Overspending is a common financial pitfall that can lead to complete disaster. Okay, maybe that’s a little overly dramatic, but it can definitely lead to stress, overwhelming debt, and keep you from reaching your long-term financial goals. (Which actually can be pretty disastrous!) It’s easy to fall into the trap of spending more than you earn, especially with credit cards and online shopping. Luckily, there are a few simple things you can do to protect yourself from overspending.
1. Create a budget
The first step for how to stop overspending is to create a budget. A budget provides you with a clear overview of your income and expenses, helping you understand where your money goes. Start by listing all your sources of income and then list all your expenses, including fixed bills (rent or mortgage, utilities, car payments), variable costs (groceries, entertainment, dining out), and savings goals. Once you have a comprehensive list, subtract your expenses from your income to see if there’s a surplus or a deficit.
2. Set realistic goals
When you’re creating your budget, it’s important to set realistic financial goals. Make sure you don’t set up goals that are impossible to maintain. Instead, aim for a balance between responsible spending and enjoying life. Setting achievable goals can help you stay motivated and keep up the good financial habits.
3. Track your spending
To get a clear picture of your spending habits, start tracking everything you spend money on. There are a lot of great tools and apps—like Brigit—that track your spending by category. Analyzing your spending patterns can help you identify trouble spots so you can make positive changes.
4. Identify your triggers
Overspending often has emotional triggers. It could be stress, boredom, social pressure, or the desire to keep up with others. Identifying these triggers can be instrumental in curbing your impulse to overspend. Once you’ve recognized your emotional triggers, develop alternative coping mechanisms like exercise, meditation, or seeking support from friends and family.
5. Embrace cash or digital envelopes
The envelope system (also called ‘cash stuffing’) is a tried-and-true way to manage your money. The way it works is that you allocate a certain amount of cash to specific spending categories like groceries, dining out, or entertainment. When the cash in the envelope is gone, you can’t spend any more in that category for the month. If you’re more tech-oriented, you can use digital envelopes or budgeting apps that allocate money to specific categories digitally. It’s a great way to make sure you don’t overspend in any area.
6. Prioritize saving
Saving money should be a non-negotiable part of your budget. Set up automatic transfers to a savings account for your paycheck as soon as it’s deposited. By prioritizing savings, you’ll reduce the temptation to spend everything you earn. Aim to save at least 20% of your income, but be sure to start with a realistic amount that you can comfortably afford—anything is better than nothing.
7. Avoid impulse purchases
Impulse buys are a major cause of overspending. Train yourself to avoid buying on a whim. Implement a waiting period before making any non-essential purchases. This can be as simple as ‘sleeping on it’, or waiting 24 hours or a week before deciding if you still want or need the item. A lot of times, you’ll find that the initial urge fades away, saving you money!
8. Create a wish list
Make a wish list of items you want to buy. Whenever you feel the urge to buy something not on the list, add it and wait. That way you can prioritize your purchases and spend your money on things that matter most to you. Over time, some items lose their appeal, and you can avoid the expense of buying them.
9. Downsize and declutter
Consider decluttering your home as a way to stop overspending. The less you have, the less you’ll be tempted to buy unnecessary items. Sell or donate things you no longer need to create a minimalist environment that will make you spend more mindfully.
10. Seek support
If you find you have a hard time curbing your spending habits, consider seeking support from a financial advisor or a counselor. They can provide you with strategies tailored to your situation and can offer helpful insights and guidance.
The bottom line: how to stop overspending
Overspending can lead to financial stress and keep you from reaching your long-term financial goals. But if you follow these practical steps, you can regain control of your finances and stop overspending. Creating a budget, setting realistic goals, tracking your spending, and identifying your triggers are essential strategies to help you develop healthier financial habits.
