door and chasing for those bills to be paid, no one will come to your rescue.
People will suddenly have a lot on and cannot help. Such is life.
Related: 7 Non-essentials Holding Your Future Hostage
4. Lack Of A Budget
Most people understand what a budget is, but are far too impatient to make it a system that helps them do life well.
For the avoidance of doubt, a budget is a plan of how you’ll distribute your earnings.
If you assume that the sum of parts must add to zero, then it means you’ll never spend more than you earn.
I.e. if income less expenses, less saving and investments = zero, then you’ll never have a problem.
The problem arises when people don’t have this control in place and allow the expenses to creep up and exceed income.
It’s the fastest way to becoming broke. It’s this inability to manage cashflow that most don’t understand.
Another important to make here is that most people actually have no idea how much they spend each month.
Some assume that they already make enough money and as such, don’t think of how much they spend.
If one doesn’t know how much they’re spending, how can they compare it to what they earn?
You can’t do the maths in your head as I know many people convince themselves they’re doing.
This is another reason a budget is critical as it helps to identify patterns in expense and income over time.
How To Create A Budget That Works For You
How To Stop Being Broke Forever
5. Wrong Partnerships
Another reason most people spend more than they earn is that they’re with or married to the wrong partner.
This will sound controversial but there is a direct link between being with the right partner and becoming wealthy.
In fact, in my opinion, it is the secret sauce to a guaranteed rich life.
Poor communication is one of the big reasons why couples don’t see eye to eye over money.
If you’re in a relationship right now and not yet married, count yourself lucky!
It’s your opportunity to choose wisely and not inherit a financially disastrous spouse!
Do your homework and be decisive. Don’t let love keep you blind!
6. Lack Of Self-awareness
It took me a long time to realise that self-awareness was even a thing!
Everything I write about on this blog comes from some good or bad experience I’ve had on this journey.
I’ve been fortunate to understand how my actions affect me and others. And also how my actions can either hinder me or help me soar.
I still make mistakes today, but I am better each day because I understand that self-awareness is an important element of emotional intelligence.
If you’re currently spending all you make or more than it, I’d challenge you to ask yourself some hard questions.
What is your philosophy on saving money? Or your philosophy for making money?
Is there really any point to all this spending and acquiring?
Ever been to the shopping mall and seen one of those signs that says “up to 75% discount today only”?
What should you do in such circumstances? I’d personally walk away!
Most people sadly think they’re getting a cracking deal. They don’t pause to think – Do I even need more stuff?
No one cares about you getting more stuff. If anything, they’d hate you for it.
A few months ago, I heard someone say that their brand new BMW was stolen from their driveway.
After the insurance company paid them off, guess what they did? They bought an even flashier BMW.
Ignorance takes different shapes but is guaranteed to be costly each time.
If you’re currently spending above your means, the knowledge to take control of your money is out there.
Join the Free Practical Money Management Course below:
FREE Practical Money Course!
This FREE course will show You How to Make Money, Invest for Your Future, Save & Budget better, Generate Cash flow, Work out & Grow Your Net Worth, Manage Debt and work towards Your Financial Independence!
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8. Living For Today
One of the best ways I have learned to win tomorrow is to win it today.
Once in a while when I am searching for inspiration in life, I read the Proverbs.
Here is an interesting one on the subject:
“The ants are not a strong people, yet they prepare their food in the Summer” – Proverbs 30:24
What this is saying is that the ant has a wisdom on contemplation and preparation.
Anyone currently spending all they make and more is not thinking about tomorrow.
For some, this is because they don’t earn enough, and therefore maxing out all their income.
Yet for others, it is because they’re living for today.
I’ve known people who go on holidays 4 or more times a year.
And yet, they have no idea how much cash they have in their bank accounts.
Worst still, there are those who fund such extravagant lifestyles (following others) through debt.
Then there are the ones, through laziness, believe that tomorrow will take care of itself.
Related post: READER CASE STUDY – Pay Off Large Debts Or Invest?
9. Human Liabilities
There are people (genuine or not), who tip others into spending way more than they need to.
A lot of these are direct and extended family, who through poor decisions or misfortune, rely on others.
Some struggle to say no whilst others just cannot say no and instead fund the excess from debt.
This particular issue is cultural and common amongst Africans and Asians, and will likely continue to persist.
I am all for being generous, but there has to be a point where it stops if you’re taking on debt.
Sometimes, people need the hardship to make certain changes in their lives.
This might sound harsh, but I speak from personal experience. There is always a way out.
10. Lack Of Happiness
I’ve saved this one for last because it is a biggie.
Do you spend to make yourself happy? To boost your image or status?
Perhaps you’ve had a long week and feel you just deserve it?
A treat once in a while is not a terrible thing if it’s not kicking you into the negative.
However, some take this to a whole new level and buy a brand new car or even an expensive Rolex!
Compulsive spending to fill a hole in your life caused by something else (e.g. a break-up or depression) often compounds the issue.
All this will eventually lead to regret and frustration.
You may be mad at the world for all kinds of issues. E.g. Divorce, terrible job, growing debt, poor friendships etc.
You may even have had a traumatic childhood and faced some abuse growing up.
These are very difficult subjects that many people struggle with daily. I understand and sympathize.
I’ve personally found that the best way to avoid spending on things to be happy is helped by growing self-awareness.
Getting to a point where you stop relying on things or even people to make you happy doesn’t happen overnight.
It may require digging very deep to understand the source of unhappiness coupled with therapy or prayer. Or whatever works.
Every step that gets you closer to relying less on spending to be happy is a good one.
Which of the above reasons resonated with you the most? Please comment below.
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.
Sara @ Debt Camel says
You have missed off “lack of income”.
As a debt adviser it is now unfortunately quite common to see people whose income is too low for their reasonable outgoings. They can manage for a month or two or three, but there is never any spare to save, so when something crops up (car repair, new shoes for the kids, given notice by landlord and have a new set of fees to move) they have to borrow, usually at high rates of interest as they don’t have enough income to satisfy a mainstream lender.
Often these are single parents hit by the benefit cap or with extra caring responsibilities, for an elderly parent. Saying get a job or work longer hours is often simply impractical.
The Humble Penny says
Really good points. Thanks for the insights here from your work with people in debt. Lack of income is a big issue as you rightfully identified. And I do sympathize with many in this position, which is why I try to write quite a fair bit on money making ideas and side hustles. Interesting to hear more from you on what people do when they are refused high-interest debt? As surely, not everyone qualifies for even those types of debt?
Chhavi | Mrs Daaku Studio says
People also end up spending more when they do not track their income EVER. It happened to me when I started my first job but then I started tracking expenses and understood how to budget. There are so many apps that are available that helps you track income.
The Humble Penny says
Chhavi, you make a BRILLIANT point!! Tracking income is also important if one actually wants to see their income grow one day.
vali shaik says
Hi Chhavi, I like your point to track income, can you name few apps?
Grace Ibarra says
This is so inspiring!
I guess i’m on the right path to financial freedom. Sometimes i spend to make myself happy but I also invest to make myself happier. This boost my status.
At the age of 32,single mom working as OFW i have 2 mutual funds in different bank one named after my son,owner of 2 policy contract(life insurance), travel and tours business, and remittance,paybills, ticketing and loading franchise. My advise too, never depend on single income.
I really like to read vlogs about how to manage money.
Ken Okoroafor says
Hi Grace, so good to read about your progress even with the challenges that come with being a single mum.
I found it funny that both spending and investing make you happier. Come to think of it, ofcourse!!
Thanks for stopping by.