Spending

Buying things with cash, regardless of the payment method, is referred to as spending. It's the money you use to purchase goods and services for your own use. Categories of spending can include:

• Food and groceries
• Housing and utilities
• Transportation
• Healthcare
• Entertainment
• Clothing
• Travel and leisure activities

Careless, uncontrolled spending is usually the reason that people get into trouble with their finances. The causes behind reckless use of income are often tied to habit, emotional decisions, or lack of financial planning. Here are some of the most common ways:

• Living beyond their means by using credit cards or loans to fund lifestyles they can't afford. This leads to debt accumulation, especially high-interest debt like credit cards.
• Making unplanned purchases based on emotion or marketing tactics like putting magazines and treats in the checkout line within easy reach. Over time, small impulse buys can add up.
• Without a clear cash plan, it's easy to lose track of where money goes.
• Relying on credit cards or loans without a repayment plan can spiral into debt trouble. Paying only the minimum keeps people in long-term debt due to interest.
• Trying to match the lifestyle of friends, family, or social media influencers can lead to overspending on things like clothes, gadgets, or vacations.
• Using shopping or spending as a way to cope with stress, boredom, or sadness (often called retail therapy).
• Without an emergency fund, unexpected expenses (car repairs, medical bills, job loss) often must be covered with debt.
• Regular small purchases (coffee, apps, subscriptions) can add up significantly over time without being noticed.
• Not understanding interest rates, debt, or basic cash planning leads to poor financial decisions.
• Late fees, penalties, and damaged credit can result from being unorganized or procrastinating on getting control over spending.

An option favored by many with money woes, regardless of the reason for their financial problems, is to take on a side gig to earn more money. That is equivalent to pumping the pump handle harder to increase the flow of water into your bucket when there’s a hole in the bottom to which you are paying no attention. No matter how hard you pump, the water continues to flow uncontrolled out the bottom. It would be better if you plugged the hole with a faucet to control the flow so that outflow was the same or less than the water coming in the top. Then a side gig might not be needed.

And then there are those who feel that the solution to their money woes is to either get a pay raise or switch to another, higher paying job. This is a variation of the side gig concept: earn more money. The difference is that with a pay raise or higher paying job you are only working one job instead of a side gig which adds one or more jobs to your already busy schedule. Staying with one job is an improvement over side gigs, but, regardless, that unattended hole in the bottom of your bucket will continue to gush money no matter how many jobs you have.

That unattended hole in the bottom of your bucket is your uncontrolled spending. It’s where most of your money goes when you’re not paying attention. Putting a faucet on the spending hole in the bottom of your money bucket is a key step toward gaining control over your everyday money. Installing that faucet gives you the means to stop living paycheck to paycheck by controlling your spending. That faucet is called an allowance.