Many people spend beyond their budget every now and again, but has there now become a culture of overspending in the UK?
Overspending and Mental Health
A study conducted by Massachusetts Institute of Technology (MIT) found that credit card spending triggers a chemical reaction in our brains like addictive drugs.
If we consider how many people turn to drug and alcohol abuse as coping mechanisms for poor mental health, it’s easy to see how many could also turn to overspending.
We have previously discussed how mental health issues can impact our finances, supported by data from the Money and Mental Health Policy Institute wherein 46% of those in problem debt also had mental health problems. Debt is a common result of overspending, so the link between mental health and overspending is clear here.
Social Pressures
Many may turn to overspending to ‘keep up appearances’ to those around them. These social pressures have likely increased in recent years due to the boom of social media sites like Instagram, which are focussed around status, looks, and projecting an image of yourself which is not necessarily accurate.
Cost of Living Crisis
According to the August 2022 Money Statistics produced by The Money Charity, 89% of the UK reported an increase in their living costs.
The cost-of-living crisis is an ongoing issue that is having financial effects on almost all of us. With continued inflation, combined with a lack of wage increases to keep pace, it can be difficult to avoid overspending.
Opportunity…
Credit cards and Buy Now Pay Later financing are all around us. They don’t exist in the shadows either, rather they are heavily advertised.
These forms of credit are exacerbating the issue of people spending beyond their means. They encourage overspending by enabling it and advertising it.
It’s difficult to buy something online now without seeing companies like Klarna and LayBuy as a payment option. Spending money that we don’t have now seems natural and has been continuously normalised with the rise of these types of companies.
Lack of Budgeting
Some people may overspend due to a lack of awareness that they’re doing so. Once again, if we consider the cost-of-living crisis, many people who had a budget that worked for them before price increases, will no longer see it working.
Budgeting is a huge thing we like to talk about at Red Star, and we do have previous blogs discussing its benefits and how we can effectively budget.