You know when you’ve had a terrible week, and something inside screams that shopping therapy will make it all better–even though you’re broke?
Overspending is often tied to emotions and can be triggered by many different feelings. And, once you get into the habit of spending more than you make, it can be hard to stop. Some people even get to the point of having a spending addiction.
Fortunately, there’s a way to stop spending too much, and it’s not rocket science. With some hard work, and by using the steps listed below, you can start to take control of your finances today.
1. Make a Budget or Review Your Budget
If you know you’re overspending and you want to stop, the first step is to make a budget. No matter how much you might want to find some other way, I’m here to tell you, a budget is non-negotiable.
If you already have a budget, maybe you’re just back at sticking to it. You should review it, make sure it’s realistic, and then make yourself accountable to someone.
Know that it might take you a while to be able to stick to your budget, but that’s okay — you gotta have a goal if you’re going to be better!
To make a budget, use the following steps:
a. Make Categories
First, divide your budget into categories. Some common categories are:
- Eating Out
- Vehicle Expenses
- Medical Expenses
- Personal Care Items
- Kid Stuff
- Fun Money
After dividing your budget into categories, you may also decide to break the categories into sub-categories (for example, utilities could break down into electricity, water, cable, and internet).
b. Assign Money to Each Category
After you’ve made all your categories write down how much money you’ll spend in each category during a month.
For some of these categories (like utilities) the costs are not up to you. First, write down the costs you can’t control, and then move on to categories that are more flexible.
When you are done writing down how much you’ll spend in each group, make sure you have zero money left. You don’t want to plan on spending more than you earn, and you don’t want to have money left over that doesn’t fit in a category.
If you find your budget costs are more than your income, reduce the amount of money you’ll spend in some categories.
If you have left-over money, put it into savings or another category.
If you’d like help making a budget, check out our awesome free monthly budget spreadsheet!
c. Track Your Spending
Once your budget is all set up, you need to track your spending at least once a week. After recording money spent, do the math (or use this spreadsheet to do the math) and figure out how much money is left for the month.
At the end of the month, tally everything up and see if you managed to stick to your budget. If you didn’t quite stick to the budget, don’t beat yourself up; take notes and try to be better next month.
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2. Find Out Where You’re Overspending
Now, it’s possible that budgeting is the magic bullet for you and it stops overspending in its tracks — I hope that’s what happens!
But, if budgeting alone isn’t enough to stop your bad spending habits, you’ll need to dig deeper.
The first thing you need to do is find out exactly what categories you’re overspending in; to do this take a look at your budget, and write down all the areas where you went over budget.
If you don’t have any budget data written down, try to think back to times you overspent, and write down which categories you went over in.
Keep these categories handy as we move onto the next step and get closer to solving your overspending problems!
3. Figure Out Your Triggers
Now that you know WHERE you overspend, you need to figure out WHY you’re going over budget.
If your only overspending is in car repairs, medical bills, or other required expenses, then your spending is probably necessary.
The trigger for necessary overspending is almost always circumstances. You don’t get your car repaired because you need a ‘spending fix,’ you do it because the car isn’t working right, and that’s usually out of your control.
However, necessary overspending doesn’t mean unavoidable spending. There is a solution for going over budget even for crucial expenses, and we’ll talk about it in the next step.
If your overspending comes mainly from categories like extras, entertainment, or even groceries, then your spending is probably unnecessary.
Unnecessary overspending has many triggers, and it’s important to identify yours so you can address them.
To figure out why you’re spending more than you earn, look at your overspending triggers by category.
This is what mine would look like:
I look at my budget and see I’ve overspent in the eating out category by $50.
I picture myself on the days that I ate out this month, and I think about what was going on in my life.
I figure out the things that often cause me to overspend on eating out are:
- I am too tired at the end of the day to cook, so I order in.
- I’m feeling stressed out, so I stop by A&W on the way home from an outing to eat my feelings.
- I didn’t plan well, and I don’t have any groceries in the house, so we have to order supper.
Now that you know why you’re overspending, it’s time to find a solution and show your money who’s boss!
4. Deal With Your Triggers
After identifying each trigger, and figuring out whether your spending is necessary or unnecessary, you’re ready to start finding the solution.
Solutions for Necessary Overspending
If you’re overspending on vital expenses, the best solution (other than winning the lottery) is to build an emergency savings account. If you have money set aside for surprise expenses, chances are you won’t have to go over budget; you can just draw from your savings.
To build your emergency savings, you may need to move some numbers around in your budget so you can put money aside each month.
If you have absolutely no wiggle room in your budget to build savings, consider trying to make a bit of extra money with a side hustle, just for long enough to build up an emergency savings account.
Solutions for Unnecessary Overspending
For those of you who are spending too much on extra stuff, the solutions will be different depending on triggers.
Ultimately, there are two strategies you can use:
- Find a replacement behavior for overspending (if shopping is your ‘therapy’)
- Stop yourself from being triggered in the first place
For example, I figured out how to stop myself from being triggered. I realized that one of my triggers for overspending on eating out is being I’m too tired at the end of the day to cook.
For me, a solution for this trigger is meal planning. When I have some easy dinners scheduled into my week, I can whip them up quickly even when I’m feeling beat. Or I can get my husband to cook.
If I am being tempted to overspend on eating out because of stress, I can use a replacement behavior to deal. Instead of snarfing down ice cream, I can work out or do some deep breathing exercises.
Your solution may look different than mine, but you’ll know best which strategy will work for you! If the first one you try doesn’t work, try another strategy!
Stop Overspending and Gain Financial Freedom
Whatever the reason for your overspending, you can gain control and have financial freedom.
By making a budget, figuring out where and why you overspend, and coming up with solutions, you can start living within your means.