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.
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.
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.