11 Reasons for Your Overspending (And How to Stop That) - Life's Little Pleasures and Struggles

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More and more Americans are living beyond their means. A recent study showed that 80% of Americans are caught up in the chains of debt. That’s a huge number! To build wealth and achieve financial security, you simply need to spend less than you earn. But so many people do just the opposite! If left unchecked, overspending can become one of the fastest ways for us to end up in a bad financial situation.

Sadly, now-a-days it’s becoming easier and easier to fall into this terrible habit, and many of us are guilty of this. So, what drives us to spend too much? Let’s find out.

You don’t have a budget

You might be overspending just because you don’t have a proper budget in place. Yes, having a budget is that important. Like taking a road trip without a map, if you don’t have a clearly defined plan for your finances, it is way too easy to lose track or take your financial life down a dangerous path.

Without a budget, even if you have a very good monthly income, instead of saving money, you will most likely overspend and end up being in debt. Because saving money has very little to do with the amount of money you earn. It needs you to develop some healthy financial habits. Creating a budget is one of them.

When you have a realistic budget, you can track your expenses, live within your means, and don’t tend to overspend. You only buy things you can afford, and won’t add more to your debt.

So, if you want to get your habit of overspending under control, the very first thing you should do is create a sustainable budget. You should also make sure to incorporate saving, investing, and giving in that monthly budget. And don’t forget to budget for special occasions like birthdays, weddings, holidays, or that vacation you desperately need.

Once you have a budget, try your best to stick to it. Ultimately, your budget is only as effective as your willingness to operate within its boundaries.

You haven’t set your financial priorities or goals

Another common reason for overspending is that many people don’t have their financial goals and priorities clearly defined or chalked out. When you are just putting money into the bank on a regular basis without any specific goals, it can be easier to withdraw it for various reasons. You can easily overspend and use the money which you could save for those important goals. When you know what you are saving for, savings become easier. Knowing what you want to do with your money, what things you want to accomplish financially, where you want to see yourself after 5 years from now is important if you want to stop overspending.

It’s like giving yourself a reason – “why I should save instead of spending more”, and it is an essential part of achieving financial success.

Therefore, one of the best ways to stop overspending is to figure out an even more powerful reason NOT to spend money. For example: you want financial security for your family, or you want to retire early and enjoy your life, or maybe you want to save for your kids’ college education.

You buy on impulse

Yes! You spend your hard-earned money on stuff that you really don’t need or use. You are an impulse buyer and make many unplanned, last-minute purchases without planning or giving it much thought. Shopping is a kind of entertainment for you. And you are now paying for it with your financial freedom.

To combat the urge to fill your cart, plan ahead and only shop with a list. Write down what you need to buy and how much you will spend. Use cash. And only carry the amount you have decided to spend ahead of time into the store. And once you are done with your shopping, get out of the store as quickly as possible.

You want to impress others

Another prime reason you might be overspending is you want to keep up a so-called good or polished appearance. You want to impress other people and be like them who you think have it all. And you love to have nicer car, bigger house, latest gadgets, name-brand clothes, or shoes, or handbags, or wrist-watch. And you fail to differentiate between your wants and needs, and end up wasting tons of money on stuff that you really didn’t need in the first place. In the end, you find yourself in debt – not being able to pay your bills.

Whether you end up financing a car you can’t afford to buy outright, maxing out your credit cards on expensive, designer clothes, or taking on a mortgage that devours your income, trying to impress others almost always leads to overspending.

So, what should you do?

You should focus more on your life, and try your best to improve your financial health. Do things that add more value to your life, and spend money on meaningful pursuits. The more time you spend doing this, the less time (and desire) you will have to try to impress others.

You use credit cards to buy things instead of cash

When you use cash while making a purchase, you tend to be very aware of how much money you are literally letting go. It’s real money, and studies have shown that you spend less when you shop with cash because it hurts to let the money go. Scientists who study consumer behavior call this “the pain of payment.”

Researchers at MIT found people who were told to use a credit card instead of cash were willing to pay more for purchases. Because you don’t feel that pain when you slap down the plastic since it’s so easy, you don’t even have to look at the figures before signing your name. This might be why relying on credit cards leads so many of us to overspending. When scientists asked 30 people to predict that month’s credit card balance, all 30 got it wrong — on average underestimating by 30 percent.

So, when you charge credit cards to buy things instead of paying in cash, you usually end up overspending. You think you have time to pay it off later, and you don’t consider the amount of extra money you have to pay in interest. Most credit card accounts today have interest rates in excess of twenty percent.

So, what should you do?

If you can’t seem to stop overspending, then one of the best things you can do for your financial well-being is to stop using credit cards. I know it may seem little inconvenient, but think about it – if you don’t use credit cards, then you lose the ability to spend money that you don’t have. It’s as simple as that.

You are easily bored

Have you ever found yourself scrolling through your favorite online retail store just because you don’t have anything else to do? Well, you aren’t alone. One of the other major causes of overspending is boredom — and until it’s pointed out to them, most people don’t even realize how much of a problem this can be.

Boredom is definitely bad for your budget. “One of the most dangerous things is unscheduled leisure time, and some people fill the void by shopping,” says Klontz. “And it’s easier to do than ever since you can buy things right from your phone.” When you are just pressing a couple of buttons on a touchscreen, it somehow doesn’t feel like real money the way actually opening your wallet and taking out cash or a credit card would.

Put simply, if boredom is one of the reasons you overspend, then filling your time with fun, productive activities is a great way to improve your financial life. For instance, if evenings are when you experience the most boredom, you could find a workout partner and hit the gym every day after work, watch a nice movie, meet a friend and enjoy some hearty conversation, or find a new hobby and keep busy with that.

Emotional spending or retail therapy

People admit engaging in “retail therapy” or emotional spending. The negative feeling causes a behavioral shift toward immediate improvements in mood. And when we are feeling down, we tend to splurge. Shopping allows people to visualize themselves in a “better” life, where they are dressed in nice clothes or surrounded by nice things. Buying makes these visualizations a reality.

People often revert to overspending as a way to relieve stress. Whether you spend money when you are stressed out, sad, or even excited, emotional spending can cause some serious problems in your financial life. Shop when you are on an emotional high instead of when you are tired, hungry, stressed, or upset. Do not shop when you have had a bad day or because you feel like you deserve it. You deserve financial freedom more than you deserve a new handbag or a new pair of shoes to make you feel good.

So, if you want to curb your overspending habits, it’s important to assess whether or not a particular emotion causes you to spend money. Once you find out which emotion is that, try to do different things to divert or calm your mind when you experience that emotion. Spending money shouldn’t be in that list of actions!

You easily fall for good sales

Buying something that’s on sale, does not save you money (unless you really need that item and you were ready to pay more for that). It just means that you bought something at a discounted price.

This idea that you are saving money by spending money is what makes people frequently fall for good sale or clearance, and thus, most of us end up overspending. The worst part is that it usually manifests in the form of frugality. Most people think by buying items on sale, they are actually saving money, not overspending.

So, what you should you do to stop that behavior to curb your overspending?

Avoid going to malls or stores when special sales and discounts are offered. Shop with a list. Take sometime before buying something big and expensive. Make purchases with a limited amount of cash. And buy only what you need.

You underestimate the little expenses

Most people are aware of the amount they pay for rent/mortgage, car payments, utilities, and other fixed big expenses per month. But it’s those not-a-big-deal amounts like dining out/take-outs, Starbucks coffee, gifts, entertainments, gasoline etc. that can really sneak up on your wallet. If left unchecked, those little expenses quickly add up.

To limit their effect, have everyone in the family write down all expenditures for a month. Then have a family meeting to disclose your spending. Decide to cut down or trim your expenses where you can and have an affordable fixed amount for those little expenditures that you all should stick to. Track your progress regularly.

You don’t enjoy life’s little pleasures

Maybe you are someone who spends a fortune on second-rate entertainment. When your money is tight, you need to look for free or low-cost entertainment. We all need to enjoy life and have a good time; but you need to make sure the way you are trying to enjoy your life is in your best financial interest. Don’t squander your financial future for some short-term pleasures today if it isn’t in your budget. If you know that you can’t afford an activity, just don’t cave in.

Life’s best things are free. Take time to notice and enjoy all the simple pleasures around you. Take advantage of your local public library. They have plenty of books and movies you can check out — for free. Spend more time in nature. Have fun with your family and friends doing things that you all can enjoy together without spending money or breaking your budget.

You want to maintain your lifestyle

Many people don’t want to adjust their lifestyle according to their current situation once they find themselves in a bad place financially. After they have lived a certain way for a while and suddenly find themselves without a job or a stable source of income, it’s hard for them to give it up. The lifestyle they have become accustomed to, they feel, must be maintained, even if it means more and more debt followed by bankruptcy.

If you are someone like them, you should review your finances and your current needs. And then, make a realistic budget, and cut all the unnecessary or extra expenses that you can live without for now. And also, trim down your living expenses by downsizing so you can live within your means without overspending or accumulating high-interest credit card debt.

Parting words

Overspending is usually the result of showing off, not living on a budget, lacking financial goals, emotional spending, and even boredom. If overspending habit is busting your budget and causing you much financial stress, taking some time to address the root cause might just be one of the best things you can ever do for your financial well-being.

Do understand that the road to financial success is paved with good money habits. And that includes spending mindfully. So the sooner you kick your habit of overspending to the curb, the better your financial future will be.