Overspending & Some $1,600 later…
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The wall that was supposed to be free to knock down, actually turned into a $1,600 remodel project. While remodeling our kitchen was not what we had planned, the kitchen project sort of just escalated, similar to how most over spending occurs.
Just like how some…
- Vacations never meet the budget.
- Weddings end up costing a fortune.
- Small home projects turn into kitchen remodels.
- Car repairs turn into new cars.
- And so on.
All of the above I can say I am personally guilty of, but at this point I can only imagine… but you might be shaking your head in agreement. We all make poor spending decisions from time to time, but over spending is becoming more and more of an issue for American adults, especially millennials.
A recent USA Today news article showed that Americans “Nonessential” spending is out of control, spending a whooping $18,000 per year.
Just see the chart below:
|Takeout or delivery||$177.08|
|TV & online streaming services||$23.09|
While going way overboard on a kitchen remodel wasn’t on the list, $18,000 in overspending is a lot of money.
Some of the above spending may be deemed as “Necessary spending” and there is nothing wrong with grabbing a bite to eat out at lunch, but spending $700 or more each month on drinks and food is over spending – no matter how much you make.
Simply reducing the numbers in half is an extra $9,000 per year to pay towards your future. So if overspending is getting out of control, how do you stop overspending?
Here are 10 ways to help…
10 Steps to Stop Overspending
1. Set a budget for spending categories
A Gallup poll infamously published results showing that only 1 in 3 adults use a household budget. So while some might say they have a spending problem, it might really just boil down to a budgeting problem.
But is budgeting really that important?
According to Forbes, in early 2019 it was estimated that 78% of adult workers were living paycheck to paycheck. On top of living paycheck to paycheck, according to Friedman,
“More than 1 in 4 workers do not set aside any savings each month.”
So in other words, not only were most adults not saving, they were overspending…clearly. Simply starting a budget and beginning to understand your spending habits is essential to stop overspending.
Think about it, how can you take control of your spending if you are not even aware of your spending problem in the first place?
2. Identify high spending areas
Once you start a budget you will quickly be aware of your high over spending areas.
Sort of like when you go to the dealership and look at a car you really like, then all of a sudden you see it everywhere – money works the same way. Bringing attention to your high spending areas will help you take control of your spending.
For example, if you’re the person from above who is spending $350 per month on delivery and lunch, chances are you were not even aware of this (If you were see #9 below). Now that you are aware you have identified a weak spot or a gap.
Knowing what to avoid and where you spend most of your money will help you stop overspending in those areas.
3. Know your weak spots
A key to stop overspending is to identify your spending triggers.
If you know everyday at 3:00 you feel a little tired, which means you walk to the vending machine and buy a soda, come up with a solution. Or maybe you go grocery shopping after work before dinner – when you’re starving – and you buy more food then you should.
Regardless, we all have tiggers or weak spots that sometimes allow us to compromise our spending. Here are a few spending triggers to be mindful of:
- Time of day. Are you someone who spends more at night or online at lunch?
- Seasons. Do you spend more when it is cold or hot?
- Mood. Spending more can be related to your current mood, be aware.
- Hunger level. Most impulse food buys boil down to cravings and hunger level.
4. Track your spending
You set up a budget, you identified the categories where you waste most of your money and you even figured out you should avoid the grocery store late night… now it is time to track your spending.
Truth be told, it has never been easier to track spending with apps like Mint, Personal Capital and EveryDollar. Explore each app and see what works best for you. Figure out whether checking your app weekly or every few weeks works best for you – but make sure you check your spending.
Note: Consider setting up notifications for your high spending areas to receive alerts when approaching budget maximums.
5. Implement a 30 day no spend rule.
The best fix to your overspending… a 30 day no spend challenge.
It’s good practice in general to challenge yourself. Whether you avoid soda or stop swearing for 30 days, creating healthy habits is always a good idea. So why not create some healthy spending habits?
Here are some quick ideas to implement a 30 day no spending challenge:
- Don’t eat out for 30 days
- Don’t drink for 30 days
- Pay all your bills on the first, then don’t spend a single dollar for 30 days (Plan ahead)
- Don’t spend money going out for 30 days
- Stay off social media for 30 days
- Avoid certain food types for 30 days
- Don’t cuss (Avoid putting pennies in a jar ?
6. Checkout 1x per month when shopping online.
Prior to 1999 it was easy to avoid overspending by simply avoiding the supermarket and retail malls.
However, 20 years later with the rise of e-commerce, social media and the internet, the term shopping has taken on a whole new meaning.
Avoiding stores is a lot more challenging when you’re scrolling on your Facebook feed and the vacuum you were considering buying at the red to boutique conveniently pops up on your news feed…10% off.
Simply put one click online shopping as made over spending as easy as a click. So how do you avoid overspending online and impulse buying from your phone?
Checkout 1x per month when online shopping.
Instead of checking out every time you shop online, just add the items to your online cart. Then on a set day of the month, go and review all of the items in your cart. Why is checking out monthly so powerful:
- Checking out online 1x per month will cause you to eliminate items that you really don’t need
- It takes impulse buying and spending out of the equation
- You really begin to harness your online shopping
- All of this will create more spending awareness (See #2 above)
7. Prevent overspending by using cash.
Dave Ramsey is notorious for harping on using cash and the envelope system. If you find yourself struggling to curb you overspending, it may be time to splurge on a sharpie and some white envelopes.
Give each envelope a name such as “Food” or “Gas” and set aside cash on the first of each month. Using your budget from #1, you can spend what is inside the envelope. Most overspending boils down to convenience and habit.
It is estimated that adults who use plastic cards consistently spend 12-18% more when compared to cash spending. The tangible cash spending psychologically prevents overspending.
Just make sure to either cut up your credit cards or to hide them from yourself so you don’t grab them if you happen to run out of your allowance.
8. Don’t be too hard on yourself
You’re bound to overspend again, if in the event you do, don’t get too down on yourself.
While you should hold yourself accountable, if in the event you break one of your personalized spending rules, don’t beat yourself up. Falling completely off the wagon is much more detrimental than taking a quick step off the wagon.
If in the event you can’t seem to stay on the wagon, it may be time to get some real help.
9. Get help
It is OK to ask for help in life, especially when it comes to your spending. Sometimes spending can be more psychological than anything and even a sign of other issues (There is such thing as retail therapy).
Getting help to curb your overspending can come in many forms, here are just a few to consider:
- Find a trusted friend or family member to talk with about spending
- Use a trusted mentor or financial adviser to look at your finances monthly
- Have monthly meetings with your significant other to discuss spending
- Stop justifying spending
- Create an accountability system
- Seek professional help if needed
10. Set some priorities.
Overspending can mean many things, but once you set some priorities it typically gets easier to avoid spraying your money.
Maybe you decide you want to save 10% of your income or finally knock out your student loans. No matter what your financial goals are, setting some priorities will help curb your overspending habits.