The Wall Street Journal (WSJ) recently ran an article about affluent individuals and families who, despite large six-figure salaries, managed to pile up a huge amount of debt.  They cited one woman who had accumulated $300K in debt despite earning more than $200 a year.  Reader responses, unsurprisingly, were variously indignant, angry, and puzzled.  Many couldn’t understand how it’s even possible to spend that much more than one’s income.  So the newspaper followed up with a budget created for a fictitious family of four earning $400K to show how easy it is to overspend.  With an $850K mortgage, a $30K grocery bill (from shopping at high-end stores, purchasing $60 bottles of wine, and hosting numerous dinner parties), plus $60K cars for each member of the family, they managed to spend $10K more than their after-tax earnings.

Certainly creating and sticking to a budget is one good way to control spending. But not everyone is comfortable being that regimented, especially when they have a large income.  If you ever wondered if you are at risk of overspending, here are some the key warning signs:

• Buying things on impulse.  It’s one thing to occasionally splurge on filet mignon when you go shopping for chicken.  It’s quite another to purchase an Arctic Cat ATV the day after seeing one cruise by.  Even small unnecessary purchases can add up if you make them frequently enough.  How crammed is your garage or closet (or house) with stuff you don’t need?
• Considering debt to be free money.  The proliferation of credit cards makes it easy to spend more money than you currently have.  Before running up a balance on your card, do you create a plan to pay it back?  And in addition to consumer credit, many of us need to carry longer-term debt to pay for our home, possibly our cars, and even our children’s college costs.  How much total debt have you used to finance everything?  If it’s more than 50% of the total value of the assets that you own, that’s a lot of debt to have to eliminate!
• Not planning for your future.  Do you take the attitude that things will always work themselves out?  While an optimistic view of life is healthy, if you haven’t created a plan for your future, you’re leaving future success up to chance rather than taking control of it.  And you never know what might happen.  Many middle-class Americans found themselves without a house or a job after the Crash of 2008.  The common refrain was “I never in my life expected to find myself in this situation.”
• Viewing material wealth as a status symbol.  What’s unfortunate is that American culture and economic growth are both oriented towards increasing levels of consumer spending.  According to one respondent to the WSJ article, “We’re constantly bombarded by images of ‘the good life’ and made to feel inadequate if we’re buying cheap furniture, cheap clothes, and cheap cars.”  Ironically, the wealthier a family appears, the poorer they likelier are, and vice-versa, according to the book The Millionaire Next Door.  How well are you able to resist the urge to keep up with your neighbors?
• Not differentiating between “wants” and “needs.”  You may need a car. But does it really need to be an $80K Tesla Model S?

Ultimately the more you can save, the better off your future will be.  My favorite response to the WSJ article came from a retiree who reported that “At retirement, I lost [the] biggest expense that I had when working – which was saving for retirement.”