Even if you’re trying to create good financial habits or stick to a savings plan, overspending is easy to do and can quickly throw you off track.
Overspending is spending money on things you don’t need, making impulse purchases rather than focusing on savings or other priorities (like retirement, education, or a home), or indulging when you can’t actually afford it. Most of the time, it’s the little purchases you’re not paying attention to that add up quickly.
Even if you find yourself overspending, there are a few things you can do to break the bad habit and get back on track. Here are five major causes of overspending and ways to avoid them.
1. No Budget
When you create a budget, you start by analyzing how much money you’re making and earning vs. how much you’re spending each month. You also take time to document existing debt and develop a plan for paying those debts off (i.e., with a debt consolidation loan). The next step is to create a plan for spending and saving, both on necessities and wants.
However, without understanding how much you make and how much you spend, and creating a plan for your spending, it’s easier to overspend. Budgeting can be made simple using a free online tool or mobile app, or you can just use a pen and paper, but it should be the first step in avoiding overspending.
2. Managing Feelings
When some people are stressed, sad, anxious, or bored, they turn to spending money to alleviate those feelings. They may feel stronger impulses to make unnecessary purchases for themselves as “treats” to boost their mood. Mindless browsing, shopping or spending out of boredom can not only be a sign you’re avoiding focusing on something or procrastinating, but also easily lead to overspending.
These impulse purchases mean you’re likely buying things you don’t need, didn’t plan to buy, and sometimes don’t even really want. Instead of swiping your credit card, find an alternative to managing those difficult feelings. For example, take a walk or exercise, read a book, play with a pet, visit a friend, write in a journal, meditate, or find another healthier form of stress-relief.
3. Confusing ‘wants’ and ‘needs’
Do you really need new clothes, new shoes, or to eat out at your favorite restaurant? Or are they just something you want, but are trying to justify as a need? Or, while you may actually need a laptop or computer for an educational or work requirement, do you need the latest version or the most expensive brand?
When we tell ourselves a ‘want’ is a ‘need,’ we can convince ourselves it’s ok to spend unnecessary funds. However, it doesn’t take long to cross the line to overspending. If you’re thinking about making a purchase, consider what is actually a necessity vs. what is a nice-to-have. While a new pair of shoes is nice, if you already have several pairs you can wear, you likely don’t need to spend that money.
4. Rewarding Yourself
When people achieve milestones in life or something big or exciting happens, they often celebrate or treat themselves to a deserved reward. In reality, this is just an excuse to spend money unnecessarily.
While we should celebrate the exciting things in life, it doesn’t have to be by running out and going out to fancy dinner or buying something from the store. Make a plan in advance for a reward for a milestone you may hit so you have time to save. You can also treat yourself, but set a reasonable budget for how much you’ll spend and don’t go over that limit.
5. Using a Credit Card
Paying with a debit or credit card is convenient, but it’s also more challenging to monitor your habits and track how much you’re spending. It’s also much easier to swipe the card without really knowing the cost of purchases.
If you use a credit card, set up alerts to let you know each time you spend money and how much the total was. On a weekly and monthly basis, review how much you spent and what you’re spending on, and use a budget to ensure you’re not overspending in an area you shouldn’t be. You may also find it helpful to pay in cash for non-necessities, which makes the cost of the purchase more obvious and can make you think twice before buying something.
Other Ways to Stop Overspending
- Automate and prioritize your savings
- Create small, reasonable goals for saving and spending
- When you do spend for fun, set a limit or spend in moderation
- Review all memberships and monthly subscriptions and cancel those you don’t use
- Reduce and organize your monthly bills, and take advantage of discounts you’re eligible for
- Don’t store credit or debit cards on websites to make checkouts easier, which forces you to be more conscious about what you’re buying
- Don’t shop without a list
- Unsubscribe from store and promotional emails, which can encourage you to spend money on items you don’t need
Caitlyn is a freelance writer from the Cincinnati area with clients ranging from digital marketing agencies, insurance/finance companies, and healthcare organizations to travel and technology blogs. She loves reading, traveling, and camping—and hanging with her dogs Coco and Hamilton.