Have you ever checked your bank balance partway through the month and wondered where all your money went?
Spending as much money (or more) than you make each month won’t lead to long-term financial security, but many people do it.
But oftentimes, the problem is actually self-discipline. The solution for that is to take a hard look at your spending and plug some of the holes in your budget.
Let’s explore 5 common reasons for overspending and strategies for reducing the impact on your wallet.
Keeping up with the Joneses
Many people feel a need to keep up appearances by driving a flashy car, living in a McMansion, or wearing designer jeans. That all-American urge to “keep up with the Joneses” may be amplified by seeing shots of your friend’s Caribbean vacation or brand-new BMW on Facebook.
In fact, marketing professors Andrew Stephen of the University of Pittsburgh, and Keith Wilcox of Columbia University, found that high Facebook use may result in less self-control when it comes to spending.
The fix: As you’re browsing Facebook, remember that status updates only tell part of the story.
Your friend may drive a nice set of wheels while drowning in debt. And if you notice that shopping with friends results in peer pressure (“you must buy those boots – you deserve it!”), try shopping alone instead.
Getting lured in by the ease of online shopping
Thanks to a host of daily-deal and flash-sale websites, you can buy everything from groceries to designer goods to weekend getaways, all without leaving home. And once you do, those retailers will try to score repeat business by emailing you often about sales on items you weren’t even shopping for in the first place.
The fix: Unsubscribe from those emails or set up a filter so they’re automatically marked as read and moved into a special email folder.
That way, you can find that promo code when you’re ready to shop for something you actually need, but you won’t be tempted by a catchy subject line or pretty graphics to buy something you don’t need.
Drinking and shopping
Alcohol lowers your inhibitions and that can result in purchases you wouldn’t have made while you were sober. Retailers know this and some actually ramp up their email campaigns in the evenings when consumers are likely to have knocked back a few drinks.
The fix: Don’t mix alcohol and online shopping. If you see something you like while you’re drinking, save it in your online shopping cart so you can go back and view it again when you’re sober and have had a chance to consider the purchase.
Succumbing to the “ripple effect”
When you buy a new suit, you may also need to pay for alterations and dry cleaning. And maybe you also decide to replace your scuffed-up dress shoes and worn-out dress shirts.
Welcome to the “ripple effect,” where one purchase leads to several more. This can happen also happen when, for example, you upgrade your car (expensive cars often mean more expensive repairs and gas) or your home (that old futon just doesn’t do your waterfront condo justice).
The fix: Do your homework and think through large purchases so you can factor extra costs into your budget. Whenever you buy a car or home, have funds set aside for maintenance.
Receiving a windfall
When you get a decent-sized wad of cash you weren’t expecting (maybe an inheritance, a bonus, or a tax refund), it’s tempting to blow it all. That can result in continuing to spend because it seems like money is practically falling into your lap.
The fix: Allocate a small portion of a windfall to something fun like a night out or a new pair of shoes. Then put the rest towards savings or paying off debt. That way you’ll be able to enjoy the windfall without getting carried away and letting it sway your future spending.
Have you found yourself overspending? And if so, what strategies have you tried to stop?