A material world indeed we live in. Rising levels of disposable income are not the only mark of our culture of consumption. It is also marked by rising levels of disposable income and a decline in personal saving by our rising consumer debts. An increased debt on the personal level is cause to worry even though economists say that consumer spending keeps the economy alive.

From 1985 to 2005 it was reported by the Federal Reserve Bank of Cleveland that there was a decline of approximately ten percent in personal savings in the U.S. At the same time the debt-to-income ratio nearly doubled. The household debt in Canada has also risen to twice the rate of the disposable income.

While we seem to think overspending is normal it is not wise. It can be disastrous. Recognize common financial mistakes and avoid them:

Unneeded Spending

A dollar at a time is how fortunes are lost. When you get that double iced mochaccino or go the movies or order something online you may not think it is a big deal but everything adds up. You spend $1300 a year with only $25 per week spent on dining out. Your mortgage or car payment could have been made with that.

Indefinite Payments

Cable television subscription radio and cell phones have continuous payments that leave you with nothing. Do you really need to keep paying for them?

Charging

It is now standard to live off borrowed money. Gasoline and groceries is just a couple of the things that will be gone before the bill is paid but people are willing to pay double-digit interest on them. The price of things charged to credit cards increases due to the interest charged for them.

New Cars

Few people can afford to pay cash for a car, but millions of them are still sold each year. Even if you can make the payments if you cannot pay cash for a new car you cannot afford one. You pay interest on depreciating assets when you borrowing money on cars. The cars value and what was paid for it become a wide gap now.

While the factory warranty is usually for ten years or 100,000 miles most people still trade cars every few years.

How Much Car Do You Need?

Most of us have to have a car. How many of us actually need an SUV? SUV’s are not only costly to buy, but to insure and gas up as well is a small fortune. Is an oversized engine worth it when you don’t have to tow a boat or trailer? If you don’t make a living with your SUV it isn’t worth the extra cost. Consider buying a car that uses less gas and is cheaper to insure and maintain when you get it.

Too Much House

When you buy a house, smaller may be better. A six thousand square foot homer is usually more than you need unless you have a huge family. Your monthly budget will decrease largely because of the taxes and upkeep of such a large house. Not to mention the utility bills.

Don’t Refinance

Your castle is your home. You give your house away when you refinance it. Thousands are spent on interest and fees. You shouldn’t be paying for eternity but building equity

Living Week to Week

You need everything you make when you overspend. This is a bad position. It could be a disaster if you miss a paycheck. It’s a matter of spending less not making more. The choice of saving should be a priority.

The Great Depression is the last time the U.S. household savings rate was at levels it is. That wasn’t even one percent in 2007. The savings rate in European countries is ten percent or more while in Asia it is about thirty percent.

Can You Really Afford a Purchase?

Small expenses add up. Begin keeping track of them to avoid the dangers of overspending. Larger expenses are next. Remember being able to make payments and being able to afford something are different. Before adding new debts consider them carefully and make saving a top priority.