Did you know that Australians are blowing their budget in an effort to impress others?
Well, according to Finder's new research, 16% of Australians – equivalent to 3.2 million people – have spent more than they can afford to keep up with their inner circle.
In fact, the respondents admitted to spending a whopping $1,246 over their budget in the past 6 months in an attempt to compete with friends and family.
Overspending is common among younger generations
Finder’s research shows that overspending is especially common among younger generations – gen Z (30%) and millennials (21%).
The common reason for this is the fear of being left behind.
Money is still a taboo topic for many and can be tricky to navigate when you’re comparing yourself to others who have different financial priorities.
Social media is a significant contributor with people’s ‘highlight reel’ constantly on display.
However, the satisfaction of splurging to promote a certain lifestyle is often short-lived and all you’re left with is mounting debt to manage in the long run.
Where are they spending their money?
Based on the research, going on expensive holidays (14%) and buying designer items (6%) are some of the ways Australians have felt pressured to keep up.
More than 1 in 4 (27%) have felt obliged to split the bill evenly at a restaurant despite ordering less, while 1 in 7 (14%) have gone on an expensive holiday while being unable to afford it.
Meanwhile, women (21%) are almost twice as likely than men (12%) to give in to financial peer pressure.
Despite this, men ($1,855) spent twice as much as women ($926) in order to impress others.
Implications of overspending
Overspending could be doing long-term financial damage in the process.
Living beyond your means can lead to short-term suffering and ultimately unmanageable debt that could harm your credit score.
The most genuine way to demonstrate success is to develop great financial management skills.
Look at how much you earn and what your everyday bills and expenses are so you know how much you can afford to spend on luxuries such as eating out and shopping.
There’s no shame in letting your friends know you’re on a budget and won’t be splitting the bill evenly.
Building your savings fund
- Work out how much money you need to save. Goals are easier to achieve if they're specific, so work out a figure and write it somewhere you'll see often to keep you on track. Try to aim for at least 3 months' worth of living expenses saved
- Analyse your current expenses. Take a look at your transactions for the last few months and what you're spending on living expenses versus everything else. From here, you should be able to find opportunities to cut back on your spending and work out how much you can realistically save each month
- Pick an account for your emergency savings fund. Even if you've already got a savings account, it's a good idea to open a separate savings account dedicated to emergencies. Keeping the money in a different account will help prevent you from dipping into it for things that aren't urgent.
- Monitor your progress. After 1 month, take a look at your progress and see if you can increase your monthly goal or if you need to relax your target a bit.
