Why overspending is one of the biggest financial mistakes you can make

When it comes to money mistakes, financial advisors see them all.

One key theme, overspending, tends to crop up, whether it be on homes, a college education or even fine jewelry.

For one pair of clients, realizing how much they had spent in the past 18 months on jewelry — $1.4 million — was a shock, said Barry Glassman, a certified financial planner and founder and president of Glassman Wealth Services in Vienna, Virginia.

The following year, after meeting with Glassman, they pared those outlays down to about $8,800, which went mostly to jewelry repairs.

“When people see where their money is going, their behavior changes,” said Glassman, who is a member of CNBC’s Financial Advisor Council.

The ultra-high-net worth clients’ spending is out of reach for most consumers. But the temptation to overspend can affect everyone, no matter their income.

“At the extreme, this is why most lottery winners go bankrupt,” Glassman said.

“They feel like they’ve made it, they feel wealthy,” he said. “But they don’t realize the difference between wealth and income.”

Not all discretionary spending is negative, particularly if it is intentional and aligns with your goals, notes Preston Cherry, a CFP, founder and president of Concurrent Financial Planning in Green Bay, Wisconsin.

“There shouldn’t be social shame in spending to fund your well-being, present or future,” said Cherry, who is also a CNBC FA Council member.

But Glassman, Cherry and other experts on the council say there are certain risks that can damage your bottom line and put your ability to achieve other goals at risk.

When it comes to splurges on big-ticket items, Louis Barajas, a CFP, enrolled agent and CEO of International Private Wealth Advisors in Irvine, California, said he likes to visually show clients how their spending may interfere with their financial independence.

“This is a work on mindset over budget,” said Barajas, a CNBC FA Council member.

One big-ticket purchase, buying a home, can set people back if they take on too much house or too big of a mortgage, notes CNBC FA Council member Cathy Curtis, a CFP and the founder and CEO of Curtis Financial…