Your salary should cover all of your monthly expenses, with money left over for some fun. So why do you always seem to run short by the end of the month? Maybe the blame falls to overspending.
The good news? Overspending is reversible. Read on for six ways we overspend and the changes, including some simple ones, you can make to keep your spending in check.
Paying With Credit
“Each time you buy something with a credit card, you are overpaying and stealing from your future,” said Jay Zigmont, PhD, a certified financial planner and founder of Childfree Wealth. “With inflation, the Fed is raising interest rates, which means that credit card interest rates are also going up. The challenge is that we do not see the credit card interest rate in the price of something we buy. If you buy something for $100 and have a 16% credit card interest rate, then a year later that item has cost you $116.”
If you must pay with a credit card, paying the bill off each month is crucial.
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“As credit card balances grow, so do monthly minimums,” Zigmont said. “And then you have less in your pocket each month, requiring you to put more on credit, and the cycle continues.”
“To get out of debt and stop paying more, the first step is to lock your credit cards and stop taking out more debt. It is nearly impossible to get out of debt if you are still taking out more. In your online apps, remove all of your credit cards and move to a prepaid debit card that you prepay each month. In this way, it will stop mindless spending.”
You’re wandering up and down the aisles of your local store, or scrolling through Amazon late and night, and see something you want and throw it in your cart, you don’t need it. You just want it.
Despite economic fears, Americans are spending more on impulse buys this year than last. A poll of 2,000 adults commissioned by Slickdeals showed that 64% of people have increased their impulse spending over the past two years, currently costing the average person $314 per month. That’s up from $276 last year and $183 in 2020.
Everyone wants to splurge once in a while, so add your impulse buys into your monthly budget, capped at what you can afford — such as $50. Or give yourself a week to think about it. If the item is still weighing on your mind after time passes, see how to fit it into your budget. You are just as likely to forget you ever pondered the purchase.
Paying Late Fees
Late fees represent money you don’t have to spend at all. While it’s easy to overlook paying a bill before the due date — we probably all have done it — it adds up. In a March 2022 report, the Federal Trade Commission said the average fee for a late credit card payment was $31 in 2019. The more often your payment misses the deadline, the more you’ll pay. The FTC said a first-time late fee was $26 on average or $35 for subsequent fees. In all, Americans paid $14 billion in late fees in 2019.
It isn’t just credit card companies that charge late fees. If you pay your cable bill past the due date, for example, you’ll be charged a late fee. The amount varies by state. To keep late fees from occurring, consider putting your recurring monthly expenses on autopay.
Not Making a Budget
A budget provides a framework for your monthly spending, taking into account your income and your set expenses: rent, insurance, car payment, student loans, automatic savings and such. Factor in discretionary spending, too, from the coffee shop in the morning to your monthly night out with friends.
If you don’t make a budget — and stick to it — your checking account could run dry before the end of the month. By using one of today’s many budget apps, you’ll know where you stand with each monthly spending category, reducing the chance you’ll overspend.
Having Restaurant Food Delivered
The pandemic gave a big boost to food delivery, with people thankful they could enjoy the food from their favorite restaurants, even if they were closed or limited to the public, and with no contact with the public. Diners were willing to pay for their safety, and we’re still enjoying the service — and paying for it.
“The processing and delivery fees add up to 30% (of) a dinner bill,” said Melanie Simons, CEO and co-founder at ReFrame Wealth. “Instead, order takeout and pick it up yourself, order from restaurants who do their own free delivery, and subscribe to meal kit deliveries like HelloFresh that bring all the ingredients to cook at home straight to your door.”
Traveling in the Prime Season
Sometimes, Simons said, people spend way more than they need to when traveling.
“By simply planning travel early and selecting destinations that are favorably priced in specific seasons, people can save thousands on travel every year,” she said. “For example, a trip to the Caribbean islands during the shoulder seasons — typically September to November — can save a ton in costs and be incredibly enjoyable. Similarly, a summer vacation to gorgeous ski areas like Vail or The Alps means half-priced accommodations.”
Overspending doesn’t have to play havoc with your budget. A few modifications to your habits — and some planning — can keep you from spending more than necessary.
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