This sounds simple right? Don't spend money you don't have. Still I can name a few occasions where I fell into this trap.

Bear trap of spending more than you earn

The first time was when I was still in college. Back then in the Netherlands I had a checking account with a debit card. Everytime you would try to get money out of your account with the debit card it would check if you had enough balance. If not it would reject the withdrawal request. Simple; no balance, no cash.

For foreign travel (back then your debit card would not work in a foreign country) you could request special travel cheques. You could cash these at any post office or  bank abroad. When the cheque was cashed, there was no real-time check if you had  enough balance in your account. I had requested a few of these cheques, but for some reason got 15 of them.

credit cheque

With these checks I managed to spend much more than the money than I received from my student stipend, and worked myself into 2000 guilder hole (about $1000). Which was large considering my monthly stipend was about 800 guilders. And after deducting fixed expenses only had about 300 to 400 guilders to live off (food, entertainment etc).

Since the negative balance was large and I was not able to pay it off. I ended up getting a notice from the bank that I was registered at the national credit registry (bkr) as having unpaid debt. Yikes, wasn't even out of college yet.

In order to pay off the debt I ended up canceling my student room. I moved back home to my parents. Then worked all summer at a green house in a neighboring town picking flowers to earn the money to payoff my debt. I still remember the flowers well: Freesia's and Baby's breath.

Nowadays creditcards make it much easier to get yourself into trouble. Ie spend more then your earn. The seduction of a creditcard is that the point where you actually need to pay up for your purchase is moved 1 - 2 months forward to your future income.

This causes a number of problems. First you lose track of the current month's balance, ie you still have cash sitting in your checking account, where in reality you already spend it. Second now your credit expenditures lost connection with your  month's income and it is much easier to overspend.

So to summarize if you want to stay ahead, don't spend more than you earn.

Photo by Nicolas Peyrol / Unsplash