If you are a resident of the United States and your expenses are more than your income, you are not alone. Over 40 % of Americans spend more than their income, resulting in a financial life infested with debts.
When your expenses are much higher than your income, your financial life gets ruined and you find yourself drowning in the sea of debt. Settling your bills and saving up money for the future would be quite difficult due to shortage of money!
Spending more than you earn is not a wise choice; it sells your income to the future. Without an effective plan to account for the money you spend, your debt will lead to more debt via interest.
What Happens When Your Expenses are Higher Than Your Income?
When your expenses are more that what you earn, you enter a cycle where you have no choice but to live month-to-month. Living month-to-month results in a situation where you have absolutely nothing to fall back on when you are out of money. Unfortunately for us, we still choose to dwell in the habit of spending more than our income because we believe that we will eventually catch up on our debt in the future – we ultimately don’t!
Your salary should always be dedicated to present comforts, future planning, and most importantly, your savings. Your savings can act as an emergency fund which will come in handy when you have an emergency situation. It is also important that you create budgets so you don’t spend more than you want to, either knowingly or unknowingly. Cut back unnecessary costs so you have enough money to settle your bills.
Do you spend more than your income and you see nothing wrong in it? Well, this article is poised to predict what will happen to you if you fail to stop such unhealthy spending habit.
When the rate, at which you take water from a jar, is more than the rate, in which you fill the jar with water, the jar would eventually run dry. That is a simple illustration of what happens when your expenses are more than what you earn.
Why You Spend More Than Your Income?
Spending less than you earn is the best way to prevent the debt plunge and live a life of financial freedom. Below are other reasons why you find it hard to spend below your means.
People spend more than their means for many reason. Indiscipline and failure to create a strict budget and stick to it are the two major reasons why your expenses are often more than your income.
Debt Hangover:
Debt hangover is simply when individuals live with and depend solely on debt. Many people out there run their lives with debt and continue to plunge deeper and deeper into the murky hole of debt with no opening in sight. If you always find it hard to restrict how you use your credit card, you will end up spending more than you earn and you may not even realize it until you are deep in debt. Debt can be seen as a drug because it is quite easy to get and has the potential to ruin one’s life. It can last for a very long time if you aren’t careful.
How long does it takes to get out of debt? Well, if you are serious enough, you won’t die with your debt unpaid.
Less debt provides you with much financial relief, it also restricts the way you spend. Use your credit card only when you have to so you don’t spend more than you earn. Your expenses should be lesser than your income to avoid debt. There are some reasons why it is so hard to break the cycle of debt you are into. until you figure out the reasons, things might not change.
You can read full post on the debt hangover in this source.
Copying Others:
If you choose to spend like your neighbor who obviously earns more than you do, you may find yourself using up more than you earn. Don’t look to copy an extravagant spending habit when you earn less; even if you earn a higher income, spend money on your terms.
Social media has caused a massive surge in envy and desire. A friend of yours gets a new car, takes a picture of it and posts it on Facebook, you see it and the next thing on your mind is to follow suit. You purchase a car worth $10,000 when your salary is not more than $3,000! That is definitely not a wise financial decision. You shouldn’t be making such expenses with a low income.
You need to be able to look away when your friends are lavishing their money on things that are much higher than what your salary can afford. If you choose to get overwhelmed by these things, you will definitely make sure you look for any means possible to match their spending irrespective of your budget. The balance on everyone’s credit card is quite different, you have to note this!
Failure to Plan How You Spend:
When you spend, make sure you settle the important bills first. This can be effectively done by planning how you spend. Get a paper and make a list of your priorities and spend based on that list. This will make sure that you don’t spend more than you earn because doing so may land you in debt.
A budget can also help you keep track of your expenses, it also assist in resisting the urge to spend much. If you don’t know how to create a plan regarding how you spend, you can seek the help of an expert. Cut off all unnecessary expenses from your budget and let it contain important necessities and bills.
So many people often find it hard to adequately fend for themselves while settling a debt. If you fall in such category, boosting your income is one of the many things you have to consider when in debt and need money.
Spend for the Wrong Reasons:
If you spend to make yourself happy then you may end up spending more than you earn. Get hold of the way you spend so you don’t spend much or all of your income for the wrong reasons. You need to spend money on the right things and for the right reasons if you wish to spend within your means. A little treat once in a while is not a bad idea, but you need to properly regulate it so you don’t over spend.
You don’t need that new expensive Rolex watch, you can get one when you have a higher income or you can go for one that is less expensive. Purchasing a Rolex watch of $5,000 when you make just $700 monthly is a purchase you don’t need to make.
The bottom line: You need to cut unnecessary expenses and spend for the right reasons of you don’t want to spend more than your income.
You might be also interested to read about the mistakes people make when trying to get out of debt fast within my other article.
How do You End the Urge to Spend More Than Your Income?
You need to understand that when you spend more than your income, you are actually doing yourself harm. It is a bad habit that you need to end right away. How do you end it? You need to discipline the way you spend.
Don’t pull out your credit card and make a purchase simply because you want to please a friend or because you came across something (not a necessity) you cherish. You can also get the help of a professional regarding ways in which you can restrict the way you spend. The professional should be able to give you the best advice on how to spend within your means and clear any available debt. Also, there are some organizations in the US that assist families financially. Contact them to examine if you qualify.
Being accountable for the money you spend is also another way to ensure that your expenses aren’t higher than your earnings. Are you drowning in debt? There are some things to consider in order to get back on your feet.
Also, one thing you must know is that, being embroiled in debt is not something you should be shy about. In the US., there are several individuals struggling with debt. Even if you find yourself stuck in a debt as huge as $50,000, with the right steps you can pay off $50,000 debt in a year.