If you often find that there is more coming out of your checking account than going in, you might be guilty of overspending–or spending more than you can comfortably afford.
But while overspending can be a long-ingrained habit, breaking this habit often isn’t as hard, or painful, as many people assume.
Getting your spending more in line with your income (and your goals) comes down a few simple steps, which include: tracking your spending, then setting up a basic budget, learning to side-step spending temptations, and establishing some short- and long-term savings goals
Here are some ideas that can help anyone control excess spending habits and improve their financial habits.
Easy Tips to Stop Overspending
1. Following the Money
One way to gain control over spending is to actually track how much you’re spending each day (that includes every cash/debit/credit purchase you make, plus every bill you pay) for a month or so.
You can do this by carrying around a pad and pen or simply saving all of your receipts, and then writing up a list, or inputting these expenses into a spreadsheet on your computer. There are also a number of phone apps that can make the process of tracking your daily spending easy.
Once you start tracking your expenses, you may be surprised by what you discover. Spending tends to be so frictionless these days, many of us really don’t really have an accurate sense of how much money we are actually spending.
Seeing it clearly laid out can help you think twice before buying something nonessential, and also help you become more intentional with every dollar.
2. Setting up a Budget that Works for You
Once you’ve done the work of tracking your monthly expenses, you may next want to compare this to how much money (after taxes) is coming in each month, and set up a personal budget.
This involves putting your spending into categories, and also listing them in order of priority. Some of your expenses are necessary, such as rent and utilities, and would go high on the list, while others, like clothing, travel and entertainment, are more “nice to haves,” and would go lower.
When creating a budget, it is important to allot money for both necessary and unnecessary spending each month.
You may also want to allot a category for saving towards your short- and long-term goals, whether it’s building an emergency fund, coming up with a downpayment on a home, or funneling more money into your retirement fund.
Financial planners often recommend breaking down your after-tax income into three buckets according to the 50/30/40 rule:
• 50 percent on needs
• 30 percent on wants
• 20 percent on savings
Once you set up these spending parameters, and know how much money you can put into each bucket, the next step is to try to keep your spending in line with these goals.
3. Identifying Areas Where You Can Cut Back
To make it easier to spend within your budget, you may want to take a look at your list of expenses and find areas where you may be able to prune back.
For example, you might find you mostly watch streaming services, yet are still paying for a pricey monthly cable package.
Or, you might see that you’re paying for memberships or subscriptions you no longer need or use. If you’re grabbing take-out most nights, you might consider cooking at least a few nights per week.
Everyone spends differently and will likely have expenses they are used to paying for, but it’s possible that some of those expenses might not be that necessary, or even wanted anymore.
4. Consider a One-Month Spending Freeze
One quick way to change your spending strategies is to put yourself on a 30-day nonessential spending freeze.
Or, if that seems too tall an order, you might pick a category (such as clothing) to stop spending on for a month, or agree to not buy anything at a specific retailer for that period.
A spending freeze can immediately pay off by leaving more money in the bank (or fewer bills) at the end of the month.
And, once you start seeing the payoff of not giving in to impulse buying, you may find yourself spending less even after the freeze is over.
5. Switching to Cash
It’s easy to spend money when only using credit cards and debit cards. Whenever possible, it’s a good idea to use cash so that it’s easier to track where money is going.
Consider taking out enough cash at the beginning of the week to cover your daily expenses to help you stick with your budget.
Or, you might want to try the envelope system. This involves gathering a bunch of envelopes for all your variable expenses, and labeling each one according to how much you’ve allocated in your budget. Then, put that amount of cash inside for the next week.
If your in-box is often cluttered with emails alerting you to sales at your favorite retailers, you may want to think about getting off these e-mailing lists.
Sales and great deals happen all year round, and generally the best time to purchase something is when you really need it.
Even if you don’t find that needed item at its lowest ever sale price, you will likely end up spending less than buying more things simply because they are on sale.
If the temptation to buy doesn’t constantly land in your inbox, you’ll be less likely to give in to it (and won’t even know what you are missing out on).
This move could quickly translate into more cash, or one less bill, at the end of the month.
7. Asking the Right Questions When Shopping Sales
When shopping in stores, it can be tempting to pick up something on sale as a smart way to save money. However, this practice doesn’t always pay off, particularly if you’re purchasing items you really don’t need.
Before purchasing something on sale—no matter how good the deal is—consider answering the following questions:
• Am I buying this only because it is on sale?
• Do I really want or need this item?
• Will this add to my credit card debt and is it worth doing that?
8. Shopping Smarter at the Grocery Store
We’ve all heard the advice, “don’t go to the grocery store hungry.” While that’s a good rule to follow, there are some other easy ways to save money on food. Such as:
• Making a shopping list and only buying items on that list.
• Planning meals ahead of time and stocking up on the exact groceries needed for that meal.
• Buying produce when it is in season and costs less.
• Stocking up on favorite non-perishables when they’re on sale.
• Signing up for store reward membership programs (if free), and using coupons (which can often be found in newspapers, online at the store or manufacturer’s website, and on coupon specific websites) whenever possible.
• Shopping low–food stocked on the shelf closest to the floor tends to cost less than that at eye level
• Picking store brands, which often cost less but are of a similar quality to higher end products
• Checking to see if purchasing a larger size offers a better value, as long as you will use it before the expiration date.
9. Creating Short- and Long-Savings Goals
Overspenders are often focused on the here and now, and may think less about how their spending can affect them in the longer term.
A great way to resist the urge to overspend, is to create some savings goals. This might be having enough for a downpayment on your dream home, or building up an emergency fund for financial peace of mind. Or, maybe you’re looking to buy a car or renovate your kitchen in a couple of years.
Whatever you’re saving for, you may want to set up an account precisely for that purpose–as your account grows, you can gain motivation.
Consider putting the money earmarked for a short-term savings goal in a place where it can earn higher interest than a traditional bank account, but will allow you to access your money when you need it. Some good ideas include: an online savings account, money market account, or a cash management account.
You may also want to consider your long-term goals, such as putting more money into your retirement account (if you aren’t already contributing the maximum allowed per year).
To keep you on track with your savings goals, also consider setting up automatic payments between your checking account (or wherever your paychecks are deposited) and your savings account. You could select a dollar amount to be sent each month after your paycheck gets deposited.
Automating is a simple and powerful way that can help make progress toward savings goals without having to think about it all the time.
You may not be able to completely reform an overspending habit overnight.
But by tracking your spending, setting up a basic budget, and altering some of your everyday habits, you may soon be able to gain control over your financial life, and start reaching your short- and long-term savings goals.
One way to help keep spending in line (and jump start savings) is to sign up for a SoFi Money® cash management account.
SoFi Money allows you to easily track your weekly spending in your dashboard within the SoFi Money app.
SoFi Money also has a Vaults feature, which allows you to separate your spending from your savings, while still earning interest on all your money.
Vaults also allows you to track your savings progress and set up recurring monthly deposits. Plus, there are no account or minimum balance fees.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.