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How do you stop overspending when you just love to go shopping? To spend some of that hard-earned cash to treat yourself? You’ve busted your butt working from 9 to 5, Monday through Friday, so of course, you deserve it, right?
There’s actually nothing wrong with this scenario. You should encourage yourself to enjoy the rewards of your effort. The issue is when you’re recklessly spending your income because you decided you want to completely ignore your financial reality.
Let’s tackle this subject, this pink elephant in the room: overspending. How often do you find yourself making a misfortunate stop at the mall, right after getting your paycheck but before budgeting your monthly expenses? You’re happy carrying bags from your favorite stores, and when you look into your bank account there’s hardly any money left. Where did it all go? If you answered “too often to count”, then we have a problem.
It’s ok if you want to reward yourself, as long as you can afford it. That means that you’re not stuck in unplanned debt. It’s ok to fall to owe money if it is an inexpensive loan, with an important purpose, like buying real estate, a much-needed car, college tuition, or solving an emergency. It’s not ok when it comes from filling gaps or supplementing monthly expenditures with a credit card.
If this is your situation, you have to change your spending habits. You should not let your lifestyle rule your finances. Ask yourself: On my salary, what is the best possible way of life? Instead of: How can I afford to live the lifestyle I desire?
Why Do We Overspend?
There are a lot of factors that prompt reckless spending, but to achieve a healthy relationship with money, you have to identify them, change your habits, and most importantly, you have to do it the right way to make sure this new dynamic towards spending is for the long-run.
Maybe your wastefulness is due to deep-rooted issues that are distressing you. If this is the case, you might need support from a therapist to help you recognize the emotional or psychological triggers that drive you to this unhealthy spending behavior.
It’s been proven that shopping can release dopamine into your system and create excitement. A natural high. (source)
Whatever the issue, here is a list of the most common causes of overspending and feasible ways to help you curb temptation and stop overspending.
1. Your Desired Lifestyle is Bigger Than Your Budget.
This is a very common situation, especially nowadays, with so much pressure to project a lavish lifestyle on social media. It’s extremely challenging to cut back on expenses and give up living you the way you enjoy and love, but if it’s causing you debt, you have to cut back.
Maybe you feel the need to compensate because you felt deprived growing up, or you come from an affluent family and you wish to continue spending your earnings unrestrainedly, even if it’s out of your means.
Solution: Our economy often fluctuates, so you should adjust your expenses accordingly. Learn to live within your budget and prepare yourself with at least three months’ worth of bills saved for any hardship. If you notice that you don’t set limits to your expenditures because you’re repeating your parents’ financial habits, break the cycle and find a new financial role model.
2. You Seek Retail Therapy.
You can’t control everything that happens in life, but you can control how you react to stressful circumstances. Don’t go shopping to relieve yourself from anxiety, sadness, or anger. Splurging on a new wardrobe can be a fast solution to your negative emotions, but it will be costly in the long-term.
Solution: Only shop when you’re relaxed and able to make rational choices. Steer clear of environments that push you to shop impulsively, like malls, fairs, on holiday, etc. Find a healthy way of dealing with your feelings that will give you lasting relief, like going for a walk, to the gym or therapy, if needed.
A debt diary can be useful, too. Write down a note whenever you feel triggered to go reckless with your money. Describe your feelings, what tempted you, how you managed to control yourself, or how you felt after overspending. These techniques should help you gain control and stop overspending.
3. You Feel Pressured.
Do you feel uncomfortable admitting to your friends that you can’t afford something they can? Do they shame you because of it, or are they understanding and supportive? Some people go to great lengths to maintain an image, and some are just wealthy enough to afford a lavish lifestyle. Even good friends can be a bad influence unintentionally. If the company you keep has terrible spending habits and pressures you to be the same, it might be time to question your relationships.
Solution: Don’t pressure yourself and try to keep up if you’re accounts will end up in red numbers. Decline invitations if you don’t have the financial capability to spend as they do, or suggest inexpensive but fun plans, like picnics or potlucks instead of going out for dinner at a fancy restaurant. Focus on your personal goals and make an effort to ignore the pressure. If they are true friends, they will be understanding, supportive and would never let hanging out be the reason for your debt.
4. You’re Not Familiar With Your Spending Habits.
Maybe you haven’t even realized that you are actually overspending. You haven’t calculated how much you make a year and how much your bills are. Hey, it happens! Especially if you’re young and just moved out of your parent’s house.
Solution: Make smart financial choices by analyzing how you handle your disbursements. Pay attention to both small and big expenses. You’ll achieve this by keeping a monthly budget (which is the core to healthy finances). By doing this, you can keep yourself accountable for every dollar spent, and you’ll know on what, where and when you used it. Cutting down on the smaller payments, like your daily latte, can save you hundreds of dollars with very little sacrifice.
5. You’re Unorganized.
If you’re constantly finding yourself coming home from the supermarket and realize you bought a bunch of things you already had in your pantry or having to drive back to the store to get stuff you forgot, then you’re being unorganized with your spending.
Solution: Plan ahead! Plan your weekly meals, make a shopping list and stick to it. Shopping online can also help you stick to a budget, just beware of any temptation (like deals on things you don’t need). Imagine how much you could save on groceries and gas money!
6. Bye-bye, Plastic!
When using a debit or credit card, purchases can easily add up because you can’t physically see how much money you have left. Some folks just feel uncomfortable carrying cash and/or going to the ATM, so they would rather use their debit cards to pay for everything. You won’t notice how your funds are rapidly diminishing until you check your balance. Putting unplanned debt on your credit card, even if it’s a small sum, is setting yourself up for disaster.
Solution: Force yourself to stop relying on cards, especially credit cards. Start getting used to carrying cash, that way, it will be easier to know when to stop spending. If this seems like an impossible feat, plan on doing it for short periods, like a week. Withdraw only the amount of money you want to spend. If you overspend, you have to penalize yourself by going to the ATM.
Delete your credit card information from your favorite shopping websites, and if you must purchase online, use gift cards. Leave credit cards at home and only take them out to cover emergencies. You’re spending the bank’s money, not yours.
7. You Lack Financial Goals.
Some people are lucky enough to be completely oblivious of their finances because someone takes care of the expenses. But even if this is your comfortable reality, you can make smart choices and take advantage of the situation, especially if this scenario ever changes (a death in the family, a divorce, bankruptcy, all traumatic experiences that can pull the rug from under you if you’re not protected). It’s always smart to have short, mid and long term monetary goals.
Solution: Set short term financial goals that are attainable and can help you curb your spending habits. You’ll relish this independent, you will have your own cash for you to save, or even better, invest. A great example of a small financial goal that can result in great benefits could be reducing your going-out expenses from $200 to $100 a week. After that, work on your mid and long term goals, like starting a new business or investing in the stock market.
8. You Haven’t Realized How Much Work Things Actually Cost.
As we mentioned earlier, you deserve to treat yourself every once in a while. Maybe you want to get yourself an expensive designer purse. But are you willing to work extra hours just to have it?
Solution: If you’re tempted by an impulse purchase, consider how many work hours it is equivalent to. How much are you willing to work extra to be able to afford it? This might put things into perspective.
Before you buy something, ask yourself. Do I need it, can I afford it? Is it worth it? Can I find it cheaper someplace else? Sleep on it. If you hesitate, or your answer no, then don’t buy it. As simple as that. You’ll thank yourself later.
If you are having trouble keeping track of your spending, check out our expense tracking log in the resource library. We have this post that goes with it to help you get started.
The Bottom Line
Spending money on yourself and others can make you feel good, but if you’re over-indulging is affecting your finances, you will have to teach yourself to say no to reckless spending. Understanding what makes you spend and putting the effort of changing your monetary habits, like budgeting, will give you a better understanding and appreciation of how much work you put towards your earnings. Establish your personal and financial priorities and don’t let the consequences of overspending affect you and your loved ones. Economic hardship can have a terrible impact on mental health, homes and families.
Once you learn how to stop overspending you’ll be able to redirect your income towards your planned financial goals for the future.
For more help with tracking your savings and establishing a budget, check out these posts:
