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Why You’re Overspending and How to Stop

 Published on June 5, 2019

When you’re walking down the street and being bombarded by things you want to buy from all sides, it might be tough to stop yourself from making a few impulse purchases along the way. Whatever your particular indulgences are, it’s normal to fall into the habit of overspending even when you’re trying to efficiently manage your money.

The process of overspending isn’t necessarily the same for everyone. Some people might overspend by forgetting to contribute to their savings, while other people may squander away their money on impulse purchases instead of putting it towards their actual priorities, like a college fund, retirement, or travel. The good news is that once you understand why and how you’re overspending, you can start working towards better spending habits.

Let’s take a look at why you’re spending more than you should and what you can do to curb some of your bad spending habits.

Why People Overspend

People overspend for different reasons, but they can usually be sorted into one of these three categories.

They don't track their spending

person who doesn't know why they've been overspending

It can be easy to start overspending when you don’t have a clear idea of how much money you’re actually spending every day. Maybe you have a vague idea of how much you spend on lunch, gas, groceries, and whatever else you buy that day, but your idea of how much you’ve spent and the actual number can be farther apart than you think. 

Ease of use of credit cards and digital wallets

With credit cards and digital wallets like Apple Pay, it’s never been easier to make a purchase. All it takes is a quick tap of your card or phone, and you’re on your way. But this ease of use isn’t always a positive, particularly when it comes to keeping track of your spending. Even if you sit down at the end of the day and go through your bank statements or receipts, it can still be tricky to stop yourself from overspending in the moment. If you’re having this problem, you might want to think about making as many of your daily purchases as possible with cash. Physically handing over money might make you think twice before making an impulse purchase.

Minimal self-discipline

It might sound easier than you think, but when an item you want is staring you in the face, it can be hard to say no. That’s why if you’re looking to curb your overspending, it’s important to think ahead to future expenses.

Picture this: You’re driving by a McDonald’s on your way home from work when you suddenly hear your stomach grumble. You pull into the drive-through and excitedly wait your turn to give your order. After all, $10 is a small price to pay to satisfy your hunger.

The problem here is that it’s easy to see the immediate value in spending those $10 in the moment, but it can be difficult to look ahead and see areas where it may serve you better in the future. When was the last time you contributed to your retirement fund? And how much money do you have stowed away in case you run into an unexpected expense that needs to be taken care of right away?

How to Stop Overspending

It’s important to start by understanding why you’re overspending in the first place. The next step to curbing these impulses is to start implementing some better financial habits.

Make a Budget

If you want to stop the cycle of overspending, you’re going to need to take a hard look at what you’ve been putting your money towards. But this may not be as easy as it sounds when you haven’t been properly tracking your spending. That’s why you’ll need to put together a thorough spending plan.

budget to stop overspending

There are plenty of different budgeting techniques out there; the key is finding one that works for you. Maybe you like to visualize your monthly expenses on a budget calendar, or maybe you need to budget for an irregular income. Whatever method you choose, just make sure you’re keeping track of how much money you have coming in, how much you need for bills, food, and rent, and exactly what you’re spending your money on.

If you need some more ideas to get your budget started, take a look at our Ultimate Budgeting Guide or check out these free personal finance apps that can help you manage your monthly expenses.  

Work towards small goals

It’s important to the think about your long-term financial goals like your retirement or your children’s college fund when your organizing your budget, but these things might seem so far off that they feel a little out of your reach. That’s why it’s important to start incorporating smaller goals to keep you going. This might be something like putting aside $500 in savings by the end of the summer, or making the last couple of payments for your online loans ahead of schedule.

The pay off for these short-term goals is typically more immediate, so they may help to motivate you along the path to your eventual long-term financial goals.

Automate your savings

You may have tried to limit your overspending in the past, but just couldn’t manage to curb your impulse purchases when push came to shove. But what if you had no choice?

automate savings to stop overspending

Having a portion of the money from each paycheck automatically deposited into your savings account – or having some sort of automatic transfer in place – is a great way to limit the amount of money you have on hand to spend.

It’s not always exciting to be putting all of the extra money you’ve saved into your emergency fund, so use a small portion of these savings for something you enjoy. Maybe you want to start putting a little money aside here and there for a family road trip, or maybe you just want a fun night out at a restaurant at the end of the month. Whatever your personal priorities are, use a bit of these savings to enjoy yourself and keep you motivated.

Leave room for moderate spending

When you’re trying to curb your overspending, cutting out all of your extra curricular spending may not be a recipe for sustainable success. Punishing yourself for letting your spending get a little out of hand can backfire. If you’re depriving yourself of every tiny luxury, like the occasional lunch outing or pricey latte, you may be more prone to going overboard when you do finally decide to loosen the reigns on your saving habits.

Instead of cutting out all of your discretionary spending, budget out a certain amount each month to use on these little luxuries. It helps to break your budget down into budget percentages so you know exactly how much money you have for each portion of your budget, including discretionary expenses.

Don’t let overspending derail your finances

We’re all prone to making the occasional impulse purchase when we’re out and about, but when it becomes a habit, overspending can end up being a real problem. That’s why it’s important to start recognizing why you’re spending too much in the first place. Once you have that covered, you can start to implement some healthier financial habits into your life. The key is to stay organized, keep track of your spending with a budget, and slowly start to cut out some of the problem areas. If you can manage to curb some of your bad financial habits, you may have an easier time working towards your long-term financial goals!

Do you have tips for cutting back on overspending that you don’t see listed here? Share below!

Posted in: Financial Tips

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see MoneyKey's Terms of Use.

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