Do You Overspend?

I just read two interesting articles about spending habits. One focused on boomers and the other discussed the differences in spending habits of boomers, Gen X, Millennials, and Gen Z. The latter article was based on data from Bank of America.

My Spending

I started seriously tracking my spending in mid-life and must admit it gave me pause. I can identify with the boomer woman who wrote the article about her spending habits. She found it much easier to spend on her children than to spend on herself. In fact, she felt guilty spending on herself – to the extreme! She attributed it to growing up in an environment where needs could not be fully covered by family income, not to mention spending on any wants.

I grew up in a household that covered its needs – we were clothed and fed and had a comfortable home – but my parents had to set priorities for any extras. To ensure that their priorities were met, my father kept a ledger of income and expenses to the penny. I learned those values but also decided that I did not want to keep track of every penny and wanted to have disposable income to spend as I wished.

Family is a priority for me. I have four sisters and two sons who are married and have blessed me with six grandchildren. I love to see them regularly and celebrate birthdays and holidays together.

Throughout my career I developed close friendships. Our get togethers for lunch or happy hour are truly my attitude adjustment time. Combined, I can easily overspend on gifts and eating out so that is where I concentrate my watchfulness.

Spending Patterns

After COVID, boomers (born 1946-64) and Traditional households (1928-45) showed high growth rates in credit card spending while Gen X’s (1965-80), millennials’ (1981-96), and Gen Z’s (1997-2012) spending dropped.

The COLA increase for Social Security is attributed to part of the boomer increase as well as higher saving rates during COVID. On the other hand, higher housing costs and the end of the student loan repayment moratorium affected younger generations. Spending patterns also played a role.

A survey by Qualitrics on behalf of Intuit Credit Karma found that 36% of Gen Z and millennials reported having a friend who influenced them to overspend. As a result, 88% of millennials and 80% of Gen Z have taken on debt. “The overspending is concentrated on dining or drinks and nights out, trips and vacations and birthday celebrations.”

Sound familiar? Their patterns of overspending do not sound much different than mine except to the extent of taking on debt. So, what causes that degree of overspending according to the above report?

Reasons for Overspending

According to Credit Karma, these are the top reasons survey respondents spend money they don’t have when they’re with friends:

1. Not wanting to feel left out. (31% of Gen Z and 32% of millennials).
2. Wanting to keep up with their friend’s lifestyle. (29% of Gen Z and 28% of millennials).
3. Wanting to please their friend. (29% of Gen Z and 28% of millennials).
4. Another 28% of millennials admit they just don’t know how to say “no” to this friend.

As we age, perhaps we are less enamored with matching the spending of friends, and our friends have less influence on our lives. Perhaps we are more conscious of the need to watch spending to buy a house, pay for the education of children, or save for retirement. Priorities change with age.

As we become more self-confident, perhaps it becomes easier to say “no”? Or maybe we distance ourselves from those friends whose influence is damaging to our financial health.

How to Combat Overspending

My parents taught me to watch expenses and save by their example. My former husband and I tried to do the same although we indulged our boys more than either household we grew up in. I admit that I never sat down with my sons and discussed family finances or talked about good saving and spending patterns. I expected them to learn the same way that I did – by example.

Parents still set the standard, but what happens if the adults in the household do not set a positive financial role model?

Because of my experiences as well as those of my investment and financial planning clients, financial literacy education has become my passion. I believe that age-appropriate financial concepts should be available in our education system at multiple levels. There are some wonderful programs offered in our communities – Junior Achievement, for one – however, mandated study in school would touch every boy and girl. According to the latest research, only 25 states currently mandate at least some financial education, sometimes as part of an existing course. That must change!

We set an example for our children and grandchildren, and they are watching! If you want some ideas for age-appropriate money and saving tools and programs, watch for my upcoming blog on that topic.

Let’s Have a Conversation:

Did you have formal education on a financial topic? If so, where did you receive that education and who taught it? What is the most important financial tip you received?