Is it really easier to spend money than to earn? This question can be quite complicated depending on what you understand about easy spending money, earning, or saving.
If you have enough money that can cater to your needs and wants, then yes, you find that it is easy to spend money because there are many things you would want to purchase. But if you don’t have so much for everything you presently desire, spending your hard earned money might be considered a major problem.
Whatever the controversy may be concerning how easy it is to spend money, we can all agree that compared to earning or saving, it is easier to spend money.
If you check through your bank statement, you can easily spot that your withdrawals greatly surpass your income. What is the reason for this? Is there a way to circumvent this so that you can spend less often? In this article, you are going to see every reason (justifiable or not) why it’s easier to spend money than earn, and what you can do to overcome this.
Is it really easier to spend money?
I asked this question earlier. Now, let’s look at it more closely.
Spending money requires no significant effort. You just pull out the cash or make the payment in exchange for the product or service you desired. This is unlike earning or saving when you would need to put in so much physical effort, mental energy, and self-motivation into it.
According to the psychology of spending, our spending habits reflect our personality and are affected by our emotions, values, and desires. Spending money provides a sense of instant gratification and control. We may spend to fill perceived voids in our lives, to please others, to feel better than others, and so on. This inner psychology of spending makes spending more enjoyable, and by extension, easier than actually making money.
5 Reasons You Spend More Money than You Earn
The psychology of spending summarised above provides us with a general view of why it feels easier and more interesting to spend money than to work for it. Here in this section, you will see specific reasons why this is so.
Bear in mind that the overall goal of this post is to help you get a better hold on how to earn more than you spend. Yes, it’s possible to comfortably earn more than you spend.
1. Human wants are insatiable
One important reason why you find yourself spending more than you earn is that your wants are numerous and insatiable. This is an economics concept that explains that no matter how much of our wants get satisfied, there will always be more wants ahead. This is natural for everyone but economics also provided a solution to this.
Lionel Robbins, a famous pioneer British economist, defined economics as “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”Robbins, L. (1932). An Essay on the Nature and Significance of Economic Science, P. 15.
Also, according to Regener Gagnier in his bookGagnier, R. 2000. The Insatiability of Human Wants: Economics and Aesthetics in Market /Line Break Society, University of Chicago Press, p. 352, human wants are insatiable due to some unforeseen contingencies in the environment and society in general.
These established that the inherent nature of man, the environment and society make human wants insatiable. Economics, as a tool, is what Robbins prescribed as the solution to this problem of insatiable wants. Robbins, together with other economists, re-classified desires into wants and needs, with the former referring to desires that are not so essential to livelihood, and the latter referring to basic desires for livelihood and sustainability of any economic activity.
2. Money is naturally hard to get
What else do you expect from the only commodity that can be exchanged for any other commodity? Gone are the days when trade by barter was the means of exchange. That hit its stumbling block when it became increasingly difficult to measure the value between two different products. In the barter system, it was also difficult to store wealth. The monetary system successfully became the gold standard for the exchange of goods and services.
For you to get money, you need to offer goods or services that are equivalent to their value. For example, you get $100 by offering goods or services worth $100. This is quite straightforward theoretically but it’s more complicated in reality.
Several factors now determine the value of your goods or services. While some of these factors depend on the inherent value of the product or service, the more important factors today depend on the portfolio of the offerer, the forces of demand and supply, etc.
All these factors, put together, make it naturally more difficult to get money than to spend it.
3. Technological enhancements
Today technology has made it even easier to spend money than it used to be. We now have online payment platforms and easy product delivery services. Problems with handling huge amount of cash for purchase has now been eliminated as money can not be carried as a single debit or credit card.
This problem of paying is what Prof. Drazen Prelec talked about when he said, “Credit cards are insidious because they disconnect the pleasure of buying from the pain of paying”. It becomes easier to make a purchase these days than ever before, thus making it easier to spend money than earn it.
4. Lack of self-control
Impulsive buying is a result of a lack of self-control. You may find yourself spending more money if you are unable to resist the urge to buy. Going back to Robbin’s statement about wants and needs, you need to categorise your wants and needs well enough and give more priority to your needs.
On the idea of priority, another concept emerged called the “scale of preference”, where wants and needs are arranged in an order of decreasing importance with the most important topping the scale and the less important down the list.
Lack of self-control is an important reason why most people spend money more than they should. You will see more about this later in this post.
5. Lack of a futuristic mindset
A futuristic mindset is one that focuses more on the future than the present. Spending money on products and services inherently gives us a sense of immediate gratification. To someone without a myopic mindset, this is okay, until hardship hits. However, someone with a futuristic mindset believes more in the concept of delayed gratification which summarily explains that rewards can be postponed and built to become bigger.
Likewise, I will touch on this slightly in a later section of this article.
Unhealthy habits that make you spend more money than you earn or save
It is easier to spend money and harder to earn money, but some of these unhealthy spending habits make things even worse.
Spending without a plan
If you don’t have a monthly budget plan, your money will disappear without a trace. You won’t know where your money went. That’s because you never had a plan in the first place.
A budget is one of the best ways to implement a spending plan. A budget tells you how you want your money to go, to what purpose, and how much of it. Without a budget, you might overspend your money without knowing. Even if you are earning a significantly adequate income, poor financial planning can still make you run into serious debts.
Paying for convenience
Paying for convenience refers to that additional fee you pay for a product, item, or service, that was not part of its true cost. For example, when you pay an additional fee for an item because you want to pay via credit card. The additional expenses may not look huge for individual transactions but they can add up cumulatively.
Spending without keeping track
Have you ever wondered how your money was spent? Almost every one of us has. Budgeting helps you plan your expenses ahead, but tracking helps you to monitor the spending you have made within a given period, usually a day.
Tracking your spending is easy. You just need to have a leader and a pen to document what you spent throughout the day. Tracking your spending is important, especially when you are living on critical funds (almost depleted). Thankfully, technology has also made it easier to track your spending in the form of mobile apps.
Everyone knows the problems associated with impulse buying until they are asked to stop it. Yearly, Americans spend over $3,300 on impulse purchases. These are expenditures they didn’t plan for, things they really do not need but just felt like buying them anyways.
One simple way to stop yourself from impulse buying is by asking yourself this question each time you are presented with the thought of buying something, “Do I really need it”. Whatever is not essential to your livelihood, or not required by your business, or whatever might place an unwarranted strain on your finances is not needed until proven otherwiseAmericans Report 51% Increase in Monthly Impulse Spending, According to Year-Over-Year Survey Commissioned by Slickdeals – PRNewswire.com.
Below is an algorithm that would guide you in your purchases.
Do you spend just to feel happy? This is something called emotional spending, where the individual purchases items just to be able to forget their problems. If you are such a person, you can reach out for help on how to stop doing so, because it can drain you of your hard-earned money within a short time.
Furthermore, when you later realize that the last purchase did not take away your problems, you are forced to keep spending and spending, until you have totally depleted your funds. Instead of spending emotionally, focus on your goals and how to rise above the problems. Avoid coating your problems with something transient, they will resurface before long.
3 ways to earn more than you spend
Now that we have looked at the reasons why you spend more money than you earn, let’s look at three ways you can earn more than you spend. By earning more than you spend, I am placing emphasis on the number of incomes you have compared to the expenses you make.
Trading or business entails that you put a portion of your money into a business as capital. You may sell a product, render a service, or connect consumers to buyers as a middle-man. The possibilities of trading are endless but the one thing you will see that will give you so much joy is that you will see more income transactions than purchases.
Investing means you are putting your resource(s) or money into an established business or system in a way that the money would work for itself and earn you profits by the end of the day. Investment is a great way to earn more than your colleagues at work who are receiving the same salary as you.
3. Save minimally
Saving is very important for emergencies and contingencies. I intentionally included “minimally” in the phrase above because saving too much can be a problem. You will see how.
Saving is the process of setting aside a portion of your income as reserve money. You do not touch this money except for true emergency purposes.
If you are saving for emergencies, that’s a nice idea but you must also set aside some money for investment and business discussed above. This is because saving money with no other plans for investment can make your money lose value over time as inflation rates rise.
It’s easier to spend money than make it because of the psychology of spending. People derive some satisfaction from spending money but of course, no one feels so gratified working hard for money. The only motivation might be your evaluation that you would receive your payment by the end of the working period.
Overspending can be a big problem for your finances. To overcome this problem, a good knowledge of the innate causes of overspending will be important. Also, it was important that I show you the three major ways to increase your income streams. While you are at those, you also want to cut down your spending to the point that they don’t overwhelm you financially.
If all these do not effectively yield the desired results, overspending could be linked to some mental issues, for which case you might need to seek the professional services of a mental health physician. A few mental illnesses have been linked to overspending, e.g, mania or bipolar disorder. But whatever these are, you can get the help you need in optimizing your spending and maximizing your earnings.
|↑1||Robbins, L. (1932). An Essay on the Nature and Significance of Economic Science, P. 15|
|↑2||Gagnier, R. 2000. The Insatiability of Human Wants: Economics and Aesthetics in Market /Line Break Society, University of Chicago Press, p. 352|
|↑3||Americans Report 51% Increase in Monthly Impulse Spending, According to Year-Over-Year Survey Commissioned by Slickdeals – PRNewswire.com|
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