Overspending is an incredibly easy thing to do when you are just going through life and not paying much mind to your finances. I will admit that I have been there; I have caught myself many times purchasing things that I barely, if ever, used. There is just so much STUFF out in the world and it is the marketers job to convince us that we need something, when in reality we don’t. Below are five tips and tricks on how to stop overspending on unnecessary things.
(1) Stop Using Credit Cards.
If you’re not paying your credit cards off each month, consider getting rid of them. It is easy to overspend when using credit cards. Every little dollar does count, so although your $5 breakfasts don’t seem like a lot of money, it does add up over time. When using credit cards, it’s not hard to get in the habit of just swiping your card. Whereas, should you decide to use cash, then you would physically see and feel your money leaving your wallet.
(2) Implement the Cash Envelope System.
The cash envelope system, when implemented correctly, is going to help you stick to your budget. It works by creating a budget for different categories of your monthly spend. These categories generally consist of groceries, dining out, entertainment, clothing, random spending, etc. When thinking of categories, it is not fixed expenses, but rather areas where you may tend to over spend in.
After the budget has been created for your different categories, you create an envelope for each one. Each one is then filled with cash and that is the budget you stick to for the month. Money can not be transferred from one envelope to the next and once the money is gone, it’s gone. This means if you do not have anything left in your dining out category, then it’s dinners at home for the remainder of the month.
Read more on the cash envelope system” target=”_blank” rel=”noopener”>cash envelope system over at Dave Ramsey’s website. There are even affordable envelopes to help get you started, like the one listed below.
(3) Stick to a Budget.
Our society is one of wants and not needs which can make it hard to stick to a budget. The reality is that basic needs consist of a roof over your head, food, healthcare, hygiene products and clothing. When creating a budget, it is important to remember this. Create a budget for yourself, including miscellaneous expenditures and stick to it.
(4) Set Financial Goals.
Whether you want to build up your slush fund or save money for a down payment on a house, setting financial goals will help curb your spending. You really have to commit to it, though. If you just say “I want to save for a house”, but don’t have a plan in place nothing is really going to stop you from spending money on unnecessary things. Sit down, set a timeline and calculate out how much you would need to save each month to make that happen. Setting goals will help you keep your eye on the prize and there is a nice reward at the end of all it. After you have met your financial goal(s), set another one or two and keep the process going!
(5) Calculate Worked Hours.
When I feel like my spending has been out of control, I will start thinking about products in terms of worked hours. Let’s say you make $20 per hour at work and you are about to make an impulse purchase on a new pair of shoes (that you don’t need). The shoes cost $120; therefore it would take you 6 worked hours to be able to afford the shoes. That’s almost a whole day’s worth of work … just for a pair of shoes! That $120 could be used for groceries, put in your retirement account or placed in your savings. Before making impulse buys, try thinking about it terms of worked hours.
As the saying goes, old habits die hard. It may take you a little time to get used to being on a budget and you may struggle at first. This is OK. The biggest thing is that you actually start. Let us know if the comment below if you have any other tips or tricks to keep yourself from overspending.