In a 2015 study of World Bank Group, 64% of Filipino households earning about PHP 50,000 per month say that they don’t have enough money to pay for basic necessities. That is 2% higher compared to households with monthly income of PHP 10,000.
Mind-boggled? You’re not the only one.
The study pointed out that only 38% of the respondents track their expenses. Thus, Filipinos always have insufficient fund regardless of income.
Bottom line: Monitoring your expenses is important to avoid overspending.
What is Overspending?
According to Merriam-Webster, overspending means “to spend beyond one’s means.”
If you tend to spend a lot of money one moment and wonder why you’re broke the next, you’re not alone. Overspending is a serious problem to many people. In fact, 20% of World Bank Group’s survey participants ran short of money due to overspending.
What’s more alarming is that 19% of those who overspend borrow money just to cover their food expenses!
Don’t get me wrong, spending money to reward yourself is fine. After all, what you earn is the fruit of your labor. However, buying things you can’t afford is not.
Related article: 5 Consequences of Overspending
So, how would you know if you’re an overspender? Take the short quiz below by answering “Yes” or “No.”
- I think I need more space at home for my stuff.
- I have purchased some items which I rarely or never use.
- I feel like my salary just slips between my fingers.
- I feel better whenever I go shopping but I regret it afterward.
- I have no time for budgeting. I can’t follow it even if I make one.
- I think I have enough money, but I end up short in cash days before the next paycheck.
- I hate making money decisions. I will put it off as much as I can.
- I need to buy something every time I go to the mall.
- I feel guilty when I buy things which are not included in the shopping list.
- Sometimes I buy things because it reminds me of a happy memory or an important person.
If you answer “Yes” to most of the questions, there’s a high chance that you’re an overspender.
Still not convinced?
Tell-Tale Signs of an Overspender
According to financial psychologists Dr. Brad Klontz, “Emotionally charged circumstances make us prone to overspending.”
We tend to splurge when we’re stressed or emotional. That’s because our amygdala (which is the brain’s emotional center) overrides the prefrontal cortex or the logical part of the brain. Simply put, reason flies out of the window when we’re emotional.
The result: Our impulse control is compromised. And this puts our budget at risk.
If you’re one of those who make poor monetary decisions, there’s a high chance that…
1. You Have Unused Clothes in Your Closet
I bet you’re familiar with the term “shopaholic,” and associate it with ladies who shop ‘till they drop. But what you may not know is that it’s actually a serious addiction. In fact, it’s a slang term for compulsive buying disorder.
Compulsive buying or oniomania happens when you can’t resist the urge of purchasing something.
Based on the book Consumer Culture, Identity and Well-being, it can be seen as an exaggerated form of a search for self-validation. Add to that the demands and materialistic values of the consumer culture.
While this problem is often associated with women, men are not exempted. In a 2013 survey, it was revealed that men spend £988 (more than PHP 64,000) a year on clothes, shoes, and accessories.
Common signs are hitting the mall and going home with lots of shopping bags every weekend.
You may also want to check your closet. If you see new clothes (with price tags, even) and you can’t remember purchasing them, it can be a sign that you’re overspending.
2. You Always Have “Critical Wallet Days”
In relation to compulsive buying, people who overspend tend to have critical wallet days. Also known as Petsa de Peligro, Nolan Lazaro defines it as “a state of loss in finances prior to salary day.”
Earlier this year, Pulse Asia released their findings on Filipinos’ urgent personal and national concerns. Three out of the seven most urgent personal concerns have something to do with money. These are:
- To have a secure and well-paying job or source of income
- To have enough to eat everyday
- To have some savings
Yet, we always treat ourselves during payday.
Related: 5 Poor Money Management Habits that Filipinos Do
Again, there’s nothing wrong with it. Treating yourself becomes a problem when you forget to prioritize your obligations. When you always go shopping on a weekend, it’s a no-brainer that your income won’t last until the next payday. Worse, you won’t have enough funds to pay your bills.
When life happens, where will you get the cash to pay for an emergency?
3. You are Late in Paying Your Bills
Imagine this scenario: You received your salary earlier in the day. And then you thought it’s not a bad idea to have medium rare steak for dinner in a posh restaurant. When you arrive home, envelope upon envelope of bills welcomes you.
Reality hits you hard on the head. How are you going to pay your bills?
You’re likely to be overspending if you can only afford to make minimum payments every month. What you don’t realize is that paying only for the minimum can do you more harm than good. Your remaining balance may incur daily interest fee, which adds up quickly. If you’re a credit card holder, late payments can hurt your credit score.
Another sign to look at is if you always borrow money from other people just to cover the bills. According to Life & Debt author Leslie H. Tayne, turning to friends and family for money means that you’re financially strapped.
What could possibly happen when you keep putting off your bills? You risk yourself of law suits, wage garnishment, and creditors can take away your properties. Meanwhile, borrowing money from other people and being unable to pay can ruin your relationship.
4. You Have More Debt than Income
List down all your debts and the amount for each. Subtract that to your monthly income. Did you get a negative result?
If yes, then it’s a clear sign that you’re living beyond your means.
How did this happen?
You receive your paycheck. You shop and buy stuff like there’s no tomorrow. And then you realize that you need to eat. You borrow money from your friends and family just to get by until the next payday.
When the next payday comes, you’ll pay your debts without realizing that you don’t have enough to support your needs. Your option is to borrow money from your friends and family to get by until the next payday. And it’ll be the same thing over again.
Acquiring debt, paying for it, and acquiring more debt just to get by becomes a vicious cycle. Not to mention that being buried in debt is not good for your physical and emotional health.
5. You Maxed Out All Your Credit Cards
Maxing out your credit card is one thing, but maxing out two or more can be a sign of overspending.
The former is understandable since initial credit limit is usually low. Not to mention that a large purchase can eat up your credit limit in one swipe.
However, maxing out multiple credit cards mean you’re spending more than you intend to. After all, it’s super easy to walk in a store, pick all the items that you fancy, and then swipe your card.
Another possible reason is the “credit card premium” mentality. As pointed out in a 2010 research entitled How Credit Card Payments Increase Unhealthy Food Purchase:
“The pain of paying in cash can curb impulsive urges to purchase such unhealthy food products. Credit card payments, in contrast, are relatively painless and weaken impulse control.”
There are also cognitive factors involved here. In another research by Carey Morewedge and colleagues, it appears that credit limit can make purchases appear small.
For example, a Venti Caramel Macchiato in Starbucks that costs PHP 185 is just pinched if you have a credit limit of PHP 15,000. So you’ll shrug off the price, give your credit card to the cashier, swipe it, and you’re done!
But imagine if you only have PHP 200 in your pocket.
Recommended article: How to Become a Millionaire in Under Five Years
6. You Hide Your Financial Situation from Other People
Hiding is another symptom that your finances are out of control.
You make sure that you’re the first to check the mail so that no one can see the bills. You also keep on spending so that no one will notice that you’re drowning in debt.
For one, people are so opinionated nowadays. In this age of social media, public shaming is easy to do.
Second, it’s uncomfortable to admit that you have money issues. In fact, Debt Advisory Centre revealed that “almost a quarter of people in the UK (22% or 11 million adults) keep debt secret from their partners or family.”
While some aren’t comfortable talking about money, there are people who hide their debt out of embarrassment. What these folks don’t know is that money problems can put a lot of stress in a relationship. Add to that the huge trust issue it can incur.
Get Your Spending Habit Under Control
Emotions, clever advertising, and peer approval can trick you into spending beyond your means. Worse, you might be overspending without even realizing it.
Related: 9 Ways to Fix Your Overspending Problems
The warning signs mentioned above can help identify whether you’re an overspender or not. If you are, there are ways to help you get your budget under control. But before you do that, it’s important to acknowledge that you have spending issues.
After all, the first step in the recovery process is to admit that there is a problem.