Blame it on the Jones’s.
It’s no secret that we overspend, and our tendency to over-leverage became painfully exposed in 2008 when the housing market crashed and economic growth came to a screeching halt.
“We are a get-rich-quick society; we want to get rich fast and we don’t think about the consequences,” says financial advisor Gary Sirak. “People get excited and buy homes they can’t afford and stocks they don’t really understand. We want to portray that imagine of having it all.”
If there was any silver lining to the Great Recession, it was that consumers reined in their spending habits and started to beef-up their savings. Late last year the New York Federal Reserve reported that consumer debt decreased by $60 billion in the previous quarter as Americans cut back.
But this mindset may be short lived.
“What happened with the economy in 2008 was significant enough for people to take a look at their spending patterns and make changes,” says Sirak, author of If Your Money Talked…What Secrets Would it Tell? “But we have no memory at all, we will be freaked out and more conservative with our money, but as soon as any signs of an economic upturn show up, we will be right back to our old spending habits.”
In 2009, the Census Bureau reported that Americans spend $1.33 for every dollar earned.
But experts warn that we can’t blame our propensity to buy things we can’t afford solely on the want to impress our neighbors and friends. In some cases, overspending is an addiction, much like with alcohol or drugs.
“We are more and more stressed out as a society and for some people, an outlet to this stress is buying stuff,” explains Gloria Arenson, author of Born to Spend and marriage and family therapist. “Real compulsive spenders don’t even take things out of bag, the release is getting it.”
Los-Angeles based therapist Nancy Irwin says overspending tends to be a coping mechanism. “You need to find the underlining issue that is trying to be fixed by overspending and learn how to deal with it in a healthy manner.”
She adds that there is nothing wrong with keeping up with the latest trends or being indulgent from time to time, as long as the intent is in the right place. “It’s OK to keep up with the latest technology if you are into that or you enjoy giving your kids the biggest pool on the block as long as it comes from a creative place and serves your high consciousness and not just your ego.”
Economists have long maintained that economic growth hinges on consumer spending — but there is a fine line between spurring growth and digging the nation deeper into an economic sinkhole if too many households are plagued with debt.