You see something in your local electronics store, at Amazon or at the car dealer and you just have to have it…NOW! Welcome to 21st century consumer society, where the urge to overspend is everywhere. All we have to do is swipe the credit card or add it to our virtual shopping card. Bing, bang, boom-It’s yours! How are we supposed to resist this 24/7 onslaught of BUY NOW! It’s not easy to resist but there are some strategies you can use to reduce the urge to overspend.
One of the biggest obstacles to financial success and living the life you want to live is overspending. In fact, I’d say that overspending is pretty much a national epidemic. We live in a world where it’s expected that we should spend, spend, spend. Whether you make $30,000 or $3,000,000 there is always something out there we just “need to have”. From the latest clothes or electronic gadget, to vacations, automobiles and houses, there’s always something. Unfortunately, all those “need to have’s” cost money, and spending money to “have” everything can quickly drain your account and threaten your financial well-being.
While the temptation to overspend is great, I have found a few strategies that have helped me, as well as many of the people I work with, reduce the urge to overspend.
One of the most powerful overspending fixes is to build (and actually use) a budget. Now, when you hear the “B” word you may immediately recoil at the thought of having to put yourself on one. Many people see budgeting as restrictive, negative and a sign that you are weak or unable to make good decisions. I respectfully disagree with all of that!
The reality is that following a budget is one of the most empowering things you can do and instead of showing weakness, a budget shows you are serious about your life as well as your money. Think about it, every successful business operates under a budget. The budget allows them to efficiently allocate their resources to take advantage of opportunities. If billion dollar companies use a budget why shouldn’t you? Don’t you want to be successful?
There are many tools for helping you keep track of your money and expenses. You can use a notepad and pencil or one of the many software-based tools. I highly recommend a tool called YNAB (You Need A Budget). It’s an advanced, yet easy to use tool that my wife and I have used for 4 years. I also use YNAB with clients who are looking for a way to honestly and accurately track their spending.
Whatever method you use to track your spending the key is to honestly account for all the money you have in your life and build a budget that reflects your goals and priorities. If there are certain areas that you find yourself overspending on, go ahead and add that to your budget as a specific category. For me, my “downfalls” when it comes to potential overspending are in the areas of electronic gadgets (especially audio equipment), music and photography equipment. So, to combat that I have an “audio equipment and music” category as well as a “photo equipment” category in our YNAB budget that we allocate a specific amount to each month. If there’s money in the budget, I can purchase that new amplifier, CD-box set or sweet new large format camera lens. If there’s not any money in the budget, I’ll have to wait. Simple as that!
Sometimes the urge to spend can be hard to ignore. You check your bank account balance, see that it’s positive and then see the next great thing, whatever it is. Whoa, hold on there, bucko. Don’t go spending all the “found” money just yet. You need to take a Spending Timeout!
What’s a spending timeout? A spending time out is when you hit the pause button on your urge to spend. By taking a break and letting your urge to purchase sit a while you will often find that the urge disappears. How long should the spending timeout be? Well, it should be at least 24 hours, but longer is better. In my case, when I find the urge to buy a new CD or album, 24 hours works most of the time. When it comes to a new piece of audio equipment, like an amplifier or speakers, I find that I need at least 30 days. And when it come to something like a new car (a more detailed post about buying cars is coming soon) I need at least 60 days.
During the “time out” you can reevaluate whether or not you actually need whatever it is that you’re craving. It also allows you time, especially on bigger ticket items, to make sure that you really can afford the item. The timeout also gives you time to do additional research, double check your budget and just chill out a bit while you take a look at your entire financial picture and prioritize what’s really most important.
A third method you can use to curb the urge to overspend is to pay cash for the item. When I say cash, I mean real honest to goodness cash, the kind that you carry in your wallet. There’s something about actually taking greenbacks out of your wallet and trading them for merchandise. It makes the buying process more real.
While paying cash is practical for smaller items it can be an issue for larger, more expensive purchases. In that case, writing a check (instead of financing the purchase or putting it on your credit card) still holds much of the “realness” of paying cash. The immediacy of knowing that when the merchant cashes your check, money leaves your account, is oftentimes enough to keep you from overspending.
The best way to quash your urge to overspend is to combine all three tips into one “SUPER ANTI-OVERSPENDING POWER TOOL!” Ok, maybe that’s a bit over the top but there is huge value in combining multiple tips to combat overspending. If you take the time to build and use a realistic budget and combine that with a spending timeout and use cash (or check) to purchase items whenever possible, you will dramatically reduce the incidence of overspending in your life. They say knowledge is power and that certainly applies to spending. The more you know about you, your goals and your ability to spend, the more likely you are to reduce the urge to overspend.
If you have any questions about your own situation, or would like an independent second opinion on anything in your financial life, you can contact me or set a time for a no obligation call to discuss things further. If my services might be a match for your needs I’ll let you know. If not, I’ll let you know that as well.
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