According to WordNet, BANKRUPTCY is a state of complete lack of some abstract property or failure/ inability to discharge all your debts as they come due “the company had to declare bankruptcy", or it is a legal process intended to insure equality among the creditors of a corporation declared to be insolvent.
(http://wordnet.princeton.edu/perl/webwn?s=bankruptcy&sub=Search+WordNet&o2=&o0=1&o7=&o5=&o1=1&o6=&o4=&o3=&h=000)
Are people spending more than their earnings, especially the young adults? Where do people get so much of money? The banks offer them to get credit cards and encourage them to spend more, and when they spend over budget and they are unable to put up with the debts, the bank declares them as bankruptcies. People spend more than they can afford to satisfy their wants. Is this a necessity in today’s society? Due to this, that is why there are so many people going bankrupt.
Let us have a look at ‘The Seattle Time, Washington’ on the 24th of November 2008 where the percentage of bankruptcy has rise to 40%. This state is ranked 12th in the America Nation with the most bankruptcy. It is to be said, “Bankruptcy filings state wide are up 40 percent from a year ago — the highest level since Congress changed the law in 2005 and made it tougher for people to cancel their debts”. This news is based on the rise on bankruptcy where American citizens are unable to pay off their housing debts.
(http://seattletimes.nwsource.com/html/localnews/2008428045_bankrupt24m.html)
What has happened has already been done. People make mistakes. However, when there is so many social issues out there that are unsolved, do we need another one adding to our list?
The question here is that how are we going to help solve this current social issue on spending more than we earn?
13 comments:
Lot of people this day especially young people spend more than earn, sometimes they just do not know which is necessary thing they should buy or not. One of the way to solve it just help them to classify which is necessary expenses for them and what the expenses which not really important so they can delay it first to save their money.
That’s true and I do believe that it has been adapted in to the people’s culture. Over spending regardless on how much the budget is, just because of the sick of showing off!!! Banks and financial institutions have created the demand pull disaster which will lead to the shortage among the societies. There must be the control on the credits given to the public and also the direct control on the breeding through the societies to not encounter to the food shortage. Monitoring the executives and money lenders and also the financial institution’s operations and defining certain rules and making the rates of the banks on curb under the supervision of sound economic and management governments must be prioritized to not let the demand pull inflation occur and prevent from the bankruptcies as well.
It’s easy to overspend when you don’t keep tabs on how much you have. People will go for years unaware of their true financial situation because they’re afraid to look at what kind of mess they are in. It’s easier for the moment to just avoid it. They’ll pay their minimums and add new credit cards as necessary ignoring the growing debt total. It is very bad for every one who is over spending. As I’ve seen some people who spend more then their income they lost there job, house and even there family when you over spend it will be COOL when you are spending but it is High risk which will brink you to the hell.
People spending more than they earn , in my opinion it can be classified as a global issue , and this is a very bad thing to the world's economy , a lot of people they are unaware that they are spending more money money than they earn probably because Sense of power ,Spending money actually makes some people feel powerful. The more they spend, the more powerful they feel, and the only way to get that rush is to spend more money.
The second reason would be Prove self worth - Buying that fancy new car proves you are somebody, right? For some people spending makes them feel like they are worth something to the world.
The third reason would be Can’t say no - Some people feel like a failure when they can’t meet the wants of others. Whether it’s new toys for the kids, new outfit for the spouse, or a night out with the friends, some people just can’t say no, even when they can’t afford to say yes.
Source from:(http://www.accumulatingmoney.com/top-10-reasons-people-spend-more-than-they-earn/)
a fellow blogger Zewt (http://www.zewt.blogspot.com/) says this :
Tom has 100 bucks, he places it in the bank.
The bank lends it to Dick for his business.
Dick shows his 100 bucks to Harry and purchase 100 bucks worth of goods from Harry.
But Dick tells Harry he will only pay him in 3 months.
Harry record 100 bucks worth of sales.
Harry pledges his business to another bank and to lend another 100 bucks.
Harry buys a 100 bucks house.
In reality, how much money is there in the above scenario? 100 bucks? Maybe 200. But Tom will claim he has 100 bucks in deposit. Dick has 100 bucks in cash. Harry has 100 bucks in receivables and another 100 bucks worth of assets.
consider this... the law of wealth creation sounds rather simple. Tom has 10 bucks, he spends it on Dick’s restaurant for lunch. Then Dick spends the 10 bucks he earned on Harry’s restaurant for dinner. Harry then spends it on Zewt’s bar at night for a drink. In that single day, 3 persons recorded an income of 10 bucks; 3 persons can declare they made 10 bucks that day. 30 bucks will be recorded as GDP (correct me if I am wrong) and probably, 30 bucks will be taxed. But in reality, how much is there in the first place? Only 10 bucks.
Yes its true now a days every one is spending more than they earn.People should not do like this people should floow the budget every one sholud make a budget for their self and try to spend bellow the budget.
Spend more than earn. It stands to reason that if someone is spending more than what they earn they are either being given money or are borrowing it. In this age of worldwide economic growth and prosperity it has never been easier to borrow money. The problem with personal debt is that it can become a trap an example of how one can be trapped by debt can be seen with probably its most common form - credit cards. Ideally, people should ensure they pay off their balance in full by the end of the interest free period to avoid paying interest. Commonly, however, people use their entire credit limit and make only the minimum payment required. This minimum payment is usually just enough to cover the interest charges. Combined with a high interest rate this makes credit cards a very expensive form of borrowing.
There are also those people who spending equals what that they earn. If someone is spending everything they earn, obviously they are not saving or investing any of their earnings. This habit will make it very hard, if not impossible, for them to become wealthy. It also means that they will more than likely need to borrow in the future to funds larger purchases or vacations. And so the debt trap begins…
How then can we spend less than we earn?
Develop Financial Discipline and Intelligence
Let’s return to my earlier example of credit card hell. The first question would be do you really need one? The emergence of Visa/ MasterCard debit cards and Pay pal have eliminated some of the benefits that credit cards traditional had .If any one do then decide he wants a card, then he will often be tempted with a credit limit higher than he would have expected. By reducing the limit to one where he wouldn’t be scared if the card reaches its full limit. Also, as mentioned earlier, ensure he pay off his balance in full each month to avoid paying interest and building up a large debt.
Reduce Consumption
Secondly, distinguish wants from needs. As you begin to identify things as wants, you will reassess whether or not he really wants to spend his money on that product or service. Lastly, set some medium to long term financial goals and use these as motivation to control his immediate consumption.
Bringing the Two Methods Together
The best way to bring these two methods together - financial discipline and controlled consumption - is to start a budget and live by it. A budget is simply a plan that allocates the future income towards expenses, savings and debt repayment.
If any one doesn’t like the idea of creating a budget, a clever way to ensure he spend less than he earn is to Pay himself First. For those readers struggling with debt and/ or excessive consumption, be clear that spending less than he will earn involve some short term sacrifices and lifestyle changes. http://www.thechangeblog.com/spend-less-than-you-earn/
Without a doubt we can say that the rate of bankrupcy is goin higher everyday. This is probably due to the economic condition the entire world is going through currently. Nowadays, with the credit cards within grasp the young adults are actually being able to drive their dream cars and maintain better lifestyles and on the other hand the ammount of debt increases. It has its pros and cons. However to answer the question asked by Ms. Lim Eelynn, I would like to say that it depends on each of the individual card holders. The government or any other body cannot do much about it other than organizing seminars and delvering messages. But then again it depends on the people to make the right choice.
People would always want more than what they deserve, be it money, fame,or whatever. It's a trend of the new millenium for people to outspend themsleves, and it goes down to people not being satisfied with what they have.Financial institutions have also made borrowing easier, which gives an easier for people to have access to funds, which does not help the situation.People see the credit card as all gold, and are over exited with it. When they would be more realistic and conscient, they would spend less.
Yes,people spend more than they earn is classified as social issue!!There are 10 reason people overspend by Debra Vaughn;
1. Just can't say NO!
This is the one that I have heard the absolute most. Whether it's a child asking a parent for the newest fad toy or a spouse wanting the newest computer game, some people just cannot say no! Even if they cannot afford to say yes. They feel like a failure if the money is not there to meet the wants of the other person. No matter what, these people will make it happen, even if it becomes a dead end to bankruptcy court.
2. Prove self worth
Spending $40 on a haircut, $120 on a designer dress, $30 on a new pair of shoes, and maybe $75 on a facial every other week sounds outrageous to most. However, for many people, it makes them feel like they are someone. It makes them feel like they are worth something to the world.
3. Sense of power
Spending money makes many people feel more powerful. Whether it is handing over a wad of cash or pulling out a gold card to charge money, the simple act of spending a large amount of money gives them a rush of false power.
4. Poor as a child
Freud would love this one! Many people who were poor as a child feel the need to spend everything they can get their hands on as soon as they can. Perhaps there is a fear of someone taking the money away if it is not spent immediately. These people must realize that once it is yours, that is it, it is yours.
5. Lifestyle maintenance
After a person has lived a certain way for a while and suddenly find themselves in a bad place financially, it is hard to give it up. They feel the lifestyle they have become accustomed to must be maintained, even if it means more debt followed by bankruptcy.
6. Immediate gratification
When you can go into a store, see something you think you need NOW, then get credit in 5 minutes or less, you feel a sense of accomplishment. After all, you get what you want now, and don't have to think of how you are actually going to pay for it until later, when the bill arrives.
7. Credit doesn't feel the same
Let's face it, plastic simply does not feel the same as good old-fashioned paper cash. For this reason people use credit more often and tend to over spend much more than they would if they had used cash instead.
8. The money is on it's way
I have heard this over and over "I thought the cheque was in the mail." The people who tell me this are telling the truth! The cheque was in the mail, either late or for far less than was expected. When they heard they were getting money, they spent it before they had money in their hands.
9. Avoidance
I cannot tell you how many people, in all financial situations, have told me that the reason they spend too much money for lunch out with friends, shopping with the girls, etc is to not have to admit that they cannot afford to pay the bill for the whole table. If your friends drop you because you cannot afford to buy them lunch are they really friends?
10. Keeping up an image
Many people feel that if they fall below a certain image that the neighbors set, the neighborhood will think less of them. This is known as keeping up with the Jones'. The truth behind this is that the neighbors are thinking and feeling the same way.
http://www.debtsmart.com/pages/article_over_spend_01070616.htm
These reasons are been implemented mostly by the YOUNG ADULTS who some just started working,studying and working part time.Therefore,all the banks should control releasing credit cards and stop giving loan without proper investigations on the person's background.Moreover,the government should be more strict with the Money Lender Agencies to reduce giving loan to people to reduce people from borrowing money.
Nowadays BANKRUPTCY is a very normal circumstance in this social, especially in western country. this kind of situation is related to the policies of the countries that goverment given. because the goverment encourage them to spend more,so the bank created more credit cards and gave the loan to almost everyone that who wanted to buy house.hence caused bankruptcies.in my opinion, to slove this problem,we can control from the bank though the goverment policies. for example, if one citizen want to lend money to purchase a house, the bank should make sure their income can afford this debt,the bank can check their income in a year and every period get the interest and payback money though the their company.
Everyone agrees that overspending is a BIG ISSUE faced by a society, but how we can prevent it?? It is practically impossible but here are some tips of how we can overcome 1 of the main factors of overspending - Shopping Addiction!!!
The need to overcome a shopping addiction is great when you consider that there is money on the line. You may not consider your tendency to buy in excess as abuse, because you might go on purchasing sprees occasionally whether at the mall or online. However, overspending is problematic as well.
The first thing to consider is what defines the condition. If you feel a compulsion to shop when you really don't need anything, you might want to try a simple intervention.
Reasons You Shop Abusively
Your purchasing addiction and overspending are habits that you developed simply because they are pleasurable. However, this pleasure is false and lasts only as long as you are buying things. Once the item is among the others, you may feel buyer's remorse, which can lead to feelings of low self-esteem and depression.
Consider the reasons while taking steps to overcome shopping addiction. You may shop to feel better. A purchase can be a serious mood elevator in the right circumstances. However, you have made a random association in your mind between making purchases and feeling good.
Training the Mind to Overcome Shopping Addiction
You have managed to train your mind that buying is pleasurable and it can elevate your mood. You also must recognize that you "crash" after a shopping binge. The elevated mood is soon followed by awful feelings of guilt and remorse. You also feel empty because the items you bought failed to fill your void.
On a conscious level, you are aware that you are spending too much and that the purchases do not make you happy but you have trained your subconscious mind to relate pleasure with buying things. Consider fear as an example of how this works.
You may have a terrifying experience with dogs. Your subconscious mind quickly links fear and dogs so you feel very afraid automatically when faced with a canine. The dog is not threatening but you still feel the fear because your mind is trained for this response.
The same goes for shopping and pleasure. You had a pleasurable buying experience that leads your subconscious mind to seek that same feeling repeatedly. Just as you learn to be afraid of the non-threatening dog, you learn to seek pleasure in buying things.
http://ezinearticles.com/?Overcome-Shopping-Addiction-and-Overspending&id=1447139
Yes, it is true that today every society faces overspending problems and I agree with Ayesha’s all 10 reasons why people overspend and here are some step to avoid overspending,
• Admit the problem.
Before you can fix anything, you need to be aware of the issues. Understanding the reasons or root causes for your behavior is an awesome start. I know, however, too many folks who refuse to admit any shortcomings, so much so that the subject of money becomes taboo to them. When that happens, you know that somebody’s got something to hide. Ultimately, it becomes just their business really — they can’t fix something that they don’t want to acknowledge.
•Do not be idle.
Sitting around twiddling your thumbs can bring on temptation and things that are harder to control. What’s that old English adage again? An Idle Mind is a Devil’s Workshop. Well, just think of it in terms of spending.
• Replace your spending habits with other inexpensive activities.
This is something I’ve done often, and believe me, it works! Take on a few hobbies, start some low cost home businesses where you may actually earn money (instead of just spend), and preoccupy yourself with activities that can wake up your talents, improve your skills, hone your creativity and increase your productivity.
Think of the energy it took you to earn enough to afford the items you’re about to purchase.
I call this, the “Your Money or Your Life” strategy.This approach asks you to value the amount you spend on a purchase as a factor of your time and energy. By knowing how much time and energy it takes you to earn the dollars you’re exchanging for an item, you may feel discouraged to continue with the purchase.
Buy out of necessity by maintaining shopping lists.
Being organized cuts down on the expenditures. This way you are focused about what you’d like to buy. Sticking to a list (and making sure you don’t stray) will keep you within the confines of the budget you created.
• Look at all the stuff you already have and appreciate them.
Check your possessions once in a while and give them a moment. After you realize what and how much you already have, you may lose the desire to own more. I recall that when I had to move to a new home, and had to pack up our stuff, I uncovered the tons of things I had accumulated throughout the years but just stored away. It embarrassed me into changing my impulse buying habits altogether.
• If things are getting out of control, get rid of your credit cards.
Studies show that people who have no credit cards spend less. This won’t apply to me because I do own a few cards which I use for convenience, but you’ll need to assess your own situation and what you’re comfortable with.
Article source:- http://www.thedigeratilife.com/blog/index.php/2007/01/25/stop-overspending-now-14-ways-to-conquer-binge-buying/
Overspending money is not good at any age. Now a day especially youth people are spending money more than they are earning. As Ayesha mentioned some reasons I am totally agree with her points and I would like to add some more points of overspending of money.
• Poor planning. Those who do take the time to prepare budgets often do not figure in life's many surprises such as repairs, medical bills, or loss of income. If you do not have a budget planned, start one. Make sure you do include a reasonable amount for unknowns. Create the budget with neither an optimistic nor pessimistic view, but one as realistic as possible.
• Desire for acceptance and/or importance. People will overspend to meet either one of these desires. The problem is, those who will accept you only if you have money are not people with whom you want to associate yourself. Importance generally comes from what you choose to do with your time, not your money.
• Purchases are often made more on emotion than reason. We all are creatures of emotion and when our emotion and reason are in conflict, emotion will most often triumph. Advertisers and salespeople know this and sell based on our emotions. Think about it, how successful would a cigarette ad be if they only listed all the practical reasons why one should smoke? When we act on emotion, we tend to overlook our budget or somehow justify the purchase. It is best to purchase large ticket items or non-necessities after at least 24 hours of consideration.
• Accustomed to a lifestyle. A lifestyle is essentially a habit of living; a habit that is not easy to break. If one's income is reduced, the lifestyle is still usually maintained by increasing debt. Being forced to reduce the quality of one's lifestyle can have adverse effects on one's motivation, attitude, and overall happiness. It is best to live a more consistent lifestyle by saving and planning for times of reduced income.
http://www.yeartosuccess.com/members/y2s/blog/VIEW/00000020/00000240/Spend-Less-Than-You-Earn.html
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