For years Tracy has tried to save for retirement. She watched her mother struggle to live on Social Security and minimal savings, so she knows she has to save part of her salary and invest it in her future. But no matter what her head tells her, she feels helpless when she sees a sale on expensive clothing. And when her girlfriends ask her to go to Sunday brunch, she can’t say no, even though she knows she should be saving her rent money. No wonder there’s nothing left at the end of each month after she’s paid her credit card minimums.
The Financial Meltdown of 2008 should have taught us that we were all spending more than we were earning. Spending too much and saving too little.
For a while, the reality of foreclosures and high unemployment seemed to teach us that lesson. Unfortunately, the lesson didn’t stick.
Even those of us who were already thinking about retirement went back to our old ways. And today, consumer debt is higher than ever. Worse yet, we see an underlying sense of entitlement, whether we can afford something or not. Excessive materialism has become the American way.
If the general population acts this way, imagine someone who has less-than-healthy money beliefs that could lead to overspending.
And what is overspending? It‘s when spending starts to harm our finances.
Why Do We Overspend?
When a self-destructive money behavior happens again and again – on automatic pilot – the cause is often a belief we picked up as a small child. Psychologists point to the years before our conscious minds were fully developed and when we had no way to judge right from wrong, and true from false.
We absorbed as truth whatever we saw or heard from parents, other authority figures, and sometimes, peers. We tried to navigate our expanding world by applying those early messages.
With time, we outgrew many of those messages, but some are still sitting unchallenged in our subconscious and continue to be disruptive today. Because of the mischief they cause, we call them emotional ‘gremlins’ or money gremlins when they impact our financial decisions.
Most early messages that lead to overspending relate to being deprived of something important, whether for financial or emotional reasons. They often originated with fights between parents over money or things, whether they were withheld or used as bargaining chips. Or painful comments from other adults or peers that caused embarrassment, shame or ridicule.
Those uncomfortable messages of infancy would likely be reinforced in later years, for example, by:
- teasing by schoolmates for not dressing the way others do
- seeing how gift-giving alters relationships
- witnessing erratic or hot-and-cold behavior around money at home
- experiencing deprivation of something of great emotional value
The result? The overspender promises to do whatever it takes to get those ‘things’, believing that will finally bring happiness. In reality, the spending seeks to fill a painful void – need for comfort, affection and connection.
Overspending can become a vicious cycle: an irresistible impulse to spend leads to losing control over the spending. Loss of control causes anxiety. And more spending can quiet that anxiety, thereby destroying the possibility of ever investing in any future security.
How to Stop Overspending
When there’s some damage to credit or a missed opportunity to create a sound financial plan, intervention by friends and family may be enough for the overspender to face this behavior. A crisis – financial or other – can also be a wake-up call.
In either case, it’s not just a matter of a stricter budget or cutting up credit cards. It calls for honest self-awareness. The overspender will have to understand the reason ‘why.’ That means identifying the original messages embedded during childhood, the events that created them and the later triggers that reinforced the behavior patterns.
Uncovering and confronting these deep-rooted reasons are a very important part of our journey towards financial wellness. Everyone’s financial journey is different, and everyone has different gremlins hiding behind closed doors. That’s where our team of expert financial coaches come into the picture – to help you figure out which gremlins are holding you back, how to overcome them and create a plan of action for you to improve your financial health. A whopping 88% of respondents from PricewaterhouseCoopers’ 2019 Employee Wellness Survey felt that having some form of help or guidance with managing their personal finances would improve their overall financial picture.
Research also shows that when we have a coach who encourages us, with whom we can speak openly and honestly, the chances of achieving our goal skyrockets to 95%. That is what we do at Diamond NestEgg – we’re here to guide you towards your peak financial form, to support you when things are great and, even more importantly, to help you push through when they’re not so great – because all of us fall down sometimes and need a little help picking up the pieces and getting back up.
So Let’s Start Improving Your Financial Fitness Together
Whether you’re just hopping onto the financial fitness train or you’re already well on your way and want to tweak a few things, or even if you don’t know what to do next, shoot us an email at firstname.lastname@example.org or call us on (212) 729-4841 for a quick chat.
We’re on a mission to improve your financial health, to stop the money worries at home and at work, and to give you back control of your finances, so let’s do this together and get into tip-top financial shape. No matter where you are now financially or where you want to get to, we’re here to listen and support you every step of the way.
About Diamond NestEgg
We’re Diamond NestEgg, an innovative financial education and personal coaching company that loves to help hard-working Americans improve their financial health. Our mission is to show you how to save money, not spend it, by dismantling the mystery around personal finance. From learning basic budgeting skills to understanding complex government services, we’re breaking down the complicated financial jargon and giving ambitious Americans the financial knowledge and tools to take back control of their bank accounts and future savings. With our personalized human touch, resources and innovative technology, we deliver comprehensive financial education and coaching to help you reach your peak financial success.