We all like to treat ourselves every now and then, but for some people overspending has become a habit without them even realizing it. Here are some signs that you may be a spendthrift.
You’re Living Paycheck to Paycheck
“Some sure signs you’re a spendthrift are when you find yourself living paycheck to paycheck,” said Megan Kelly, financial advisor at GoodCheddar. “That can be a sign of dining out too often, overindulging in retail therapy or similar that consumes much of your pay.”
If you have little money left over after paying your bills and are waiting for the next paycheck just to cover basic expenses, it likely means you are overspending.
You’re Always in Debt
You put things on credit instead of saving up. You buy now, pay later, but don’t necessarily have the cash on hand to cover these purchases.
“If you find yourself always in debt or paying it off each month but still carrying a balance,” Kelly said, “it’s another sign of being an overspender.”
Carrying balances on your credit cards, taking out payday loans or having an increasing amount of debt each month indicates that you are spending more than you earn.
You Don’t Have Savings
If you don’t have an emergency fund or are not saving for retirement, it probably means you have nothing left over after covering your expenses. This is a red flag for overspending.
“A lack of savings, despite a decent income, often points to overspending,” said Dennis Shirshikov, head of growth at Awning.com.
Jake Hill, CEO of DebtHammer, said, “If you can’t bear the thought of leaving money sitting in a savings account when you could spend it on something, you’re likely an accidental spendthrift. This type of person generally thinks about their finances in the short term and is highly motivated by instant gratification.”
You Make Impulse Purchases
“Buying items on a whim, especially those that aren’t budgeted for, can be a sign of overspending,” said Sherman Standberry, managing partner at My CPA Coach.
Maybe you have closets full of clothes with the tags still on, because you just love the thrill of buying new clothes but then never actually wear them. Or scoring a discount makes you feel like you’re saving money, even if you wouldn’t buy the item at full price. So you buy expensive items just because they are on sale.
You Always Buy the Latest Gadget
If you have a habitual need to upgrade tо thе latest phone, computer or other gadget, even whеn thе current оnes аre рerfectly functional, that’s a good sign of overspending.
For example, some people feel compelled to upgrade to the newest iPhone model every year when it’s released. This penchant for the latest and greatest tech is driven by wants rather than needs. These frequent upgrades also carry high price tags, so they can quickly consume large portions of your income. The novelty wears off fast, but the financial impact lingers much longer.
Reining In Spending
If these signs sound familiar, you may need to reassess your spending habits. Here are some tips to help change overspending.
Track Your Expenses and Stick To a Budget
“Track your income and expenses to understand where your money is going,” Standberry said. “This will help you identify areas where you can cut back.”
Kelly said, “Developing some knowledge on financial literacy along with good habits for managing your money can go a long way towards conquering patterns leaving you in debt and help get you back on track.”
“Setting a realistic budget and sticking to it is crucial,” advised Shirshikov. “This includes allocating a portion of income to savings and investments right at the beginning of the month.”
Use Cash Instead of Credit
“Using cash or debit cards instead of credit can help curb overspending, as you can only spend what you have,” Standberry said.
The downside of credit cards is they disconnect spending from an awareness of finite resources. When you use credit, it is easy to spend more than you actually have in your bank account. But when you use cash or debit, it naturally curbs overspending.
Limit Impulse Buys
You may be using shopping to deal with emotions like boredom, anxiety, stress or sadness. Buying something new offers a quick hit of mood boost or distraction from negative feelings. But this is only a temporary effect. It does not address the underlying issues driving those emotions. Identify when and why you shop as a coping mechanism, and find healthier alternatives to deal with those emotions. Your well-being and wallet will thank you.
“Try to wait at least 24 hours before making a significant purchase,” Standberry suggested. “This can help ensure it’s something you really need and not just an impulse buy.”
Don’t Let FOMO Drive Your Spending
“You may also find yourself trying to keep up with friends when your budget doesn’t really accommodate all activities,” Kelly said. “Don’t let the fear of missing out (FOMO) put you in the hole financially. Be selective and stay within your budget when choosing when and how you’ll be part of your clique.”
FOMO can be a spending trap when trying to keep up with friends or peers. It’s easy to get caught up in wanting to attend every happy hour, concert, trip or event to avoid feeling left out.
But, as Kelly advises, it’s important to stay grounded in your own financial situation and not overspend just to keep up appearances. Having an honest conversation with friends about your budget limitations can help align expectations. And being selective by only joining activities that fit reasonably within your means avoids FOMO from driving you into debt.
Hide Your Money from Yourself
“If you struggle with spendthrift habits,” Hill said, “try opening a separate savings account that isn’t linked to any of your other accounts — especially checking. The ‘out of sight, out of mind’ principle can help you leave your savings in place and allow it to grow.”
When you have a distinct account used expressly for building savings, there is a psychological benefit. Even though the funds are still accessible, placing them in their own account earmarks those dollars for the future. It builds a mental distinction that this is money meant for goals, not impulse purchases. This can go a long way toward changing spendthrift habits by creating healthier boundaries around saving versus spending.
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