Overspending is spending more money

Money

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

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

Credit (finance)

Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

 is available. This can also be called 'investing' in the public sector when infrastructure 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

Anxiety is a psychological and physiological state characterized by somatic, emotional, cognitive, and behavioral components. The root meaning of the word anxiety is 'to vex or trouble'; in either presence or absence of psychological stress, anxiety can create feelings of fear, worry, uneasiness,...

 or stress. Others may overspend to impress their associates, for example, by picking up the bill for a meal at a restaurant.

Credit

Sources of credit such as credit card

Credit card

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

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 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

Savings may prevent overspending because they provide a reserve for unexpected contingencies such as medical expenses and loss of income due to illness.

Outcome

Bankruptcy

Bankruptcy

Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. 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

Hadrian , was Roman Emperor from 117 to 138. He is best known for building Hadrian's Wall, which marked the northern limit of Roman Britain. In Rome, he re-built the Pantheon and constructed the Temple of Venus and Roma. In addition to being emperor, Hadrian was a humanist and was philhellene in...

 and Tiberius

Tiberius

Tiberius , was Roman Emperor from 14 AD to 37 AD. Tiberius was by birth a Claudian, son of Tiberius Claudius Nero and Livia Drusilla. His mother divorced Nero and married Augustus in 39 BC, making him a step-son of Octavian...

 and then dissipated by the spendthrift emperors like Nero

Nero

Nero , was Roman Emperor from 54 to 68, and the last in the Julio-Claudian dynasty. Nero was adopted by his great-uncle Claudius to become his heir and successor, and succeeded to the throne in 54 following Claudius' death....

, Caligula

Caligula

Caligula , also known as Gaius, was Roman Emperor from 37 AD to 41 AD. Caligula was a member of the house of rulers conventionally known as the Julio-Claudian dynasty. Caligula's father Germanicus, the nephew and adopted son of Emperor Tiberius, was a very successful general and one of Rome's most...

 and Commodus

Commodus

Commodus , was Roman Emperor from 180 to 192. He also ruled as co-emperor with his father Marcus Aurelius from 177 until his father's death in 180. His name changed throughout his reign; see changes of name for earlier and later forms. His accession as emperor was the first time a son had succeeded...

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

Proscription

Proscription is a term used for the public identification and official condemnation of enemies of the state. It is defined by the Oxford English Dictionary as a "decree of condemnation to death or banishment" and is a heavily politically charged word, frequently used to refer to state-approved...

 and expropriation

Confiscation

Confiscation, from the Latin confiscatio 'joining to the fiscus, i.e. transfer to the treasury' is a legal seizure without compensation by a government or other public authority...

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.