If you think you are overspending, and struggling to rein it in, you’re not alone. In the UK, almost 6 million adults with incomes over £30,000 run out of money before their next payday because they are spending above their means.
The good news is that bad spending habits can be broken. Here are four steps to reset your spendaholic spending patterns.
Recognise when you have overspent
To stop spending money you will need visibility and control of your finances. And that’s easy to get.
If you use a credit card, debit card or online transfers for the majority of your transactions, gathering that data is simple. Use a free open banking app like Money Dashboard. With a few clicks you can link your accounts to the secure site. It takes care of the rest by labelling and categorising past and ongoing transactions.
You’ll then see monthly spending breakdowns in categories like “transport” “bills” “shopping”. This will make it very clear where your money is going.
You may be surprised by just how much money you are spending in certain areas.
Adapt your budget accordingly.
Now that you’ve categorised your historic spending, you want to adapt future spending around a new budget.
To do this, total up your available balance and subtract any of your saving goals and any scheduled withdrawals in the next month. The remaining is what you are safe to spend. No more.
Set a budget for yourself and commit to not going over. Yes, this is a challenging commitment but there are methods to prevent an overspent budget. Many swear by bullet journaling, the Kakeibo method, the 30 day rule, the envelope method, a detox, and more.
Stop spending money on unnecessary things.
There are many bits of advice out there about how to stop spending money on non-essentials. These cover all the usual culprits from taxis to gym memberships. You can also make your money harder to access by leaving your house with only some cash in your pocket.
And at the heart of the issue are impulse control and the ability to rationally consider “do I need this“. So take a moment before each purchase – weeks, if possible – to consider the value.
Look at your budget that month and decide if you can really afford it. And, if you still want it, take time to check if it can be substituted for something more affordable.
Think about your Financial Goals
Overspending today comes at the expense of your future goals and financial wellbeing.
If you do not yet have an emergency fund, you might want to make it a priority. Set aside some funds each month until you have up to three months worth of essential spending just in case.
Other savings and investment goals should also be on the mind, be it saving for a holiday, a house or a retirement fund. By setting savings monthly goals for these future pursuits, it can be easier to convince yourself to stop spending money in other areas today.