If Someone Starts Spending Money On These 11 Things, Their Finances Are In Trouble
What you buy may signal to others that your finances are in danger.
New Africa / Shutterstock While spending money on nicer, more luxurious, and convenient things isn't inherently bad, it can lead to financial trouble without moderation and budgeting. When spending money on anything, the impact of that purchase needs to be taken into consideration.
These impacts can run deeper than just taking away an individual's financial freedom. Overspending on certain things can taint relationships and send the individual into a constant spiral of negative thinking. Before something serious happens, determine what you truly can afford and learn how to develop a budget that works for where you are currently with your finances.
If someone starts spending money on these 11 things, their finances are in trouble
1. Designer clothes and accessories
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If a person irrationally spends their money on designer clothes and accessories, there is a good chance that their finances are in trouble. Without proper budgeting and making sure to know when it is okay to splurge and when it's not, spending money on things that cost a lot eventually starts to take a toll.
Designer clothes and accessories cost a significant amount more than things that might not be designer but still function just as well as the designer-made product. “The appeal of luxury goods is undeniable, but the price tag can be off-putting. Buying these goods can be cost-prohibitive unless you have a job with a high salary or a willingness to go into credit card debt,” according to Investopedia.
2. Unnecessary luxury upgrades
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Living a luxurious lifestyle that involves constantly spending money on unnecessary upgrades is a sure way to put your finances in trouble. This leads to what is known as lifestyle creep, which is defined by the Berger Financial Group as the increase in spending that occurs as a person's income increases.
“Lifestyle creep often goes hand in hand with increased borrowing. As you strive to maintain an elevated standard of living, you may rely on credit cards, loans, or other forms of debt to finance your expenses. Over time, this can lead to a debt spiral, with interest payments and monthly obligations eating into your income and limiting your financial freedom,” explains Nic Gordon, a financial advisor who works with the Berger Financial Group.
3. Excessive dining out or food deliveries
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What may initially draw people in for its convenience factor may actually be causing them more financial trouble than it's worth. Excessive dining out or food deliveries, while harmless in moderation, can quickly become a costly habit.
“Delivery apps like Postmates, Uber Eats, Grubhub, and DoorDash are convenient — but super expensive. Not only are you charged for the meal itself plus tax, but also the service fee, delivery fee and tip for the delivery person. Most of the time, you end up paying more for the delivery than you do for the actual food (it’s ridiculous),” according to Ramsey Solutions, a company founded by Dave Ramsey that helps people regain control of their finances.
Before spending money on something simply because you’re craving it and it's convenient, consider creating a budget to help track your spending so you don’t overspend on things like this.
4. Frequent online shopping
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While occasionally treating yourself to some online shopping can be rewarding, if you don’t want to be financially in trouble, you should manage how often you shop online. Not only can online shopping be influenced by how convenient it is, but there are psychological factors that play a part as well.
For people who struggle with compulsive buying, seeking help and working towards developing a more long-term way of thinking towards spending money on online shopping is crucial to saving their finances.
“Everyone has dreams and goals — what are yours? Maybe you want to get ahead of debt, upgrade your car, buy a home, take a special vacation or save for your child's college fund. When you're tempted to shop online, think of the exciting goals you're working toward,” suggests Wright-Patt Credit Union, a company dedicated to helping people manage their money.
5. Gambling or sports betting
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When someone spends unreasonable amounts of money on gambling and/or sports betting, there is a good chance that their finances are in danger. There are several ways spending money on these things can start to negatively impact their financial security, their relationships, and their mental health.
“Financial stress from gambling losses can strain relationships, lead to arguments over money and erode trust between partners. In severe cases, problem gambling can lead to depleted savings accounts, maxed-out credit cards and even bankruptcy,” according to Edelman Financial Engines, a financial planning and investment advisory firm.
6. Risky investments
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Someone choosing to spend their money on risky investments will most likely be putting their finances in trouble. While the chance for high-gain will seem appealing to most, the opposite outcome, high-loss, is what is more likely to occur.
“High-risk investments may offer the chance of higher returns than other investments might produce, but they put your money at higher risk. This means that if things go well, high-risk investments can produce high returns. But if things go badly, you could lose all the money you invested. And the chance of things going badly is higher,” explains the Financial Conduct Authority, a United Kingdom-based company that regulates financial services, ensuring fair treatment of customers. It is important not to get too caught up in the potential rewards from risky investments and instead invest in safer options that can almost guarantee earnings.
7. Luxury vacations using credit
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If someone is constantly splurging on luxury vacations using their credit card, it won’t be long before they have to deal with financial troubles. While it may seem perfect to plan a whole vacation knowing you can just put it on the credit card, financing luxury vacations this way will lead to high-interest debt and potentially overspending.
“Vacations put most of us in a 'treat yourself' mindset, and with a credit card, it’s easy to swipe first and think later. In fact, a LendingTree survey showed that over 40% of Americans went into debt after a vacation, with credit cards being the most common method of overspending,” according to Palisades Credit Union. The credit union also explained that accumulating higher interest rates will take away potential perks that were earned, meaning someone who originally was going to reap rewards and cashback opportunities before vacationing will end up missing out on those perks.
8. Buying expensive gifts to impress others
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If someone constantly feels a need to buy expensive gifts for certain occasions to impress others, they will likely endure financial troubles. Not only will this need for external validation lead to debt, but it will also make it difficult for any of their financial goals to ever be met.
One almost universal financial goal is to be able to retire someday. When a person spends all their money on short-term gratification, they have less and less money being saved for their future, meaning that financial struggle awaits them in their old age.
9. Unused subscriptions and memberships
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If someone constantly starts up subscriptions and memberships that they fail to use and then forget about, they will most likely see the impact of this through their financial troubles. While having a couple recurring charges may not seem like a big deal, when a couple turns into dozens and the individual forgets to cancel the ones they aren’t using, these charges quickly start to add up.
“Subscription services can be a great money-saving measure if used responsibly, but they can also cause financial drain when not managed properly. Knowing your budget and keeping track of what you are subscribing to is paramount for avoiding this problem,” explains AmeriEstate Legal Plan.
10. Frequent vehicle rentals or rideshare use
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If someone frequently rents out vehicles or uses rideshare apps to get around, chances are they are soon to be in financial trouble. While this may seem convenient, it can be substantially more expensive than owning your own vehicle, depending on your lifestyle and driving needs.
Having to pay for these things daily starts to quickly add up. In order to ensure someone is doing the most cost-effective thing for them, they should consider their lifestyle and determine whether it makes more financial sense to own a car or use other means of transportation.
11. Rent-to-own furniture
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If someone constantly takes the route of spending money for rent-to-own furniture, there is a good possibility they could run into financial troubles. While it may seem to make the most financial sense, an individual actually ends up paying more money on furniture when they pay for it this way instead of buying it outright.
“It may take more effort and time to find lightly used furniture or appliances that are still in good condition but you are letting the previous owner take the brunt of the loss in value. While you are eliminating the immediate gratification of obtaining new stuff, you will be literally saving yourself thousands of dollars,” according to the Lee Law Firm, a firm that specializes in resolving debt issues for its clients and helping them be financially healthy.
While many things come with instant gratification and convenience, it is crucial to consider long-term goals when deciding what to spend your money on. You could also consider determining what purchases make sense for your lifestyle and financial budget in order to make the most financially sound decisions.
Kamryn Idol is a writer with a bachelor's degree in media and journalism who covers lifestyle, relationship, family, and wellness topics.
