How to stop overspending and start saving money
Maintaining a budget is essential to keeping your finances in order, but for some people, once monthly expenses are met, they lose track of where discretionary dollars go—falling into the trap of overspending.
Overspending isn’t always a direct result of financial irresponsibility. The reasons behind it might be psychological, in that having purchasing power satisfies some unmet emotional need, or it could be a matter of “keeping up with the Joneses” and choosing to overextend finances for appearance’s sake. Getting clear on why you overspend is the first step toward getting out of an undesirable habit and starting a new, healthy one—saving.
Three ways to start saving more money
1. Track your purchases
Your bank statement is a valuable tool; it gives you a list of where you spend your money on a monthly basis. But what it doesn’t tell you is what exactly you’re spending your money on. That trip to the vending machine or that morning drive-through coffee seems like a negligible expense every day, but have you done the math on a weekly or monthly basis? It adds up quickly, and more to the point, is it really necessary? With a little thought and pre-planning, you could implement some budget-friendly solutions for convenience purchases that ultimately save time and money.
2. Commit to a budget
You may have to set a budget, and it does take some effort to put one together. Begin with the basics: How much money do I have? How much do I need to cover my obligations? Once you have the necessities covered, take a look at what’s left over. Use that amount to set a few mini-goals for yourself, like setting aside a certain amount for a larger, future purchase or saving for vacation. Don’t forget to earmark a small amount to spend on fun, like hobbies or dining out.
3. Use cash
In the age of debit cards and pay-now apps, this suggestion may seem a little old school. But it works. Put a set amount of cash in your pocket, and limit your spending to that amount. By setting parameters around your buying power, you’ll consider your purchases more carefully—a check-and-balance is much less prevalent when using a simple card swipe. And if you end up running out of cash, you have to go to an ATM, giving you time to reflect on if what you’re buying is actually a “need” or a “want.” In many cases, the answer will surprise you.
Planning is the key to budgeting your money and finding leaks that could be tripping you up. Be proactive in decision-making and you’ll likely find extra money in your budget that you can use to start saving for retirement or supplement your existing contributions. You may even be able to make the added savings work even harder for your retirement by taking advantage of employer matches, certain tax deductions and the like. After all, the more you save, the faster you can stop working and enjoy your retirement.