Overspending Despair

An overspending story

Overspending is absolutely criminal if your goal is to become a multimillionaire. The following article is a quick example of how damaging it could be, if left unchecked.

I was recently chatting to a work colleague about personal finance. She recently began work, earning a decent paycheck of about £21,000 per annum or about £1,550 per month after tax. Even better, is that she lives at home as so her only necessary outgoings are £300 per month on travel and £200 nominal rent to her parents.

My immediate thought was "wow, you must be putting away at least £700 per month". I was shocked to find out that she managed to put away only £200 each month. 

Her budget each month was as follows:

In: 1,550

Out: 

Rent - £200

Travel - £300

Going Out - £360

Shopping - £490

Savings - £200

I couldn't believe it! £360 per month on going out! £490 per month on Shopping! No pensions! Barely any saving!

You may be thinking "it's her money. She can do with it as she likes!" That's fair. However, she's planning to move out of her parents home and rent in a year or two. What I'm wondering is how she can expect to pay for a rent if she's so used to spending so much on going out and shopping? Some of you may think, as she did, that she'll manage to adjust her spending accordingly, or she'll wait until she's earning more.

Personal finance is all about psychology and mindset. Everyone wants to be comfortable in their finances (they don't have to necessarily share my goals!). Generally, no one wants to accrue debt. Unfortunately, that is exactly where my example will lead. There is no financial discipline being showed. The ONLY reason she is able to sustain this lifestyle is due to her parents charging a relatively minor rent.

I wish her all the luck in the world and hope that she doesn't run into trouble. But the harsh reality is that personal finance isn't about luck. You need to organise your finances. Know what you've got coming in and going out. The following articles should teach the basics of wealth creation and of managing your personal finances.

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