The New Year has finally arrived, but the bills of last December have never left. With Christmas and Thanksgiving and the good times over, you’ve got to get your finances together. It might have been fun to splurge during the holidays, but as you sit, credit card statement in hand, it’s time you asked yourself some hard questions. Are you spending too much money?
What better way to bring in the New Year than to bring in a new way to think about your finances? It is the season of resolutions, and this is definitely one you are capable of sticking to because it relates to you and your family’s well-being. Spending too much money for goodies was fun. Your holiday shopping spree was a freebie. Let’s call it your last feast before that new juice cleanse or workout plan. This month, perhaps you’ve got that dough stashed away for this credit card bill and you’ll get by this time, but that still doesn’t mean you shouldn’t re-evaluate and stabilize your funds for bigger purchasing goals.
But how to tell if you’re spending too much money? Credit, in general, is a scary thing, but it’s a way to establish responsibility, reliability, and a good financial health. The problem is that it could also ruin you. With student loans from college, home mortgages, and among other things, credit cards, people fall below the waters of debt and more often than not, they drown in it. This isn’t even including monthly bills of car insurance, groceries, cell phones, cable ‒ the bills add up!
You’re Spending Too Much If…
- A large part of your debt is from credit cards
- Saving is not a top priority ‒ no retirement, no college, no backup funds, nothing planned
- You have expensive luxuries you can’t afford
- Poor budgeting ‒ how many times did you go to McDonalds this week? This month?
- Not enough of your income is going to debt repayment or too much
Credit Cards Can Trick You Into Spending Too Much
The first offense is the credit card insanity. Credit cards are not the root of all evil. They can actually help your credit by boosting your credit score and showing providers that you have purchasing power. That is, if credit cards are used properly. It’s a mental thing really. You’re spending too much money if you use your credit card with the idea that it’s a source of supplemental income. Your credit card is not a second job. No one gave you a bonus at work, and you didn’t win the lottery. Money is not falling from the sky. It’s flying away from you. Use your credit card as a different form of the money that you already have. Have enough saved up for your purchase and a significant amount of the interest it will incur to make sure you aren’t more than you’re prepared to pay back.
Saving Versus Spending
Saving is a big deal. If you are spending too much money, you are most definitely not saving any of it. Unless you can see into the future, we live in a very unpredictable world. It’s better to be safe than sorry, and saving is key. Advisors suggest that ten to fifteen percent of your net income should be set aside for a rainy day. That’s tough to do when you want to buy that new outfit, but it’ll be worth it in the long run. Even if certain life goals, like your child’s college tuition or retirement, are years down the line, still plan for them. Set up provisions, so you aren’t stuck in unflattering circumstances, like a sudden illness. Health insurance is another big goal that should be considered. Sure, you’re in perfect health now, but imagine the day you aren’t. Invest in health care and start thinking about the future.
Do you really need the big house with the even bigger mortgage or the expensive car that will depreciate faster than you can get out of the debt that it got you into? Honestly? No, you don’t. At some point, it’s beneficial to start looking at your spending habits and making better decisions. You have to be the one to realize that you’re spending too much money and make the decision to change that.
The point is to not spend more than you have, which many Americans don’t do. In this world, spending is something that can’t be avoided. It’s true: money is one of the governing factors of our society. It makes the world go ‘round, as they say, but it isn’t necessary for you to be spending too much money. You can live without those new shoes and that fancy car because when it comes down to it, your family eating and being well-cared for is more important. Also, you’ll be able to rest stress-free when you have those creditors off your answering machine.