6 Ways to Stop Overspending

Occasional impulse buying is a behavior that everyone experiences from time to time, but it can difficult to tell when it crosses the line into habitual overspending. There are many reasons why we overspend, whether it’s stress-related or simply the result of poor budgeting, and thankfully there are a number of strategies that can help address those underlying issues and bring spending habits under control.

Identify Spending Triggers

When it comes to combating overspending, a crucial but often overlooked factor is to establish what kind of environments tempt you to buy things you don’t need. Just as people tend to buy more food if they go to the grocery store while they’re hungry, studies suggest that people also tend to spend more money when they are tired and stressed out, as anxious feelings and low energy can lead to more impulsive decision-making. In other cases, shopping with friends can create pressure to make unwise purchases, especially if those friends are also struggling with overspending or impulsive buying habits. Once you’ve identified what kind of environments and mindsets tempt you to spend more than usual, it becomes easier to avoid them or to wait until the temptation passes.

Create a Spending Journal

While many people keep track of large expenses and big-ticket purchases, it’s often the small things that add up and create an overspending problem. Create a spending journal and commit to tracking every single thing you buy for an entire month, even if it’s only a $2 cup of coffee – you might be shocked by how much of your paycheck is going towards seemingly insignificant purchases.

Go “Cash Only”

Credit cards are undeniably more convenient than cash, but that convenience is exactly the reason why so many people find it easy to overspend. Handing over a card for every purchase makes it difficult to evaluate how much you’re actually spending from day to day, and paying minimum balances each month instead of paying those cards off often creates a snowball effect where interest rates make it harder and harder to dig out of debt. Instead of relying on credit cards, considering setting a spending goal at the beginning of the month, withdrawing only that amount in cash, and using only that cash to make purchases for the entire month. Switching to cash makes your spending more tangible, and it will quickly encourage you to find more creative and resourceful ways to stretch your dollars further.

Build an Effective Budget

Having a budget is one of the most important steps in curbing overspending, but not all budgets are created equal. For a budget to be effective, it needs to be realistic, comprehensive, and flexible, which means that the first step is getting a clear picture of your current financial situation. Start by adding up all of your income sources, and then tally up your fixed costs, such as rent, utilities, car payments, and debt payments. Next, look at your variable spending, such as the money you spend on food, gas, and entertainment each month. Spending in these categories can vary wildly, so expect to track your expenses for a few months before you get a clear picture of your typical buying habits. Many people also find it useful to use a budgeting app to streamline the process, and some, such as Mint, can even be synced to your credit and debit cards to track and categorize your spending automatically.

Set Short-Term Goals

Making major changes to your financial habits can seem like an overwhelming task at first, but the key is to break the process down into smaller, more manageable chunks. Setting attainable, short-term goals makes it easier to stay motivated, but it’s important to be concrete and quantify those goals whenever possible. Instead of simply saying you want to save more money each month, commit to putting 10% of each paycheck into a savings account. If you want to spend less money on dining out, consult your budget to see how much you typically spend on food each month and aim to spend half of that amount.

Find Cheaper Alternatives

For people accustomed to a certain lifestyle, cutting back and adjusting to new spending habits can be difficult. However, saving money doesn’t have to mean giving up on having fun or treating yourself–it just requires a bit more flexibility and creativity. Instead of meeting up for an expensive dinner with friends, consider hosting a potluck at home. If you’re spending too much on entertainment, look for free or inexpensive alternatives like public concerts, discount museum or zoo days, or community sporting events. Most cities and towns have a website with a community calendar, and you may be surprised to learn how many interesting, low-cost activities are available in your area.

Overspending is a problem that millions of people struggle with, and any number of influences can lead to bad buying habits. But by following the guidelines above, it is possible to address your overspending problem, take back control of your finances, and keep your spending in check for good.