Concerned parents have been advising this for years – such a universal issue bears repeating. Don’t spend more than you make.
t’s easy to say but hard to do because there’s so much we want.” Financial advisor Wayne von Borstel recently shared that not applying this concept leads to unhappiness, strife, and even divorce. How can individuals get this tendency under control and their budget back to their financial goals?
Why do people spend more than they make?
Wayne von Borstel says, “We don’t pay attention to what we’re spending, what we want, or a budget … we tend to spend when we should not. We want more than we can afford.”
Many people would agree with him. Individuals need to realize that, as he says, “There’s a stressor called money,” which can cause a lot of discord in what would otherwise be a harmonious relationship. Unchecked spending lowers the household’s net worth while increasing debt. If the primary breadwinner suddenly loses the capacity to work because of job loss, death, or disability – you have a financial disaster! Borrowing is assuming that we can afford tomorrow what we cannot afford today.
Quite often, people spend more than they make because they don’t understand their finances. They let their spouse handle it. That’s a bad idea, says von Borstel, regardless of how a couple divides responsibility.
Wayne von Borstel found this to be the case with many widowed women he has helped. Speaking frankly, he said,” married women should learn what is going on in their lives, and their finances. Sit in on meetings with the couple’s financial advisor, at least occasionally, if not regularly, and ask questions without fear of sounding uninformed.” Each partner has a right to know about their financial health; if the spouse is unwilling to share that information. That’s a red flag for the health of the financial plan and the family.
Everyone, especially those who tend to overspend, should develop a budget and financial plan that works for them. The moment of joy when they buy something isn’t worth the overspending that leads to debt and stress
Wayne von Borstel says families spending too much should take the following steps.
Sticking to a budget can be challenging at first but not unattainable. People should be able to have what they want but, as von Borstel points out, “we should have a process that allows us to track what we can afford, and is reasonable, based on what we have.” The world tells us we deserve it! That is not true. The world tells us that whether or not we can afford it, they will help us get it! That is a terrible financial understanding to live in your life. It will lead to strife – both personally and in your family.
Over spenders should ask themselves these Six questions:
Are they eating out, and how much are they spending? That includes the daily lattes and work lunches for those with expensive habits. Some people can afford such treats. But most people only think they can because they haven’t paid attention.
Do they pay for memberships, streaming, phone apps, cable, and services they don’t use? They should evaluate what they spend on their virtual lives. Those who haven’t been paying attention may be surprised at how much they spend on items like this.
What’s the travel budget look like? Some people love to travel a little too much and could find adventures closer to home or ways to travel that are less expensive.
Can we do more ourselves? Learning to do household chores can save a lot of money if you have the time. Installing a dishwasher or tiling the backsplash is not as hard as it may seem.
Are we buying things we don’t need? Never go to the grocery store without a list – and stick to it. Retailers and brands design products and displays to get people to spend impulsively.
Have you developed habits that make it too easy to buy on credit? Switching to cash makes spending money feel more concrete, people tend to spend significantly less using cash than credit.
Families can cut expenses by looking at the feelings that spending triggers
People should think about why they spend more than they make. With over 37 years of helping clients make financial plans, Wayne von Borstel has heard people admit that at least some of their spending comes from feeling down, lonely, inadequate or not loved.
Whether someone is constantly getting plastic surgery, always has to have a car better than their neighbors, or wants to have the best travel pictures on social media, a lot of spending comes from this need to be accepted. When people take a moment to look at these feelings they can often get a better handle on what they spent in addition to making a plan, they should ask themselves precisely why they desire this particular item and what emotions this purchase evokes – anticipation? Joy? Remorse?
Is this a want or a need? Can you define the difference between a want and a need?
Shopper should question whether the purchase will improve self-esteem for more than a fleeting moment or they’re just trying to keep up with the Joneses. It’s essential to be aware if this purchase will bust the budget, and know how much interest there is accruing with an unnecessary acquisition.
Those who constantly spend more than they make must look honestly how it’s affecting their finances. Buying on credit literally decreases your lifestyle! This could have been money in the bank that allowed them to afford more things outright if they’d had a little patience. Deferred gratification is a phenomenal tool to financial success!
“If you can’t afford it with cash, don’t buy it.” von Borstel cautions. So, we should always spend less than we make!”
Investment advisory services offered through von Borstel is the bank an SEC registered investment advisor.