A spendthrift is someone who habitually spends money in an irresponsible or wasteful manner. Often characterized by impulsive purchases, lack of budgeting, and little regard for long-term financial consequences, a spendthrift lifestyle can quickly lead to debt and financial instability. Understanding the signs of being a spendthrift, as well as its potential consequences, is crucial for developing healthier financial habits. In this article, we identify ‘what is a spendthrift?’, the consequences of being one, and how to avoid becoming one.
What are the characteristics of a spendthrift?
Despite implying that a spendthrift might indeed be ‘thrifty’, and therefore good with their money, the true meaning of a spendthrift is in fact the opposite. A spendthrift is someone who spends their money often and frivolously, usually beyond their means and without much consideration for their financial circumstances. Spendthrifts usually demonstrate some specific behaviors that set them apart from more financially responsible individuals. Some common traits include:
- Impulse buying: spendthrifts often make purchases on a whim, without considering whether they can afford the item or if they truly need it.
- Living beyond their means: a hallmark of spendthrift behaviour is spending more than what is earned, leading to reliance on credit cards or loans to fund a lifestyle that can’t be sustained by their income.
- Lack of financial planning: spendthrifts typically don’t maintain a budget or save for future expenses. They may also fail to set financial goals or invest in their long-term financial well-being.
- High debt levels: as a result of their spending habits, spendthrifts often accumulate significant debt, especially from credit cards or personal loans, which can spiral out of control over time.
What are the consequences of being a spendthrift?
Engaging in spendthrift behaviour can have serious consequences, including:
- Debt accumulation: constant overspending can lead to unmanageable debt, particularly high-interest debt from credit cards. Over time, this debt can become overwhelming, making it difficult to cover everyday expenses or meet financial obligations.
- Poor credit score: with rising debt and missed payments, a spendthrift’s credit score may suffer, which can affect their ability to secure loans, mortgages, or even rent housing. A poor credit score limits access to affordable credit options, exacerbating financial problems.
- Stress and anxiety: financial instability caused by overspending can lead to significant mental health problems including emotional stress, anxiety, and even depression. The weight of debt and constant financial worry can take a toll on both mental and physical health.
- Limited future opportunities: without saving or investing, a spendthrift may struggle to afford major life expenses such as buying a home, funding education, or planning for retirement. This lack of financial foresight can lead to long-term difficulties.
What should you do if you think you’re a spendthrift?
Your own financial habits will alter your view of whether you may consider yourself or a loved one to be a spendthrift. The more careful you are with your finances, the more likely you are to consider somebody not so careful to be a spendthrift, and vice versa. Here are some of the key indicators that you may be a spendthrift:
- You’re unable to, or decide not to, save and then buy non-essentials
- You find it very difficult to leave any money in a savings account
- You often make impulse purchases, even if the money is needed for essentials like rent and groceries
- You resent others who might suggest you’re overspending
- You consider spending as you wish to be a ‘right’
How to avoid being a spendthrift
If you recognize spendthrift tendencies in yourself or others, it’s essential to take action to regain control of your finances. Here are some practical steps to consider:
- Create a budget: start by tracking your income and expenses to see where your money is going. Developing a realistic budget and sticking to it can help you identify areas where you’re overspending and allow you to allocate money toward savings and debt repayment.
- Limit impulse purchases: avoid the temptation of impulse buying by giving yourself time before making non-essential purchases. Waiting 24 hours or longer can help you determine if the purchase is necessary and avoid buyer’s remorse.
- Set financial goals: establish short-term and long-term financial goals, such as paying off debt, building an emergency fund, or saving for a major purchase. Having clear goals can help you stay motivated and focused on managing your money better.
- Use cash or debit: avoid relying on credit cards to fund everyday expenses. Using cash or a debit card can help you stay within your budget and prevent unnecessary debt.
- Seek professional advice: if you’re already dealing with debt from overspending, consider speaking to a reputable Licensed Insolvency Trustee (LIT). Licensed Insolvency Trustees are the only professionals legally able to file all forms of debt relief, making them well placed to advise you on the best way to begin a fresh financial future,. They can help you assess your situation and explore your options, such as a consumer proposal or bankruptcy. At Spergel, our Licensed Insolvency Trustees have been helping Canadians to gain debt relief for 35 years.
Is there a cure to being a spendthrift?
Unfortunately, it’s not always possible to change a person’s habits and attitudes related to money. Often, an individual will need to want to change in order for a difference to be made. If you recognize the signs of a spendthrift in yourself or a loved one and you or they want to change, there are some steps you can take to better manage your spending habits:
- Firstly, you need to admit and recognize that you have an issue with your spending, and then commit to making a change.
- Get a clear idea of your spending habits by keeping a detailed spending tracker for at least a month.
- Create a budget, which will help you to understand your financial situation in detail and to identify areas that need to be improved in order to get out of debt.
- Stick to your budget and your plan to become debt free.
- Resist spending money that you don’t have.
- Stay committed to the process.
If it’s too difficult to handle your spending habits alone and you’re finding yourself in spiralling debt, speak to a Licensed Insolvency Trustee for support. Behavioural specialists may also be able to help to change your habits.
What is a spendthrift? FAQs
Here are some of the most common questions we receive about being a spendthrift:
What is a spendthrift trust in Canada?
A spendthrift trust in Canada is a legal arrangement designed to protect the assets of a beneficiary who may be prone to irresponsible spending or poor financial management. The trust places control of the assets in the hands of a trustee, who manages and distributes funds according to specific terms, often providing regular payments to the beneficiary. This helps prevent the beneficiary from squandering the assets or being targeted by creditors, while still allowing them to benefit from the trust over time. Spendthrift trusts are often used by parents or guardians to secure a financial future for their dependents.
What makes a person a spendthrift?
A person is considered a spendthrift if they habitually spend money in an excessive or irresponsible manner, often without regard for their financial limits or long-term consequences. Several factors can contribute to this behaviour, including impulsiveness, lack of financial literacy, emotional spending to cope with stress, or a desire for instant gratification. Spendthrifts may frequently make unnecessary purchases, fail to budget or save, and rely heavily on credit, leading to mounting debt and financial instability. Social influences, like pressure to maintain a certain lifestyle, can also contribute to spendthrift tendencies.
What does a spendthrift do?
A spendthrift frequently engages in impulsive or excessive spending, often buying things they don’t need and living beyond their financial means. They may disregard budgeting or saving, prioritizing immediate gratification over long-term financial stability. Spendthrifts often rely on credit cards or loans to fund their purchases, leading to debt accumulation. They might make unplanned, extravagant purchases, ignoring the potential consequences on their financial health. This behaviour can result in financial instability, poor credit, and the inability to meet future financial obligations.
What is the difference between a spendthrift trust and a regular trust?
The main difference between a spendthrift trust and a regular trust lies in the control and protection of the trust assets. In a spendthrift trust, the assets are managed by a trustee and distributed to the beneficiary in a controlled manner, protecting the beneficiary from their own poor financial decisions or from creditors. The beneficiary cannot access the principal of the trust or make decisions about how the funds are distributed, which is ideal for someone with spendthrift tendencies or who might be vulnerable to financial exploitation. In contrast, a regular trust typically provides the beneficiary with more direct access to the assets, depending on the trust’s terms. The beneficiary may have greater control over the distributions, and there may be fewer protections against creditors or irresponsible spending. Regular trusts are often used when the beneficiary is financially responsible and does not require additional safeguards.
Being a spendthrift can lead to serious financial problems, including mounting debt, poor credit, and long-term financial insecurity. However, with awareness and a commitment to changing spending habits, it’s possible to avoid the pitfalls of a spendthrift lifestyle. If you’re struggling with debt from overspending, Spergel’s team of Licensed Insolvency Trustees is here to help. Contact us today for a FREE, no-obligation consultation and take the first step toward regaining control of your finances.
