is spending more money
than one can afford. It is a common problem when easy credit
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
Sources of credit such as credit cards
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.
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.
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.
may prevent overspending because they provide a reserve for unexpected contingencies such as medical expenses and loss of income due to illness.
is a serious result of overspending. In 1991, 0.9% of US households were declared bankrupt.
The Roman Emperors had little access to credit. The treasury was built up by prudent or miserly Emperors like Hadrian
and then dissipated by the spendthrift emperors like Nero
. When the treasury ran short, it was most often replenished by proscription
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.
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.