If left unchecked, overspending is one of the fastest ways to end up in a bad financial situation. Unfortunately, these days it’s becoming easier and easier to fall into this terrible habit.
But what if overspending is just a symptom of a greater problem? And what if, by addressing the root of the issue, you could stop your habit of overspending dead in its tracks?
Well, that’s exactly why we’re here.
In the rest of this post, I’m going to cover 7 major causes of overspending and what, exactly, you can do to conquer them. So, if you’re ready to pull in the reins on your spending, and take back control of your financial life, keep reading.
1. Not Living On A Budget
Plain and simple, attempting to operate your financial life without a budget is one of the most common causes of overspending. 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 drift off course — or take your financial life down a dangerous path.
So, if you want to get your habit of overspending under control, the very first thing you should do is create a budget. And I’m not talking about a generic, group-your-money-into-3-categories kind of budget. Rather, you should plan your financial life down to the penny by laying out every dollar of your income, and every expense you expect to pay throughout the month. You should also make sure to incorporate giving, saving, and investing.
Essentially, your goal is to create a plan for every dollar of your income before the month even starts.
I know this might seem a little daunting at first, but the more accurate of a budget you create, the easier it will be to keep your financial life on the proper course.
Important: creating a budget is only the first step in taking control of your spending habits. The second, and most important, step is to actually live within your budget. Ultimately, your budget is only as effective as your willingness to operate within its boundaries. So, don’t just create a budget; live according to your budget.
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2. Lacking A Financial Purpose
Another common reason for overspending is that many people don’t have an inspiring purpose driving their financial decisions.
This is often referred to as your “why”, and it is an essential part of achieving financial success.
Therefore, one of the best ways to conquer your desire to spend money is to figure out an even more powerful reason NOT to spend money. And I mean powerful.
For instance, what if your financial purpose is to provide security and financial freedom for your family? Then every time you consider spending money on something you don’t need, you will have to convince yourself that it’s more important than your family. That’s pretty powerful!
But it doesn’t stop there! Your financial purpose could be to save enough money to travel the world without restriction. Or maybe your purpose is to save up enough money so that you can quit a job you hate and pursue your dream career.
Whatever it is, the more powerful of a purpose you have driving your financial decisions, the less likely you will be to overspend.
3. Trying To Impress Others
In personal finance, one of the deadliest traps you can fall into is comparing yourself to others; or worse, trying to impress others.
Whether you end up financing a car you can’t afford to buy outright, maxing out your credit cards on clothes, or taking on a mortgage that devours your income, trying to impress others almost always leads to overspending.
And here’s the worst part, you might be spending your money to impress somebody that’s spending their money trying to impress you! It’s a vicious cycle, and honestly, we’re all guilty of it.
So, what should you do?
In my experience, the best way to stop trying to impress others is to stay laser-focused on your own financial life and immerse yourself in trying to improve your own finances. The more time you spend doing this, the less time (and desire) you will have to try to impress others.
Also, you should take a little time to answer two questions:
Who are you trying to impress?
And why are you trying to impress them?
By addressing these questions, you might just discover the entire cause of your overspending. And when you bring these answers to light, they will probably lose a lot of their power.
4. Spending On Credit Cards
One of the things I’ve come to realize is that the simpler your financial life is, the easier it is to build wealth.
For instance, the less debt you have, the fewer payments you have to make each month, and the more money you’ll have to save and invest. Along those same lines, the less money you spend on credit cards, the fewer balances you’ll have to manage, and the less likely you will be to miss a payment or overspend.
Even more importantly, if you never spend money on a credit card, you never take on the risk of high-interest debt.
Seriously, if you can’t seem to stop overspending, then one of the best things you can do for your financial life is to stop using credit cards. I know that goes against the grain of society, but I’m telling you, it works. 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.
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.
Unfortunately, this is one of the hardest causes of overspending to conquer.
Because it requires a surprising amount of self-discipline and effort to avoid boredom. Additionally, you have to be incredibly intentional and proactive.
The best advice I can give you is to figure out the situations in your life that result in boredom and try to fill them with a more productive habit. 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. Or, you could start a side hustle and fill your spare time by getting a part-time job or trying to build a business.
Put simply, if boredom is one of the reasons you overspend, then filling your time with productive activities is a great way to improve your financial life.
Patience is something I have to consciously work on every single day. From saving up enough money to make a purchase to embracing the time it will take for me to achieve my financial goals, practicing patience isn’t easy for me. However, I also know that when I get impatient, I’m much more likely to make a bad financial decision.
And if you struggle with overspending, then the real culprit might be impatience.
Think about it like this, if you want to purchase a car, you really have two options: you could save up the money and pay cash, which might take months, or you could finance the car and drive it off the lot in a matter of a couple hours.
Now, you might think I’m a little old school in my thinking, but I’m pretty sure financing a car is just a fancy way of saying you purchased something you couldn’t afford. After all, if you could afford it, you wouldn’t have to finance it, right?
Ultimately, it comes down to patience. If you have the patience to save for every single purchase, or at least hold off until you can fit them into your budget, you can put an end to all your overspending.
7. Emotional Spending
The seventh and final item on our list of reasons people overspend is emotional spending. And, similar to overspending because you’re bored, you might not even realize how much influence your emotions have on your spending habits.
There’s even a term for it… “Retail Therapy.”
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.
Whether you spend money when you’re angry, sad, or even excited, emotional spending can lead to some serious problems in your financial life.
This is just another reason why living on a budget is so important. If you have a clearly-defined plan for your money each month, then at least you have some boundaries to help you make wise decisions.
Overspending is usually just a symptom of a bigger problem. From not living on a budget to lacking a financial purpose and even boredom, there are quite a few things that can cause it. And taking some time to address the root cause might just be one of the best things you ever do for your financial well-being.
Remember, the road to financial success is paved with good spending habits. So the sooner you kick your habit of overspending to the curb, the more promising your financial future will be.
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