Stop overspending on your entire life. Understanding and being conscious of where your money is going is the first step in financial independence.
Tracking your spending can lead to knowing how your money is being spent and allow you a better, more complete picture to create a budget.
It also helps to see in which areas you are spending too much and to stop overspending.
After looking at where you are spending your money, you can make a plan to stop overspending in those areas and control your overspending.
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Signs You Are Overspending.
- You know you don’t have the money, yet you put it on your credit card.
- Your credit card balance keeps getting bigger instead of smaller, or you are taking on new credit card debt.
- You do not have a budget or money management system in place.
- Skipping the electric bill this month to go shopping instead (and promising to pay the late bill next month).
- You have more toys in your garage than you have money in savings.
- You keep telling yourself everything is fine, yet you aren’t sleeping due to financial worries.
- At least one credit card in your wallet is maxed out.
- You have no emergency fund.
- You keep putting off retirement savings, and there’s nothing in your savings account.
Here are some solutions to overspending problems.
1. Use cash.
Having a set amount of cash for the category you tend to overspend on will limit how much you buy.
Limits are not restricting; don’t think of it that way. Consider it the freedom to spend where you like to spend. But now that you are an adult, you can cap the spending.
The cash wallet system is a great way to organize those cash categories and makes your life easier. When you only have $100 for clothes, that’s all you spend. Using cash will stop overspending immediately.
Hide your debit card and cut up your credit card. Dave Ramsey talks about this in his book Total Money Makeover.
2. Have a budget.
Having a budget allows you to allocate specific amounts of money to the necessary categories. You can name $123.78 for the electric bill or $75 for date night.
Giving every dollar a job gives you freedom and peace of mind. Creating a budget is your roadmap.
Don’t send your bank account into the negative, and stop living paycheck to paycheck.
3. Set goals.
I love goals. I love to set them and achieve them. There was a time when I would just set them and never follow through, but then I learned how amazing it feels to achieve them.
Consider long-term financial goals and short-term goals.
If you want a pool and don’t have the money to buy one, you set a goal that by spring next year, you will have the money to put one in.
The idea of setting financial goals is to delay instant gratification and to work towards something that you want.
The same would go for retirement goals. I want to buy a camper van and retire my husband in two years so we can travel.
That means I have two years to save as much money as we can ( challenging our family to save 50% of our income) so we can have some big fun. Setting a savings goal can be fun.
4. Change your mindset.
Hi. My name is Sara, and I am a total mindset nerd.
Beliefs are just thoughts you think over and over.
If you are constantly thinking about how you need that just released Michael Korrs purse because that’s what makes you look successful – even though you have only been out of college at your new job for six months and you have over $100,000 in student debt, then you are bound to overspend.
Being content with where you are and feeling grateful for the purse your mom got you last Christmas will stop some of those overspending problems. Practice gratitude and contentment every day.
5. Use sinking funds.
Sinking funds are like mini savings accounts that you create for things or expenses that you know are coming.
For example, you might add $50 to your Christmas sinking fund to have money to spend at Christmas. You might add $25 per paycheck for your dog’s yearly checkup and shots.
Planning with sinking funds will stop you from overspending because if you have the money already, you won’t put all the gifts for friends and family on credit cards and then overspend because you will be building up all that interest for the next year while paying it off.
6. Realize why.
Why is it you tend to overspend? What is it about you that triggers the overspending problems?
Understanding why you are doing something is the best way to correct the behavior.
Do you feel that you are not enough?
Are you just not interested in knowing how much you are spending?
Do you not know how to budget?
These are some serious questions to ponder. Figuring out the reason behind spending more money than you have will open the door to overcoming personal challenges in money and mind.
7. Reduce spending.
Hello Captain Obvious. To control overspending, you reduce spending. Those impulse purchases are not helping your financial situation. It’s a simple answer and a simple solution.
Discovering the difference between wants and needs is very helpful in this example. You may want new boots, but do you need them?
If you live in upstate NY, where we get four hundred feet of snow and barely reach zero degrees, then yes, you may need boots.
But if it’s a pair of three-inch black dress boots when you already have a pair with a two-and-a-half-inch heel, I bet you don’t need them.
There. I just saved you a hundred dollars.
Reducing your spending can also be done by evaluating your other bills. Can you get a better rate on your auto insurance? Has your cable bill gone up again? How about dropping cable and going with cable TV alternatives?
Evaluate and negotiate with the accounts you already have.
Check your online checking account to see if you are being charged for something you no longer use.
8. Decide what you want your future to look like.
Can you step back from the chaos of your life for a second and visualize what your future looks like?
Decide that there will be no worrying about money, and start to get intentional about your spending. If you continue to overspend the way you are, you are on a fast track to nowhere.
The things that are important to you need to take a front seat in all financial decision making.
A sound future, a forever home, investing, and saving are all very important to us. We are willing to stop spending frivolously to win with money.
9. Stay home.
Saving money by staying home is harder than a few years ago. With the ability to have everything delivered to your front door, overspending is easier than ever. Seeing everyone doing fun things on social media can lead to emotional spending to compensate.
I have fallen into this trap a time or two – especially lately.
However, setting those budgets and limits in place for yourself will help.
Also, stop saving your card information on your favorite online shopping websites and unsubscribe to your favorite store emails.
Do not use shopping as an excuse to leave the house because you are bored or have cabin fever. Don’t succumb to retail therapy, and understand your spending triggers.
Do something else instead; there are many different ways to ease the boredom that doesn’t hurt your savings goals.
10. Understand your four pillars.
The four pillars of finance are your assets, liabilities, income, and expenses.
Understanding how these work, what they are, and how they can contribute to your future and overall wealth can increase your odds of financial success.
If you overspend on liabilities, your overall net worth will not be as high as you would like. Building a healthy financial portfolio is a very adult thing to do.
Understand what a credit score is.
11. Make more money.
If you are adamant about the lifestyle you want to live, yet you keep maxing out your credit cards, then you might need to make more money.
This could consist of making advancements in the company you are now at, finding a new company, or starting a side hustle.
12. Plan for big spending.
The most financially savvy way to make a large purchase is to plan. Decide what you want, save money, and find the perfect option.
My husband wants a tractor. We have a specific amount of money to spend. So he had been shopping for one that fits our budget for weeks.
I know he seems a bit deflated because he can’t find the small one he wants with the attachments he feels he needs.
But we don’t need it. So he will keep his eyes peeled for the perfect used tractor. We have been planning for it, we have the budget, and the money is all ready to go. Because we have a plan, we are less likely to overspend.
This also goes for small spending. If you are used to thinking you need something and then heading to Amazon and clicking that “Buy Now” button before you can think twice, stop doing that.
Add everything into your cart and make the purchases you need at the month’s end.
13. Stay busy with cheap alternatives.
If you find that spending money is a hobby or pastime, consider finding things that won’t open doors to overspending.
Consider volunteering for the food pantry or senior center.
Start a blog if you enjoy writing.
Go for a hike or borrow a kayak.
There are many things to do instead of spending money to keep yourself occupied.
14. Be content and grateful.
This might be the hardest of all the list. It’s always been hard for me to find contentment. I am grateful for everything I have, but I’ve always been a “go-getter” (that’s what my high school guidance counselor used to call me). I also want it all NOW!
Don’t get me wrong. I’m not saying you should be complacent and settle. It’s essential to set goals. But you can be content with what you have yet be excited for what’s coming.
15. No spend challenge.
Stop spending altogether. Make it a game and try a no-spend challenge. Make it a day, a weekend, a week, or a year.
Refrain from any unnecessary spending and watch that account balance rise. Now, you can be as strict or as lenient as you want with this – it’s your game, but come to terms with why you are playing.
16. Meal plan.
Meal planning will stop you from ordering out or going out 98% of the time.
If you can write down your meals for the week (or month) and shop for those meals, you can then take the frozen stuff out of the freezer and mentally prepare for a quick, easy meal at home.
We all know how much a couple of pizzas cost, and it’s a fraction of how much it is out for. Steak dinner and a bottle of wine. Save those times for special occasions and stop overspending on food.
17. Communicate with your partner.
When you’re in a relationship, communicating about money and how much you are spending can make or break a relationship. One of the top reasons for divorce is money.
Understanding spending habits and creating future goals together is part of the foundation of personal finance.
Even if one person gets super anxious about budgets and the other is the budget nerd, the communication between the spender and the saver needs to be settled.
Will you sit down and have regular meetings about your finances, or will you just let one person handle it?
18. Be honest with yourself.
Be honest about what you are spending and why you are sending. Decide what kind of adult you want to be and then decide to be an adult.
Gone are the days of frivolous overspending like you, a child with no goals or responsibilities. Be honest with where your money is going and how to take control.
If you are genuinely struggling with this, consider hiring a financial coach.
19. Pay off debt.
Are you aware of how much your debt is costing you each month? Taking a good, hard look at the numbers and interest you are paying is quite an eye-opening experience.
Seeing how much that big meal costs after you are paying the interest on the credit card might come as a shock. Especially if the meal wasn’t all that good.
The same goes for the $35,000 car loan. After all the interest, you will be spending so much more than that.
Get rid of that student loan as soon as you can.
20. Don’t compete with neighbors.
Stop caring what others are doing. Stop thinking you aren’t good enough because you aren’t driving a Lexus. Stop trying to impress people that you don’t even really like.
Nobody cares – and if they do, they aren’t worth your time.
Stop overspending on things you think you need.
21. Spend less on food.
How much would you save if you were to stop eating out and prepare all your meals at home? And then, if you could cut costs at the grocery store by shipping smart and meal planning, you could end overspending on food.
There are ways to trim your grocery budget.
For more advanced savers, try grocery shopping or using coupons once a month.
Final Thoughts on How to Stop Overspending.
It all comes down to being conscious of what you are spending your money on and being intentional. Adulting is hard, I know.
But planning for your future (either immediate or retirement) is an amazing gift you can give yourself and your family.
Stop overspending on things that you can control.
Dave Ramsey: 7 Baby Steps Explained (What They Will Do)