The holidays have passed, and you have overspent again. Who knows why it happens, but it seems that what you have is never enough. You want things. You need things. So you spend without thought of the future, or even the present – you are making purchases that go beyond your income.
Reasons you may be overspending:
- Everyone else has one. The television screams that you need the new car, the fancy jewelry, or the giant TV screen that just went on sale. School children come home and insist they need the latest high-label jeans or sneakers to be popular. Advertising and peer pressure can be overwhelming, and you may start to believe you need more clothes, a newer car, or a shiny appliance to be considered “good enough.”
- Compulsion. Spending compulsively could be a serious problem, and it doesn’t confine itself to gender, age, or financial caste. Do you buy items when you feel sad or bored? Are you shopping to experience a “high” over sale items or deals? Do you pile your purchases in the closet or spare room, and never even pull off the store tags? Pay attention to the triggers that cause you to head for the mall, and don’t be embarrassed to ask for help from a qualified professional.
- There is no plan. You buy groceries with no menu or budget in place (or you ignore it). Sure, you know you should be saving for “expected emergencies” like new tires for the car or the homeowner’s insurance payment. But you aren’t sure how to incorporate it into the monthly budget, because it isn’t being paid every month. Or maybe (gasp) you don’t even have a budget.
Signs of overspending:
You are paying only the minimum amount on your credit cards.
You are probably not even aware of the total on that card – you just put that minimum payment amount on automatic. If you have maxed out all your cards, this could lower your credit score and set you up for problems if you really have an emergency and need to access that credit line. Paying only the minimum amount piles on interest and keeps you sitting in that dirty old debt pit.
How to stop it:
Write down the balance owed on each of your credit cards. I know, it hurts, doesn’t it? But it has to be done. You have to be brave and face the numbers, because if you don’t know your enemy, you can’t defeat it. We’ll talk about attacking the card balances later.
You don’t know when your bills are due, and you routinely pay them late.
Averting your eyes to the credit card balance, you pretend you have no responsibility toward monthly bills such as electricity, rent, or car payments. It hurts to think about it when you’d rather be enjoying that hard-earned money by eating, taking vacations, or buying drinks for friends. Late fees add up, and your creditors red flag your account or lower your credit limits.
How to stop it: Again, you have to be brave, grasshopper. Get your calendar (an online calendar or one with puppies that hangs on the kitchen wall – any kind will work) and write down the amounts you owe every month for everything – SEVERAL DAYS before it is actually due. Yes, at this point you must trick yourself into thinking the bill is due earlier, so you do not fall into the trap of late payments. This way, the date can’t surprise you and you have no excuses.
You take money from savings to pay monthly bills.
You find that somehow you are not making ends meet, but lucky for you there is money in that retirement fund you can use to pay for that new TV. Nearly one fourth of 401(k) participants have taken loans from their account. You are routinely borrowing from your future.
How to stop it:
Make this account inaccessible if you do not trust yourself to take money from it. Have a trusted family member hold the password to the online account, or hold the paperwork for withdrawals. Create a human firewall between you and the account, and it forces you to think more carefully about the whys of withdrawing money.
You use short-term lenders to pay bills.
Ouch. It is such a bad idea that I am hurting for you, if this is true. You are paying a modern day loan shark to keep you in debt. These loans come with huge interest rates – seriously, more than 100% in some cases. Oh, yeah, they seem nice. They tell you that you don’t have to pay off the entire loan – they’ll just roll the balance over into a new loan for a fee, and the interest keeps stamping out your dreams.
How to stop it:
This is a big one, Cronies. If you are using payday loansites, you have to make this loan your top priority for repayment. Even if you have to ask a family member for help in bringing this balance to zero, you have to do so with humility and gratitude (and make the repayment to this angel person your top priority). Take on an extra job and earmark every dime to this loan. And never, ever sell your soul again.
5 ways to stop the insanity of overspending.
Create a budget.
You are probably getting tired of hearing about budgets or reading about them on financial websites. But it is the first and most important thing to do if you want to get out of debt and stop overspending. You must take control of your money, and stop letting it control you. There are plenty of great free apps you can use, like Mint or Penny . Or you can print free budget templates (here are some examples). Everyone has a favorite, but what matters is that you are using some form of plan to monitor your expenses and income.
You can follow the snowball method of payment by eliminating the tiniest debt first. Or find the debt balance that has the highest interest rate and whittle it down. I also have a “wolf” method, where I single out the bill that is the fattest in my monthly budget, like a car payment or mortgage, regardless of its interest rate. It’s up to you.
Take on a second or third job.
It’s not easy, and if you have a family you have to make sure childcare doesn’t chew up the profit. But find something and know that you can leave once you have settled some of this debt and put your family back on track. Last year I took on a janitorial job to “wolf” some of my debt. I was exhausted, but soon I was able to rewrite my budget plan and give my notice.
If you are being buried by overspending, committing yourself to a cash allowance is the best way to break the habit of daily money waste. Every time you feel the urge to buy, you have to count the cash and decide if you can afford it. You think twice about the importance of that new sweater if you use your weekly lunch allowance to buy it. Find ways to have fun without spending money.
Decide what is important.
It isn’t stuff. The people you love are important. Experiences are important. Enjoy your money, instead of becoming an employee to it. You have created the problem, and you have the power to change it. Make your time matter. You can do this!