We Live Beyond our MEANS

We will not easily admit it, but most of us live beyond our means. No wonder when a financial crisis hits us, we panic.

We love to spend. Saving for the rainy days always goes to the bottom of the list.

Spending is fun! In fact, it gives us a certain sense of satisfaction. But the consequences of overspending is unforgiving.

But then again, we seem to care less, as long as we have the latest iPhone, the newest laptop model or a brand new car to boot. These things may make us feel good, however brief the feeling is or how shallow it is.

The point being, we love spending on things that do not actually add value on our way of living or lifestyle.

On the contrary, these things add undue strains on our personal finances and could even wreak havoc on our lives. No wonder, most of us are worried, afraid, and even confused about where this recession will lead us should it tarry longer.

Here's a reality check: according to Lauren Sherman of Forbes.com :

“We spend $1.33 for every dollar earned, according to the Census Bureau. We carry an average of $8,700 in credit card debt per household, according to the Federal Reserve. And 4.79% of our credit cards were delinquent at the end of 2008.”

So true eh! According to Sherman, there are 8 reasons why we overspend and live beyond our means. Here’s the list:

1. We assume our financial future is set. Which means we depend entirely on what our retirement benefits offer.


2. Retirement is expensive. It is! And the most difficult part of retirement is, you will be spending more while not generating an income for living.


3. We don't take advantage of what our employers offer us in terms of contributing to our 401(k) or any other retirement fund.


4. We forget about big expenses.


5. Underestimating a partner's income needs. Remember, with or without recession, job security is a myth. Your partner cannot hold on to that job forever. You should prepare for this inevitable.


6. We worry about things we can't control.


7. We abandon a volatile market too quickly.


8. Cheap and easy credit is readily available. We fill out almost all the credit applications or loan forms that come our way.

Not really a big list, but these are actually very basic things that we tend to overlook, and so we overspend and live for a day like a millionaire, spend the rest of our life like a pauper.

"Spending less than you make is what's important." (ibid.)

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Posted on 2/06/2009 12 comments