International Baccalaureate (IB) Practice Exam

Which of the following is a consequence of spending more than you make?

1. Missed opportunity to save and invest

2. A cycle of debt

3. Stress

4. All of the above

The correct answer is: All of the above

Choosing to spend more than you make leads to several negative consequences, all of which compound financial instability. First, the missed opportunity to save and invest occurs because funds that could have been allocated for savings or future investments are instead used to cover excess spending. This reduces the potential for wealth growth over time, limiting financial security in the long run. Additionally, spending beyond one's means can create a cycle of debt. When expenses exceed income, individuals often resort to borrowing to meet their financial obligations. This can lead to accumulating debt, as reliance on credit becomes necessary to maintain living standards, which further exacerbates financial challenges. Moreover, financial pressures can result in stress. The worry of managing debts, inability to save, and the constant struggle to align spending with income can lead to significant emotional and mental strain. Given these interconnected consequences, the answer encompasses a comprehensive understanding of the repercussions of financial mismanagement, highlighting the risks and stresses associated with overspending.