We make plenty of mistakes with our spending, but one that’s popped up often over the years is this:

We spend money we don’t have.

While usually the backstory involves some kind of good intentions, in hindsight we could only conclude that we spend money that we didn’t have.

Dumb.

How is this possible? And why would we do such a foolish thing?

Example #1: Credit

This is perhaps the most obvious example. We might typically think of splurging on a new high-priced item and rather than saving up the amount in full, we just swipe the card. But the same pattern holds true if your paying for less extravagant purchases on credit.

Note that I’m talking about situations when you truly don’t have the money. You’re buying on credit because you don’t have the funds to cover the cost upfront.

So if you’re using the card as a tool to facilitate a transaction but paying the balance immediately, you’re not spending money you don’t have.

Example #2: Hope-So Money

We run into this one all the time. We anticipate some extra income from selling some items on eBay. Or we plan to realize a bit of extra savings for one reason or another.

If we’re not careful, our mind will easily consider the money as part of our available funds. We’re going to get for selling the highchair on Craigslist. We’ve listed it for $90 but plan to accept $80. We already have several inquiries. Seems like like a good bet. Because it’s almost a sure thing, we go ahead and spend the $80.

We may not have spent the $80 on something frivolous. We may have bought something useful–at a bargain price no less. But unless the sale of the highchair was completed and we have the full $80 in our pocket, we’re counting our chickens before they hatch.

This can be a hard one to correct because most of the time our plans do pan out. But occasionally it bites us.

When we spend “hope so” money, we’re not being wise. We ought to simply have the discipline to be patient and wait until we truly have the money. Patience.

Example #3: Shuffling Accounts

Another related example is found anytime we have to prematurely pull money from one category to cover another one. For example, our electricity utility bill might be $170 per month. But it’s not due until the 18th of the month.

It’s really easy for an undisciplined spender to “borrow” $170 to deal with a more immediate expense in another category. If it’s only the first of the month, it’s easy to feel like there is enough time to make up for lost ground.

But if I do that, I’m spending money I don’t have. Even though it hasn’t left my account, that $170 is spoken for. I need to consider it as good as gone. It’s dead to me and under no circumstances should I kid myself that it’s in any way available for any other purpose.

Our Rule of Thumb

We’ve ended up with this family guideline:

Don’t spend money you don’t have.

It’s a cut and dry litmus test for spending. One of the things that I really like about it is that it doesn’t consider what you’re paying for.

You may want to splurge on an expensive meal. You may want to replace your son’s shoes. You may want to buy a few basic groceries. You may want to donate money to an orphanage. You may want to take a “much needed” vacation.

The purpose really doesn’t matter. Only spend money if you truly have it. For our own household, we’ve decided that even the best causes have to wait if we don’t presently posses the money we intend to spend.

What are some situations where you’ve found yourself spending money you don’t have?