Have you ever checked your bank account halfway 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 overspend on a daily basis.
If you consistently struggle to cover your bills each month, a solution might be to find a higher-paying job or take on a second one to bring in more income.
But oftentimes, the problem is 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 people overspend 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 high Facebook use may result in less self-control when it comes to spending.
The fix: As you’re browsing Facebook, remember status updates only tell part of the story.
Your friend may drive a nice set of wheels but be drowning in debt. And if you notice that shopping with friends results in peer-pressured purchases 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, when you’re ready to shop for something you actually need, you can easily find that promo code, but avoid buying something you don’t beforehand.
Drinking and shopping
It’s true – alcohol lowers your inhibitions and can result in purchases you wouldn’t make while sober. In fact, many retailers know this and ramp up their email campaigns in the evenings when consumers are likely having a few drinks.
The fix: Don’t mix alcohol and online shopping. If you see something you like while you’re drinking, immediately save it in your online shopping cart so you don’t overspend. Later, when you’re not drinking, go back and review it again to give yourself more of a chance to consider the purchase.
Succumbing to the “ripple effect”
When you buy a new suit, you may need to pay for alterations and dry cleaning too. And along the way, you may 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.
The fix: Do your homework and think through large purchases. Factor any extra costs into your budget. For example, 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. However, that can quickly result in continuing to overspend 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 toward savings or paying off debt. That way you’ll enjoy the windfall without getting carried away.