The reasons why people overspend extends deep into the human psyche. Human psychology is a very complicated subject and one that I am not qualified to even address, but I do know that the way people think about money can be very unhealthy and disastrous in the long run. After 7 years of coaching clients, here is a list I have compiled of reasons why people find themselves overspending.

1. Keeping up With ‘Jones’ – Many people feel that if they fall below a certain image that the neighbors have set, the neighborhood will think less of them. The truth behind this is that the neighbors are thinking and feeling the same way.
2. Avoidance – I cannot tell you how many people, in all financial situations, have told me that the reason they spend too much money for lunch out with friends, shopping with the girls, etc is to not have to admit that they cannot afford it. If your friends drop you because you cannot afford to buy them lunch, are they really true friends?
3. The money is on its way syndrome – I have heard this over and over “I thought the check was in the mail.” The people who tell me this are telling the truth! The check was in the mail, either late or for far less than was expected. When they heard they were getting money, they spent it before they even had money in their hands.
4. Credit Cards don’t feel the same – Let’s face it, plastic simply does not feel the same as good old-fashioned paper cash. For this reason people use credit more often and tend to over spend much more than they would if they had used cash instead.  Solution…Cut up your cards.
5. Immediate gratification – When you can go into a store, see something you think you need NOW, then get credit in 5 minutes or less, you feel a sense of accomplishment. After all, you get what you want now, and don’t have to think of how you are actually going to pay for it until later, when the bill arrives. This route always leads to paying for an item for a lengthy period of time and paying 25-30% more than the original cost.
6. Lifestyle maintenance – After a person has lived a certain way for a while and suddenly find themselves in a bad place financially, it is hard to give it up. They feel the lifestyle they have become accustomed to must be maintained, even if it means more debt followed by bankruptcy.
7. Poor as a child – Many people who were poor as a child feel the need to spend everything they can get their hands on as soon as they can. Perhaps there is a fear of someone taking the money away if it is not spent immediately.
8. Sense of power – Spending money makes many people feel more powerful. Whether it is handing over a wad of cash or pulling out a gold card to charge money, the simple act of spending a large amount of money gives them a rush of false power.
9. Prove self worth – Spending $55 on a haircut, $170 on a designer dress, $60 on a new pair of shoes, and maybe $75 on a facial every other week sounds outrageous to most. However, for many people, it makes them feel like they are someone. It makes them feel like they are worth something to the world.
10. Just can’t say NO! – This is the one that I have heard the absolute most and the one that I stumble into at times. Whether it’s a child asking a parent for the newest fad toy or a spouse wanting the newest computer game, some people just cannot say no! Even if they cannot afford to say yes. They feel like a failure if the money is not there to meet the wants of the other person. No matter what, these people will make it happen, even if it becomes a dead end to bankruptcy court.