Overspending is a common problem. You may have a budget you’re happy with, but then you hit the supermarket when hungry and stock up on all kinds of gourmet ingredients that send your food bill soaring. Or a friend offers you a ticket to a concert you’ve been dreaming of seeing…how could you pass up that opportunity? Or maybe your sweetie is in a crummy mood and splurge on a not-so-little something to cheer them up.
Overspending, or spending more than you can actually afford, can feel good in the moment. If, however, you wind up short on cash for necessities or dealing with credit card debt, you’ll likely realize it’s not so fun or financially savvy.
Breaking the overspending habit doesn’t have to be hard or feel like deprivation. In fact, it can teach you valuable money lessons, such as how to track your spending, understand why you may shop too much, and learn to set savings goals.
In this guide, you’ll learn smart ways to control excess spending and improve your money habits.
Here are 9 tactics that can help you take control and stop spending money.
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1. Following the Money
One way to gain control over spending is to actually track how much you’re spending each day (that includes every cash/debit/credit purchase you make, plus every bill you pay) for a month or so.
You can do this the old-school way, by carrying around a pad and pen or simply saving all of your receipts and then writing up a list. Or you might input these expenses into a spreadsheet on your computer.
There are also a number of apps that can make the process of tracking your daily spending easy. Your financial institution may have tools for this.
Once you start tracking your expenses, you may be surprised by what you discover. Spending tends to be so frictionless these days, many of us really don’t really have an accurate sense of how much money we are actually spending.
Seeing it clearly laid out can help you think twice before buying something nonessential, and also help you become more intentional with every dollar.
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2. Setting up a Budget That Works for You
Once you’ve done the work of tracking your monthly expenses, you may next want to compare this to how much money (after taxes) is coming in each month, and set up a personal budget.
This involves putting your spending into categories and also listing them in order of priority. Some of your expenses are necessary, such as rent and utilities, and would go high on the list, while others, like clothing, travel, and entertainment, are more “nice to haves” and would go lower.
When creating a budget, it is important to allot money for both necessary and unnecessary spending each month. You may also want to allot a category for saving towards your short- and long-term goals, whether it’s building an emergency fund, coming up with a downpayment on a home, or funneling more money into your retirement fund.
In terms of how to allocate your funds, there are several types of budgets you might try.
Financial planners often recommend dividing your after-tax income into three buckets according to the 50/30/20 rule:
- 50% on needs
- 30% on wants
- 20% on savings
Once you set up these spending parameters and know how much money you can put into each bucket, the next step is to try to keep your spending in line with these goals.
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3. Identifying Areas Where You Can Cut Back
To make it easier to spend within your budget, you may want to take a look at your list of expenses and find areas where you may be able to prune back.
- You might find you mostly watch streaming services yet are still paying for a pricey monthly cable package. You could then take the cable plan down a notch or reduce the number of subscriptions and save on streaming services.
- You might see that you’re paying for memberships you no longer need or use.
- If you’re grabbing take-out most nights, you might consider cooking at least a few nights per week.
- You could likely also spend less on coffee, too, especially if your once-a-week fancy coffee habit has gotten more frequent.
- Another way to stop overspending: See if you can snag a discount by bundling your insurance, if you don’t already. That typically means having your home and auto insurance with one provider. This is a way to be a smart consumer that doesn’t involve going into any stores but could help you save a chunk of change.
Everyone spends differently and will likely have expenses they are used to paying for, but it’s possible that some of those expenses might not be that necessary, or even wanted anymore.
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4. Consider a One Month Spending Freeze
Here’s another idea for how to stop overspending: Put yourself on a 30-day nonessential spending freeze. Or, if that seems too tall an order, you might pick a category (such as clothing) to stop spending on for a month, or agree to not buy anything at a specific retailer for that period.
A spending freeze can immediately pay off by leaving more money in the bank (or fewer bills) at the end of the month.
Once you start seeing the payoff of not giving in to impulse buying, you may find yourself cutting back on spending even after the freeze is over.
Another benefit of a spending freeze is that, if you typically spend money when you are bored, this practice can help you break the habit.
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5. Switching to Cash
Another of the best ways to stop overspending is to minimize your use of plastic. It’s easy to spend money when only using credit cards and debit cards. You may not realize how much money flows out of your accounts when you swipe and tap your way through the week.
Whenever possible, it can be a good idea to use cash so that it’s easier to track where money is going. Consider taking out enough cash at the beginning of the week to cover your daily expenses to help you stick with your budget.
Or you might want to try the envelope budget system. This involves gathering a bunch of envelopes for all your variable expenses and labeling each one according to how much you’ve allocated in your budget. Then, put that amount of cash inside for the next week.
When the money is gone, it’s gone: Stop spending. You could borrow from another envelope, if possible, but the idea is to work with what you’ve got.
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6. Unsubscribing
Another tactic for how to avoid overspending involves removing temptation. If your in-box is often cluttered with emails alerting you to sales at your favorite retailers, you may want to think about getting off these email lists.
Sales and great deals happen all year round, but generally the best time to purchase something is when you really need it. Even if you don’t find that needed item at its lowest ever sale price, so be it. When you don’t get lots of sales notifications and only shop when you truly need something, you will likely end up spending less. The reason: You aren’t overbuying simply because things are on sale.
Unsubscribing could quickly translate into more cash at the end of the month.
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7. Asking the Right Questions When Shopping Sales
When shopping in stores, it can be tempting to pick up something on sale as a smart way to save money. However, this practice doesn’t always pay off, particularly if you’re purchasing items you really don’t need.
Before purchasing something on sale — no matter how good the deal is — consider answering the following questions:
• Am I buying this only because it is on sale?
• Do I really want or need this item?
• Will this add to my credit card debt, and is it worth doing that?
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8. Shopping Smarter at the Grocery Store
Consider these ways to save money on food:
- Make a shopping list, and only buy items on that list.
- Plan meals ahead of time, and stock up on the exact groceries needed for that meal.
- Buy produce that’s in season and less expensive.
- Stocking up on favorite non-perishables when they’re on sale.
- Sign up for store reward membership programs (if free), and use coupons (which can often be found in newspapers, online at the store or manufacturer’s website, and on coupon specific websites) whenever possible.
- Shop low: Food stocked on the shelf closest to the floor tends to cost less than that at eye level.
- Pick store brands, which often cost less but can be of similar quality to higher-end products.
- Check to see if purchasing a larger size offers a better value, as long as you will use it before the expiration date.
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9. Creating Short- and Long-term Savings Goals
Overspenders are often focused on the here and now (immediate gratification) and may think less about how their spending can affect them in the longer term.
A great way to resist the urge to overspend is to create some savings goals. This might mean having enough for a downpayment on your dream home or building up an emergency fund for financial peace of mind. Or maybe you’re looking to buy a car or renovate your kitchen in a couple of years.
Whatever you’re saving for, you may want to set up an account precisely for that purpose. As your account grows, you can gain motivation.
Consider putting the money earmarked for a short-term savings goal in a place where it can earn higher interest than a traditional bank account but will allow you to access your money when you need it. Some good options include an online savings account, money market account, or a checking and savings account.
You may also want to consider your long-term goals, such as putting more money into your retirement account (if you aren’t already contributing the maximum allowed per year).
Another tip to try:
Automate your savings so money is whisked from your checking account into your savings before you’re tempted to spend it. This can be a simple but powerful way to make progress toward savings goals without having to invest any effort.
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The Psychology Behind Overspending
The causes of overspending can vary from person to person, but here are a few to know about:
- Lifestyle creep: This means your spending rises along with your income, so you may not make progress towards your financial goals nor building wealth. If, say, you get a $10K raise and move into a more expensive home and lease a luxury car because you feel as if you deserve it, you might wind up netting less money in the bank than before.
- FOMO (fear of missing out) is another reason why people may overspend. In a nutshell, it means that you see friends, coworkers, or social media influencers spending on items and experiences, and you think, “Hey, I’m going to do that too.” Whether it’s overt peer pressure to go on a pricey vacation or subtle forces at work, this kind of “keeping up with the Jones” can lead to overspending.
- Boredom. Some people shop as a form of entertainment that fills empty hours. If you spend an afternoon stopping by boutiques, it’s probable that you’ll be tempted to spend.
- Emotional issues, such as feelings or depression or past deprivation, that make retail therapy seem like a great idea.
- Analyzing and understanding your overspending (whether you do so on your own, with a trusted friend or family member, or with a therapist) is an important process as you move toward reining in the habit.
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How Overspending Stops You From Reaching Financial Goals
Overspending can prevent you from reaching your financial goals in a few different ways.
- Excessive spending can throw off your budget. If you purchase a pricey new flat screen or go out to eat too often, that could mean that your budget is thrown off. You might be strapped to make a monthly loan payment or put money towards your retirement fund or vacation savings. You will need to juggle and reallocate money to get back on track.
- If you overspend, you may rack up credit card debt. This is a form of high-interest debt and can be challenging to pay off. That can, in turn, make it more difficult to save for other goals.
- You may not be able to build wealth. If you overspend, you may be living paycheck to paycheck rather than building positive net worth.
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Stop Overspending, Start Saving
How to not overspend? You may not be able to completely reform overnight. But by tracking your spending, setting up a basic budget, and altering some of your everyday habits, you may soon be able to gain control over your financial life and start reaching your short- and long-term savings goals.
One way to help keep spending in line (and jump-start savings) is to find the right banking partner, one that helps your money grow faster and gives you the tools to budget well.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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