Sunday, April 20, 2008

Addicted to Spending

For some spending is an addiction. This group keeps tapping income sources to fund a life style that may turn out to be financially catastrophic. But they need their fix today. The current housing woes and credit crunch is forcing spending junkies to finance their lifestyle by home equity loans and credit card debt.

"Average balances on credit cards and home-equity lines of credit are growing rapidly, rising 9.5% and 8.1%, respectively, in the first quarter from a year earlier"
Equifax Inc. and

What does it take for someone to snap out of this self-destruct cycle? The recovery has to start with the realization that you have to live for yourself - first. You have to stop living to impress, please and keep-up with other folks. If your goal is to impress others - you will never win. You do win by living for your own sanity, focusing on your happiness and investing in your future.

To understand your spending behavior, the question you have to ask is - are you impressing yourself with your financial behaviour? Is your spending making you happy? Is your bank balance helping you sleep better at night? If you are not happy and impressed with your performance - who cares what other people think.

But the fact is - we all care what other people think. We live in a materialistic society where your social status is measured by what we drive, what we wear and what we have. And we crave status becasue status makes us feel accepted. Status defines who we are in the world.

What works for me when confronted with this dilemma is balance. Balance between my priorities and what is expected of me. I choose not to upgrade to a bigger house because I like what I have - a small mortgage, ample space and a good neighborhood. If I follow the crowd and upgrade to a bigger house - I end up with a bigger mortgage, more space to heat/cool and more stuff to buy. I choose to wear clean and smart clothes to work because what I wear is part of my professional image and image is based on other peoples persception. But I choose to shop frugally, I avoid buying expensive brand name and take care of my wardrobe. I don't spend a fortune on clothes but I spend what is requried to maintain a professional image.

We all have to find that balance in life. When you drift to an extreme you will usually end up making bad choices. When your spending gets out of control because you want to please others - eventually you end up hurting yourself. Ironically, the others we want to impress so much don't have the time or inclination to stress over us becuase they have their own problems!

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