It can be easy to overspend, especially when there are holidays, birthdays, anniversaries, vacations, and more. There are so many things to spend our money on and the current world encourages us daily to buy more. Spending more than you have can lead to serious problems such as large credit card debt, bad credit, and difficulty paying for critical items such as food or rent! The following steps can help you take action.
Review your current spending
There is a saying, “how do you know where you are going if you don’t know where you have been.” The same principle applies to your expenditures. You need to be aware of where your money went before you can make decisions for the future.
Sit down and list all recent spending in two categories – necessities and extras. Necessities are what you need to live – rent, food, utilities, car expense, etc. Extras are those that you want – event tickets, special dinners, books, holiday decorations, etc. Sometimes items can fit into either category, such as clothing or a new computer, depending on the need or want. Total what you have been spending in both categories for the last three months.
Now review your budget and current debt. Is your income meeting your expenditures? Are you accruing too much debt that you cannot pay off? Answering these two questions will help you decide what you need to do.
Analyze your reasons for spending
You cannot change your habits unless you know what is causing them. Think about what you were doing when you went over your budget. Many things in this world influence us to buy too much.
The media is constantly flooding us with new products or reasons why we should purchase something. We watch TV, turn on the computer, listen to the radio in our car, etc. Retailers want us to spend – a simple fact in our world today. They are in business to sell you goods. For example, you have a working computer but the Sunday ads come out with the latest technology. Are you assessing whether having a new computer is necessary for work or if it will simply cause you unnecessary credit card debt?
Have you gone shopping for just one thing and then purchased several other items instead? The displays in stores are very enticing. For example, you are shopping for a new dress for work (a necessity) and then you see cute party dresses (an extra). Before you know it, you have spent money on something you may not need.
Make positive decisions on what you can change
- Decide the amount you can afford to spend each month or even week for both necessities and extras.
- If you use credit cards, decide what amount you can charge each month. Interest can add up to an amount that you could use to buy items in future months. If you can pay off your credit cards monthly, you are probably not overspending and you are gaining ground.
- Whenever possible, use coupons, gift cards, or wait for sales. In today’s world, there is always a sale coming up!
- Never go shopping without a specific list, whether it is for necessity or otherwise.
- Refuse to let the holidays or special occasions control your life. Create a budget for gift spending as well.
- Avoid unconscious buying. Be aware of what is surrounding you when you are shopping and how you can stick to your budget. Learn to say no in your mind.
- Is a pending purchase a need or just a want? This answer is a big key to making a decision on what to buy and when to buy it.
- Always know what the return policy is for the items you are contemplating buying. If you regret the purchase, will you be able to return it? You need to know in the event you really need to return it to keep within your budget.
As we approach the holiday season, ask yourself if you want to control your spending or live with debt. Being aware of consequences and taking positive action can prevent or reduce the financial stress in your life.