How to Identify and Manage Overspending

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The difference between spending and overspending is often difficult to discern. One clear indication of overspending is financial instability: inability to pay more than the minimum on a credit card bill, reaching the limit on multiple credit cards or falling into debt. A less obvious red flag for overspending is clutter. This is both physical (no more room in the closet and lack of open space in your home) and emotional (feeling suffocated or overwhelmed- too much stuff!). If you have a sense that you are overspending, take a look at these tips. They will help you identify and address your spending habits.

1- NEED v. WANT

Spending money on universal needs is fairly straightforward: Housing, food, utilities, child care and clothing. Determine what you need beyond these basics. Think about hobbies, passions, day to day living and what makes it worthwhile and enjoyable. For example, if you love food and trying new restaurants, dining out is one of your needs. If you’re an avid tennis player, a high quality racquet and time on the court is a need. Find a place in your budget for these needs. Next think about when the need becomes a want. The foodie may need to dine out, but want to dine out extravagantly several times a week. The tennis player may need a high quality racquet, but want the racquet used by top professionals. Think carefully about how you can satisfy the need without jeopardizing your budget or financial stability. Crossing over into what you want- if it’s beyond your means- may be your downfall.

2- HAVE A PLAN

When you go shopping, set a specific plan for your time and activity in the store. Make a list and stick to it. For example, 10:00am-11:00am: Going to X store to buy child’s school clothes (jeans, shirts, shoes). Budget: No more than $75. This keeps you on track and prevents unplanned spending. Store personnel will tempt you (that’s their job!), so be ready to smile and say, ‘No, thank you.’ Important to also have a plan (even if tentative) for your activities post-shopping. This time management strategy gets you out of the store once your business is transacted. Having a purpose beyond browsing and shopping guides and focuses your day.

3 WHY do you enjoy spending or shopping?

This is an important question to answer. You may be celebrating, relieving boredom or depression, seeking excitement or relaxation. Identify the emotional need shopping and spending meet. Now think about alternatives- what else might meet that need? For example, if you seek relaxation, consider meditation, massage or spending an afternoon in the park. Notice when you feel stressed (need relaxation). Actively replace shopping and spending with one of these activities. The change will take time and practice, but it’s definitely worth it. You’ll be relaxed without overspending.

Shopping and spending are necessary for all and enjoyable for many. If you’re one of the many who enjoy shopping and spending, take steps to make sure you have a pleasurable experience. With proper planning and preparation, a day at the mall can be terrific.

 

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