Overspending has become a habit among income earners. It refers to spending more than you have or more than the amount that has been allocated to them.
The top reasons behind this overspending disease include the following:
- Impulse buying
It is undeniable that most consumers buy products without considering whether they fit into their plans or not. In this case consumers end up buying what catches the attention of their eyes and regardless of whether it fits into their budget or not.
- Absence of a budget
Recent surveys by a credit counsellor Gail Cunningham suggests that most consumers do not prepare budgets for their purchases. In this case consumers do not compare their spending against a possible house budget and thus have little information on their spending habits on categories like food, entertainment and clothing. This leads to people having less control over their money, whereby money ends up controlling them.
- Increase use of credit cards
With the recent technological advancements use of credit and debit cards as modes of payments has replaced the use of cash. This plastic money bring with it “painless payment” where customers do not feel a hitch when paying using plastic money as compared to use of cash.
- Underestimating little expenses
Most people keep track of large expenses such as rent, car payments, and utility bills at the expense of little expenses which includes coffee, gas, dinner etc. These underestimated little expenses however add up to really huge amounts which ends up sneaking up on one’s wallet.
- Inadequate saving
Most people consume more than they save. Little money is saved for emergency purposes and thus in the occurrence of an emergency, the little amount that had been saved is used to attend to it.
Here are the top 7 tips on how to go about it:
- Create a budget or improve on the existing budget
This entails having a hard look on your income versus your spending. You should always ensure that your income outweighs your spending at any given time.
- Switch to cash
If you were previously using plastic money as your mode of payment, consider moving back to use of cash. You may consider using the “cash only envelope budgeting system “which helps you stick to the plan “when the money is done, you are done spending.” Get several envelopes and label them each according to your various expenses, then put the allocated amount as per each expense category. This helps you manage your funds and keep track on how much you spend in each category of expenses.
- Make an attempt to forget your credit card numbers
This helps you stick to your budget since you will only pay using cash and if the amount exceeds the one you have you have to recheck on the items you bought and remove the ones not included in your budget. If your credit and debit card numbers are on your heart, cancel them and apply for new ones.
- Choose a cheaper lifestyle
This mainly works for those who love entertainment. Consider changing your dinner reservations and parties from five star and four star hotels to a more affordable middle level standard hotels or perhaps consider to start taking up cooking as a hobby. Here you will note a major difference in your spending habits which includes huge savings.
- Set attainable short term goals
Over spenders are not usually concerned on how their present expense decisions may affect them in the long run. Their mindset is on “here and now” spending. You should consider having some short term attainable goals which may include the following: sticking to my cash budget for one week. Saving 20% of my monthly income to a separate fixed account, bringing food to work to avoid spending on food and sticking to your wardrobe for say one month without shopping among others.
- Change your thinking context on spending
Always make sure that you first debate in your mind on whether to spend your income in a given manner given the energy you spend in earning that income and the relevance of that commodity at that particular time. For example, spending $200 on a party yet you spend a whole month earning that money, this form of spending is not logic according to the right context of thinking.
- Always reward yourself
At the end of a certain period of time you may decide rewarding yourself after being on a too strict budget or too strict diet in an attempt to save. If your saving improves then it shows a success and you may decide to change your wardrobe with a portion of the so saved amount. Take caution not to overspend in the name of rewarding yourself.
By following the above simple tips, you will be in a position to curb your overspending habit and you will no longer be a victim of this epidemic of overspending. Try it and enjoy the outcome!