Wilkins Micawber from David Copperfield by Frank Reynolds

Overspending is spending more

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

than one can afford. It is a common problem when easy

credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), ...

is available. The term overspending is also used for investment projects when payments exceed actual calculated cost.

Causes

Some overspending is a form of addictive behaviour due to psychological dependence. The sufferers spend in order to relieve other problems in their lives such

anxiety Anxiety is an emotion which is characterized by an unpleasant state of inner turmoil and includes feelings of dread over anticipated events. Anxiety is different than fear in that the former is defined as the anticipation of a future threat wh ...

stress Stress may refer to: Science and medicine * Stress (biology), an organism's response to a stressor such as an environmental condition * Stress (linguistics), relative emphasis or prominence given to a syllable in a word, or to a word in a phrase ...

. Others may overspend to impress their associates, for example, by picking up the bill for a meal at a restaurant. There are some who want to impress their neighbors and bring large packets, furniture frequently.

Credit

Sources of credit such as

credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

s enable overspending by allowing consumers to spend beyond their income. Financial counselors advise indebted consumers to avoid buying goods on credit and even to cut up their credit cards.

Distribution

An analysis of

consumer expenditure Consumer spending is the total money spent on final goods and services by individuals and households. There are two components of consumer spending: induced consumption (which is affected by the level of income) and autonomous consumption (which ...

showed that 40% of US households overspent in 1990. Other things being equal, educated people were more likely to overspend than the less-educated. In April 2008, consumer debt in the USA, excluding mortgages, reached the total of $2.56 trillion - over $8,000 per person.

Risk factors

The factors which result in overspending include: * Low income. * Low level of assets. * A level of expenditure similar to that of non-overspenders while having a lower income. * Higher medical and miscellaneous expenses.

Savings

Saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recur ...

s may prevent overspending because they provide a reserve for unexpected contingencies such as medical expenses and loss of income due to illness. Opening an recurring account in Bank when some fixed amount is taken out from the account and put in RD ( recurring account ). Lump sum amount is then paid back after completion of the fixed tenure.

Outcome

Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

is a serious result of overspending. In 1991, 0.9% of US households were declared bankrupt.

In History

The Roman Emperors had little access to credit. The treasury was built up by prudent or miserly Emperors like

Hadrian Hadrian (; la, Caesar Trâiānus Hadriānus ; 24 January 76 – 10 July 138) was Roman emperor from 117 to 138. He was born in Italica (close to modern Santiponce in Spain), a Roman ''municipium'' founded by Italic settlers in Hispania B ...

and

Tiberius Tiberius Julius Caesar Augustus (; 16 November 42 BC – 16 March AD 37) was the second Roman emperor. He reigned from AD 14 until 37, succeeding his stepfather, the first Roman emperor Augustus. Tiberius was born in Rome in 42 BC. His father ...

and then dissipated by the spendthrift emperors like

Nero Nero Claudius Caesar Augustus Germanicus ( ; born Lucius Domitius Ahenobarbus; 15 December AD 37 – 9 June AD 68), was the fifth Roman emperor and final emperor of the Julio-Claudian dynasty, reigning from AD 54 un ...

Caligula Gaius Julius Caesar Augustus Germanicus (31 August 12 – 24 January 41), better known by his nickname Caligula (), was the third Roman emperor, ruling from 37 until his assassination in 41. He was the son of the popular Roman general Germanicu ...

and

Commodus Commodus (; 31 August 161 – 31 December 192) was a Roman emperor who ruled from 177 to 192. He served jointly with his father Marcus Aurelius from 176 until the latter's death in 180, and thereafter he reigned alone until his assassination. ...

. When the treasury ran short, it was most often replenished by

proscription Proscription ( la, proscriptio) is, in current usage, a 'decree of condemnation to death or banishment' (''Oxford English Dictionary'') and can be used in a political context to refer to state-approved murder or banishment. The term originated ...

and

expropriation Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...

of the wealth of rich citizens. The overspending which depleted the treasury was largely due to attempts to buy popularity by means of handouts, gifts and lavish entertainments.

Government

Democratic governments commonly overspend due to political pressure and their high level of creditworthiness which enables them to borrow large sums. Such overspending is higher when legislative districts have varied levels of income and problems since all districts are taxed to provide benefits for some districts and this is politically successful. A powerful central executive such as a strong mayor with veto power can offset this tendency.

References

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