Spending Money You Do Not Have

by Tim on March 7, 2011

Consumer debt in America has skyrocketed. According to the U.S. Treasury, consumer debt has jumped from $355 billion in 1980 to a staggering $2.4 trillion in 2010.  With credit cards as one of the biggest culprits of America’s spending spree, it’s easy to see how we’ve fostered a society that thinks it’s OK to spend money they don’t have.

Don’t get me wrong. I use credit cards and I think there is a time and place for most things. For me, having the ability to automate my bills to my credit card and to make one simple payment is convenient. It’s also nice to see a few reward dollars come my way every few months.

The problem with credit cards is that they:

– Can encourage you to spend money you don’t have

If you’re not disciplined, it’s really easy to fool yourself into feeling better about buying stuff on credit. It’s the instant reward mentality and the thought that you can pay for it when the money comes.

– Look like a false emergency fund

Nope, your credit card is not an emergency fund. Sure, some use it for emergency items when they can’t access their emergency fund, but you shouldn’t use it as a substitute.

– Ruin your credit faster than you can say “debit or credit”

So you’ve opened a few store credit cards. So what right? The more you open, the more it dings your credit score. Even more, your chances of missing a payment on one of those cards get higher with every new card you throw into the mix – and you definitely don’t want to mess up your credit with missed payments.

Solutions to Spending Money You Don’t Have

– Use Cash (Envelope System)

I know it’s been said time and time again, but it really works. You can really control overspending and stop spending money you don’t have when you set aside cash to pay for things like groceries, eating out, entertainment, gas, and other expenses.

– Stick To A Budget

If you haven’t read Joe’s series on budgeting, you should take some time to look it over. It really highlights the why and how of establishing a budget. If you don’t track where your money is going, how will you know if you’re overspending? A budget really is the right way to go.

– Manage Your Account/Budget Online

You don’t have to manually track your budget with a pen and paper each week/month. There are great tools that can help you to manage your money online. Sites like mint.com, mvelopes.com, and neobudget.com can make budgeting simple. If you’re married, it’s a great way to put the finances out in the open and it helps keep you accountable with your spending.

The bottom line:

Spending more than you make is a losing game, but you can fix it if you’re committed.

To really drive the message home, here’s a skit that SNL did a while back about spending money you do not have.

What advice do you have to avoid spending money you do not have?

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook and subscribe to the Faith and Finance RSS feed.


{ 7 comments… read them below or add one }

krantcents March 7, 2011 at 2:51 pm

Only using cash is certain method to avoid debt. Pay yourself first by contributing to your retirement savings.


Bruce March 7, 2011 at 8:25 pm

The latest news BTW is that consumer debt is down. Credit cards specifically is down 15% over the past 2 years in case you haven’t read the latest news.

Agree with krantcents about using only cash. There is rely no benefit of having a credit card these days, since the birth of debit cards. And yes there are now debit cards with rewards , so you can avoid providing that excuse.


First Gen American March 8, 2011 at 1:31 pm

What ever happened to the good old fashioned practice of selling your stuff or services. There was a time when if you needed money fast you’d go to a pawn shop and sell something of value. Most people have stuff in their house that they could part with. I know I still have plenty and I purged a bunch of things 2 years ago.

Credit is not the only answer. Before credit cards, people were also strapped for cash, but they’d make do without or sell stuff or services to get by til the next paycheck.


Tim @ Faith and Finance March 8, 2011 at 11:50 pm

Great points Krantcents – using cash is simple but effective.

Bruce, thanks for bringing that up. Yes, I’ve heard the improvements and think that it’s great that we’re finally making progress with our debt problem.

Have you heard of the company Perkstreet? They offer debit rewards and are doing some great things!


Bruce March 9, 2011 at 9:22 am

Hey Tim, yes I have heard of PerkStreet and their debit rewards. I think the best move made was introducing these debit reward cards, which I am hopeful will help improve our consumer debt problem even more. I have only seen a few of these available to date, and hope to see them made available through every bank in the next couple of years.


Eric March 14, 2011 at 7:35 pm


Don’t forget about mortgage debt. If you add the mortgage debt to the $2 trillion credit card debt you mentioned, you get $13 trillion. That is a lot of people hemorrhaging a lot of interest to banks. No wonder we can not stop spending nationally, if we too, as citizens, are spending upwards of $13 trillion. Let’s pray that Christians will turn from this American system of debt and use God’s provisions instead of the banks.

Keep up the good work,
Psalm 127:1


LE May 11, 2011 at 3:25 pm

Ever think about why banks are in beautifully decorated skyscrapers with hardwood flooring and granite tables, but you live in a split-level house in need of repairs?

Look at your ammorization schedule on your mortgage and see how much interest you are paying monthly. Think about what you could do with that money if you kept it every month instead of giving it to them.


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