How to Stop Spending More Than You Make

How to Stop Spending More Than You Make
Are you a chronic over spender? If you start each month with great intentions, but eventually find yourself making mindless purchases justified by that ever dangerous “a little won’t hurt” attitude, you’re likely facing an empty bank account and severe buyer’s remorse by the end of the month.

Overspending is often a learned behavior that can result from emotional issues (“I’m in a bad mood, so I’m going shopping”), family upbringing (“I couldn’t afford much as a kid, but now I can”), or even lifestyle inflation (“I got a raise, so I deserve a new car) Take some time to check your behavior and determine whether you’re overspending each month.

Signs of Overspending
1. Your Budget Doesn’t Add Up

You’re responsible enough to have a personal budget in place, but are you responsible enough to follow it? If you budgeted $100 for clothes but spent $300, that extra $200 is coming from somewhere, meaning your splurge could be affecting crucial expenses such as utilities, groceries, or your retirement savings contributions.

2. Your Credit Cards Are Maxed
Maxing out your credit card means not only are you living an unsustainable lifestyle, but you’re using additional resources to fuel your overspending. It also means you’re accruing interest and possibly incurring expensive fees for hitting your max. When your spending is no longer about what you have in your wallet, but how much you can get your hands on to continue buying, it’s time to make a change.

3. You Only Pay Your Credit Card Minimum
When your credit card balance is so high or your budget is so tight that you can only make your minimum payment every month, you’re overspending. If you put a $1,500 flat-screen TV on a credit card with a 12% APR and you pay it off at $50 per month, it’s going to take three years and just under $1,800 before your balance is eliminated.

4. Your Credit Card Debt Exceeds Your Monthly Income
If you’re earning $5,000 per month but have $12,000 in credit card debt, you’ve been spending too much. Your monthly income should always be higher so you can make those credit card payments in full along with all of your other debts and financial responsibilities.

5. You Splurge on Fun Stuff, But Neglect Bills and Fixed Expenses
Pay before play. Financially savvy people understand the importance of paying fixed expenses before purchasing fun items such as clothing, electronics, and vacations. If you find yourself heading to the mall and treating fixed expenses as an afterthought, you’re probably a habitual over spender.

6. Your Expenses Rise With Your Income
Throughout the course of your life, you’re sure to enjoy new jobs, raises, children leaving home, and maybe even a windfall or two. If each increase in income also comes with an increase in your lifestyle-based expenses, you’re eating into whatever extra you’re getting.

7. There’s More in Your Closet Than in Your Bank Account
Do you have 14 pairs of designer shoes and a rack of clothes that still all have the tags on – and also an empty bank account? Investing more in your closet than your retirement savings or emergency fund represents damaging financial behavior.

8. You’re Resistant to Change
If you’re reading this list and recognizing some of your behaviors, but are feeling defensive or dismissive, you could be an over spender. To some folks, spending money makes them feel important, happy, and fulfilled – and who wouldn’t want to continue the behavior that sparks those emotions? What over spenders don’t realize, however, is that they’re heading down a dangerous path. Change is essential if you want to live a financially healthy life.

How to Curb Overspending
1. Create a Budget (or Improve Your Existing Budget)

Taking a hard look at what you bring in versus what you spend is a crucial first step. Seeing how much you’re blowing on clothes, electronics, and other luxury items can be a major wake-up call.

Here’s a simple process to get you started:
Start a Spreadsheet. Create a spreadsheet to categorize different expenses and types of income.

Add Up Pay Stubs. Calculate how much you’re bringing in each month from salary, wages, tips, and any other sources of income.

Gather All Your Bills. Get your utility, credit card, mortgage bills, and whatever else you have to pay each month. Start by making a category for fixed expenses and tallying them up first.

List Your Variable Spending. Start allocating funds to each variable spending category. Base your numbers on how much you’ve spent in the past, but also try to reign things in a bit. Don’t start out too strict though. If a budget is too tight, you’re just setting yourself up for later splurges and eventual failure.

Put Some Money in Savings. Try following the “50/30/20” rule: 50% of your monthly income should go to fixed and necessary expenses, 30% to fun stuff and lifestyle choices, and 20% to savings and paying off debts. Talk to a financial planner about what type of savings vehicle is best for your financial goals – a regular savings account for emergency expenses and an IRA for your retirement should help you get started.

1. Test Your Budget.
Leave space beside each budget entry and enter the actual amounts you spend going forward. Compare them to what you’d planned and adjust your numbers for the next month accordingly.

2. Switch to Cash
By switching to a cash-only envelope budgeting system, you’re forcing yourself to stick to the plan – when your money runs out, you’re done spending. Get a bunch of envelopes for all your variable expenses—or create them online with your DFCU account and label each one according to how much you’ve allocated in your budget. Then, put that amount of cash inside for the next week.

Alternatively, you may prefer to simply keep all of your weekly money in one envelope and draw out a few $20s here or there as needed. Just do whatever helps you best stick to your budget.

3. Forget Your Credit and Debit Card Numbers
When shopping online, there’s no greater convenience than knowing your credit card number by heart. Forgetting your numbers makes it slightly less convenient to buy things, and in the few seconds you’re reaching for that wallet you just may reflect upon the decision you’re about to make.

If you already know some of your numbers by heart, cancel your current cards and request new ones. Then, go through your favorite Internet shopping accounts and remove your saved information so you can avoid the temptation of purchasing with a single click.

4. Choose Cheaper Entertainment
Over spenders may avoid the urge to change their ways because they think it means no longer having fun or hanging out with friends. That’s just not the case. While you may not be able to splurge on that couple’s cruise or eat at your favorite four-star restaurants anymore, you can still be social and live a full life just by making cheaper plans.

It’s okay to let the people in your life know that you’re trying to spend less. Who knows, you might even find some of your friends or family grateful for the example you’re setting.

5. Set Short-Term Financial Goals
Someone who puts a new laptop on a credit card with little intention of paying it off immediately isn’t usually concerned about the future. Over spenders are all about the “here and now,” rarely devoting serious reflection on how their habits may affect them in the long run.

However, by setting some feasible, attainable short-term goals, you can motivate yourself to save and change those habits:

Save at least 15% of each paycheck in a separate account.
Stick to a cash budget for two weeks.
Save $1,000 in an emergency bank account.
Bring lunch to work every day for a week instead of ordering in.
Remix your wardrobe for an entire month without shopping.

Short-term goals like these can help fundamentally shift how you view and use money. They can also be a bit of a challenge, so pat yourself on the back whenever you achieve one. As you become more money-savvy and less impulsive, you can begin to set longer-term goals for the future.

6. Think Context
Now it’s time to try and think about spending in a different context. When you’re faced with a potential purchase, compare it to the more useful things you could buy with the same money, or to the energy you expended to earn it, and you might think twice about splurging.

Suppose you want to spend $2,000 on a spontaneous vacation: If you make $20 per hour at work, it would have taken you at least 100 hours to earn that cash – not factoring in taxes. That $2,000 could help you get out of debt, start a retirement fund, or even buy a car. Understanding the value of money to your personal financial picture is key to changing the way you think about spending.

7. Reward Yourself
It’s okay to give yourself little rewards now and again to stay on track. If you love clothes, put a little cash aside or load up a prepaid debit card for a reasonable shopping trip. If you tend to splurge on fine dining, plan one night each month to nosh at your favorite restaurant. Love to travel? Reward your good behavior by surfing for last-minute deals or taking a day to explore what your city has to offer.

Final Word
You can’t completely reform your bad habits overnight. However, simply acknowledging them and making a commitment is a great first step toward learning to stop spending beyond your means. Set goals and put safeguards in place, and you can slowly but surely make the move from chronic over spender to savvy consumer.

By Jacqueline Curtis
Reprinted courtesy of