Overspending is a common habit that’s difficult to break. If it’s a problem that impacts you on an everyday basis then this can have a knock-on effect on other areas of your life. Your relationships, well-being, and work can all suffer due to the amount of money you spend in excess. In worst-case scenarios, spending too much money on a regular basis can take over your whole life and lead to bankruptcy. It can feel like you have no way out, but that’s not necessarily the case.
In this expert guide, we are going to focus on the ‘why’ behind overspending, as well as ways you can control splurging on unnecessary purchases, and instead, learn to save up. Understanding the issue, its causes and ways to prevent it can help you to gradually restore balance in your finances.
Why do we overspend?
There are a number of reasons why a person may overspend, and it could be triggered by certain situations. Negative emotions, such as sadness or stress, can push you to spend money as a form of release. We’ve all heard the term ‘treat yourself’ and retail therapy is often a way we try to make ourselves feel better if we’re having a rough time. This can be in various forms, whether it’s online shopping, takeaways, subscriptions, and so on.
Whilst going to ‘check out’ can give you a buzz in the moment, often what you’re buying isn’t something that you need to spend money on, it’s more of a luxury. With this, your brain releases dopamine which gives you a temporary feeling of satisfaction. However, this sensation doesn’t last, especially when you’re dealing with the consequences of overspending further down the line.
What is compulsive spending?
Compulsive spending is when someone has an overwhelming desire to make purchases, even if they don’t have the funds to do so. Essentially, it is a shopping addiction where you can’t control the urge to buy, whether or not you actually need to. These impulses can often be triggered by something bad happening in your life, as spending can be a coping mechanism. On the other hand, if something good happens you may also use this as an excuse to celebrate by spending money in excess. This behaviour can lead to numerous problems, such as anxiety and debt, which go hand in hand. The outcome can cause a great deal of emotional turmoil and guilt, which massively impacts your daily life.
10 steps to stop overspending
Overspending is a habit that can be controlled if you take the right actions. However, keep in mind it’s not an overnight fix, as with most addictions. With conscious effort and persistence over time, you can reduce the amount you spend impulsively. Set yourself goals as motivation to keep making progress. For example, spend x amount less each month, decreasing bit by bit as time goes by. Be realistic with this – and remember, you can still allow yourself the odd treat if your budget allows it.
One of the best ways to tackle overspending is to recognise your triggers and avoid temptations where possible. With this, you’re not putting yourself in a position to splurge as much as you might normally. Keeping yourself as busy as possible can also help, as it reduces the amount of time you have to shop. Different methods will work for different individuals which we are going to explore here in more detail, to help you to figure out how you can reduce your spending and focus on effectively managing your money. Read on for 10 ways to stop overspending.
1. Become aware of your spending habits
Have a look at what you’ve spent money on recently and see if there is a pattern. By focusing on your spending habits, you can put efforts into controlling them. For example, if you’re more likely to spend money when you go to the city centre on payday, do so mindfully or even try to avoid it completely. Although this is a short-term fix, it could help you to break a long-term habit.
Think about the following questions:
- What do I spend the most money on?
- When am I most likely to spend money? Is it a particular time of the day or when I feel a certain way?
- Where do I usually splurge – online or in stores?
- How do I usually spend money? Do I spend more if I go out with my credit card?
- Who am I with when I spend more money? Do I often treat those around me even when I can’t afford to? Or is it usually when I’m alone and there’s nobody there to stop me?
Reflecting on these points will help you to narrow down the reasoning behind your spending, whilst encouraging you to focus on improving your financial fitness.
2. Get rid of unnecessary subscriptions & payments
Many of us are guilty of paying regular subscription fees for products and services we don’t need. However, if this is behind a number of your outgoing spends, then it’s time to cut back. When money automatically comes out of your account, it’s all too easy for it to eat away at your bank balance without you even noticing.
You need to define what you want vs what you need, as well as what you use enough to justify the cost. Write a list of all your subscriptions, calculate how much they cost you over time and cancel the ones that are unnecessary.
The same goes for general, unnecessary spending. Think of simple alternatives. For example, a daily iced coffee from a cafe – instead of spending a small fortune on this, make yourself a drink at home. This will very quickly make a noticeable difference. By all means, have that iced coffee from time to time, but consider it a treat instead of a part of your routine.
3. Save money on food
One of the most tempting and easy ways to spend money is on food, particularly when you’re hungry. Eating out is much more expensive than making your own food at home, especially when alcoholic drinks are involved. Whilst we need both food and drink for sustenance, this doesn’t have to break the bank.
By cooking meals in batches at home and freezing leftovers, you can save a great deal of money on food in the long run. It’s also extremely convenient defrosting something you cooked weeks before and heating it up without all the prep. Then, when it comes to beverages, could you swap out pricey smoothies for tap water? Small steps like this can really benefit your wallet. Having a food plan and sticking to it can also help.
When you go food shopping, make sure that you don’t go on an empty stomach or you’re much more likely to overspend. If you go after eating a meal, you’ll focus more on the groceries that you really need.
4. Use cash instead of credit or debit cards
If you limit yourself to cash spending, you’re much more aware of how much items cost, and you can restrict yourself to a set budget. For instance, if you go food shopping but only take £30 of cash to spend, leaving your bank cards at home and disabling other payment methods, then you will make a conscious effort not to exceed this amount of money. This is a great way to help you to familiarise yourself with budgeting whilst prioritising what your money goes towards. It’ll make you think more about the value of money.
5. Take a moment to think before you make a purchase
Why not take a moment to assess the situation before you make a purchase? Don’t dive in right away without giving it much thought, especially if it is a larger purchase. If you consider whether you need it, or if you could find a more affordable option elsewhere, then this can help you to realise if it’s worth it or not. Sleep on it – then the next day, when the moment’s passed, you may not even think about it.
6. Take on no-spend days
By dedicating a day or two a week to avoid spending any money, you can incorporate boundaries into your spending patterns. This is more doable than you may think – you can eat food that you already have at home and enjoy free activities such as a walk to the local park. You’ll feel extremely accomplished at the end of these days and you’ll end up saving a considerable amount if you stick to it!
7. Swap to house brands
One quick and easy way to reduce how much you spend at the supermarket is to go for own-brand products. You’ll find that when you’re grocery shopping, sometimes by choosing the house brand you can save over half the money per item for a product that is almost identical. Give this a go – you might even find you prefer the taste of the more affordable supermarket versions. Don’t pay extra for the label attached.
8. Don’t get tempted
There’s no doubt that temptations are highest when offers and sales come to your attention. So, try to avoid them coming to your attention in the first place. Delete the apps that lure you in, or simply turn off the brand notifications and emails. When it comes to this, ignorance is bliss. You’re much more likely to spend money on things that you don’t need when under the illusion that you’re making a great saving, which can ultimately lead you to waste money.
9. Declutter for each item bought
Out with the old, in with the new! If you can’t resist making a purchase, then why not sell an item that is similar each time you buy something new? This will not only do your bank balance good, but it will also help you to declutter your home. You don’t need to have multiple items that are similar, therefore if the older version is tired and could do with an upgrade, then rehoming it to someone that needs it is a great option to consider. There are plenty of online marketplaces, such as Facebook Marketplace, as well as second-hand selling apps like Depop or Vinted.
10. Start budgeting
One of the best things you can do to reduce the amount you spend is to create a comprehensive budget. This should cover all your outgoings and your income. Having a bank account that you put money in and solely use, allowing you to keep to a budget, can be helpful. If you calculate your monthly budget in advance and think about possible additional spends, you’re much more likely to be sensible with your money. This ties in with organising your household finances and allows you to get on top of your spending.
Whilst not all of these methods will work for you, try out a few different ideas to see what helps you when it comes to ‘how to stop spending money’. Removing the temptation to spend and opting for cheaper alternatives is something that could really make a difference to the amount of money that you have left at the end of each month. Living within your means also reduces stress and allows you to save money over time.
Saving money not only makes you more financially secure but it also allows you to plan for your future. Whether you want to save for a life-changing purchase, an emergency fund, or for later life, having an ISA or investment to fall back on when you need it is something that could massively help you. Savings plans allow you to put your money somewhere with the chance it could grow over time, even if you only put a small amount away each month. This is something that you can account for when creating your budget. However, as with all investments, you must note that returns are not guaranteed and capital is at risk.
To find out more about savings plans that can help you to manage your money effectively, such as Stocks and Shares ISAs, you can get in touch with us today and we can talk you through your different options.