woman learning about overspending
Personal Finance

Simply put, overspending is spending more than you have. The usual outcome is debt — and regret. But, with the right mindset and some handy tools, you can identify those opportunities to overspend and avoid them. And, perhaps, you’ll even save you some money in the long run.

How can we tell if we are overspending?

Sometimes it’s hard to come to terms with overspending. A few extra dollars spent here and there, don’t seem so bad at the time, but they often result in some not-so-good outcomes. There are common signs of overspending you may want to look for so you can work to keep yourself on track:

  • The budget never works. You might have a budget — but to be effective, it must be followed. If you budget $100 a month for entertainment but spend $200, that money has got to come from somewhere. That extra $100 either takes money from another expense category or it reduces your savings. Or even worse, it might put you further into debt.
  • Your credit cards are at their limits. Maxed-out cards indicate that the user isn’t in a sustainable financial situation. Every month, you are using all of your cash resources, but there’s still not enough to cover all of your expenses. Your credit cards soak up more money than you have available to spend. Plus, high interest rates could add more debt to your plate — along with possible overlimit fees. If your cards are at their limit, it’s an indicator that they are not meeting your financial goals.
  • You can’t pay off your credit card at the end of each month. Every time you carry a balance forward, you are adding interest charges to your debt load. It’s a vicious cycle, a common financial challenge, and a clear sign that it’s time to think about some financial changes.
  • You’re making the minimum monthly payments. When spending habits result in having only enough money left to pay the minimum amounts due on your credit cards, there could be trouble brewing.
  • Fun purchases take precedence over living expenses. It’s easy to get caught up in the moment with impulsive purchases during a big sale at your favorite store, shopping trips to outlet malls, “must have” concert tickets, and other spur-of-the-moment purchases. It’s nice to spend money on fun things — but when they come at the cost of what’s truly needed (utilities, rent, food, savings for an emergency fund), then it’s overspending.
  • Building an emergency fund is “something you’ll do next month.” But when unexpected events crop up and your bank account is empty, you’ll regret not having those backup funds. That can lead to overspending or, perhaps being forced to make early withdrawals from a retirement fund.

What are the reasons for overspending?

There are a few common factors behind the tendency to overspend. Some may be related to an individual’s spending habits or emotions, while others may lie more toward the economic and financial side.

  • Lifestyle creep. This is a slow increase in your spending habits as your financial situation changes. Perhaps a raise or a higher paying job has put more money in your pocket. Maybe a life change caused you to pare back on outside entertainment, temporarily allowing you to reduce expenses. Whatever the reasons, you found yourself with more “happy money” on hand — money that you could spend on anything you wanted with little impact. But financial behaviors like that can often lead to overspending, especially if those purchases affect your ability to save money or to make good investments.
  • You had no money saved for emergencies. A sudden event, like unexpected car or home repairs, can deal a blow to your personal finances. Maybe you’re even covering your fixed expenses each month, but a few of your bills have increased. Without an emergency fund, you’ll have to charge those expenses on a credit card or use the cash that you specifically allocated to regular monthly expenses. And if you skip paying that bill, there could be late fees, interest, and other penalties.
  • You failed to plan for irregular expenses. We all might forget a birthday or other occasion where we need to buy a gift. But the holidays happen every year, along with annual subscriptions to gyms and clubs, car registrations, and driver’s licenses. Not having budgeted or saved for those irregular, non-monthly expenses may result in unwelcome surprises and financial stress.
  • You make emotional purchases. Sometimes we buy things we don’t need, just for the gratification and the happiness a new purchase can give us.

What can we do to stop overspending?

There are several financial self-control strategies that you can use to address your overspending. It can be hard to change habits overnight, but these practical strategies may help you overcome overspending problems over time:

  • Create a budget and track all spending. Feel free to add a section for fun purchases — but be sure to add a method to increase savings. If you still have trouble sticking to a budget, consider putting away (or canceling) your credit cards, and paying for things only in cash.
  • Open a separate account — one with a debit card, not a credit card. This is where you’ll put your monthly allowance for discretionary expenses. When the card runs dry, you won’t be able to overspend. (Make sure that the account doesn’t allow you to overdraw.)
  • Increase your income. Look for a better paying job, ask for a raise, or find a side job. Having more income will help you pay down debt and get a handle on current expenses. And you may just find a way to make your passion profitable.
  • Address unrecognized or unacknowledged overspending. When you are poised to make a purchase, ask yourself, “If I had this item, how would my life be substantially better?” If you don’t have a good answer, don’t make the purchase.
  • Create a purchase list. Add anything you want, but also add the date on which you added it to the list. Wait 30 days before deciding to buy. Then, if you still think you need the item (and you can successfully answer the question in the section above), buy it.
  • Don’t shop when you’re upset or feeling down. It’s too easy to push the button on big-box or online purchases when you’re looking for some satisfaction. Is it really worth it? Getting a good night’s sleep, playing some relaxing music, or speaking with a financial advisor might be a better option.
  • Watch out for marketing ploys that target you based on your previous spending. Tracking technology helps merchants send you personalized ads and “20% off – today only!” sales alerts. Plan purchases, and make sure that you’re buying something for a good reason. Don’t be rushed.
  • Don’t give in to peer pressure. Don’t let friends or family members talk you into going to an expensive restaurant, concert, or on a trip that your budget doesn’t support.

With some work and knowledge, it’s possible to overcome overspending and set yourself on a solid path for a better financial future. Learn more about your financial health and how to reach your goals at Best Egg Financial Health. You’ll find tools to help you take charge and easy access to your credit score.

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.


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