The psychology of spending: how to control your spending habits
If you are struggling with overspending or impulse buying, you are not alone. Many people find it challenging to control their spending habits and stick to a budget. However, with the right strategies and mindset, it is possible to take control of your finances and improve your financial health.
In this article, we will explore some tips and strategies that can help you control your spending habits and achieve your financial goals. Read on to find out how you can set yourself up for financial success.
How Can I Control My Spending Habits?
If you want to get your personal finances in a healthy spot, you should focus on controlling your spending habits. Controlling your spending habits is not easy, but it is doable. Here are some tips that can help you control your spending habits:
1. Create a Budget
Creating a budget is the first and most crucial step to controlling your spending habits. A budget helps you understand your income and expenses, set financial goals, and track your progress. Start by listing all your sources of income and expenses, including your bills, rent/mortgage, groceries, transportation, entertainment, and miscellaneous expenses. Then, compare your total expenses to your income and identify areas where you can cut back or save. If you want more tips and tricks for living on a budget, check out this article.
2. Use the 50-30-20 Rule
The 50-30-20 rule is a popular budgeting method that can help you prioritize your spending and achieve your financial goals. You can read a more detailed article about the 50-30-20 method here. Under this rule, you allocate your after-tax income as follows:
50% for needs: including rent/mortgage, utilities, groceries, transportation, and other necessary expenses.
30% for wants: including entertainment, dining out, travel, and other discretionary expenses.
20% for savings: including retirement accounts, emergency funds, and debt payments.
3. Avoid Impulse Buying
Impulse buying is one of the main culprits of overspending. To avoid impulse buying, make a shopping list before you go to the store and stick to it. Also, avoid shopping when you are hungry, tired, or stressed, as these emotions can cloud your judgment and lead to impulsive purchases.
Another method our family has found beneficial is to create our shopping list and then order everything to be picked up. This prevents us from going into the store and making any impulse buys. We ensure the pickup day and time makes it really easy and part of our natural rhythm as a family.
4. Delay Gratification
Delayed gratification is a powerful strategy for controlling your spending habits. This methodology does require its own set of rules in order to be successful for some people.
Before purchasing, ask yourself if it is a need or a want. If it is a want, delay the purchase for a few days or weeks and see if you still want it. If the desire fades away, you can save the money for something more important.
5. Track Your Spending
Tracking your spending is essential to controlling your spending habits. Use a budgeting app like PocketSmith or a spreadsheet to record your expenses and monitor your progress. This will help you identify areas where you are overspending and make adjustments to your budget accordingly.
Lots of banking apps have tools you can use as well. Some will allow you to set spending caps in certain categories, like entertainment or clothing. Then they will email you a report in the middle and end of each month so you can see how you are trending toward the caps you set. This has been a great tool for our family to know where our spending needs to be reined in.
What is the Root Cause of Overspending?
The root cause of overspending varies from person to person. The severity can also vary from person to person. For some, they only overspend a little and every so often. For others, they are constantly spending well beyond their means. However, some common causes of overspending include:
Lack of financial education and awareness (read The Saving Dude to help you out there!)
Peer pressure and social influence
Emotional triggers, such as stress, boredom, or sadness
Advertisements and marketing tactics
Cultural and societal norms
Understanding the root cause of overspending can help you develop strategies to overcome it and improve your financial well-being. You can absolutely use your banking app to help out here, just as we outlined above. Or you can lean into any of the various budgeting apps to get a sense of what is causing the overspending.
How Do I Stop the Urge to Buy Things?
Stopping the urge to buy things is not easy, but it is possible. My preference has always been to avoid situations where I might overspend and buy things I don't need. Leaving my phone somewhere I can't use when I'm bored, finding other ways to entertain myself when I'm on my phone, or avoiding the mall or shopping areas when I'm stressed or just got paid.
Here are some other strategies that can help you stop the urge to buy things:
Identify the triggers that lead to impulse buying, such as emotions, social situations, or advertisements.
Develop healthy coping mechanisms for managing your emotions, such as meditation, exercise, or talking to a friend.
Avoid situations or people that trigger your urge to buy things.
Use the 24-hour rule: delay your purchase for 24 hours and see if you still want it.
Focus on your long-term goals
Money Dysmorphia: A Potential Cause for Spending Habits
Money dysmorphia is a psychological condition where individuals have a distorted perception of their financial situation, either overestimating or underestimating their financial status. Individuals with money dysmorphia may overspend, overindulge in luxury goods, or take unnecessary financial risks to maintain their desired image or status.
Addressing money dysmorphia requires a combination of self-awareness and professional help, such as therapy or financial counseling. It is essential to understand the underlying emotional or psychological triggers that contribute to this condition and develop healthier coping mechanisms.
For many, controlling their spending is something that comes naturally and they don't need the advice this article lays out. For others, this article will provide them with the tools they need to rein in their overspending. And for others still, this will not be enough.
No matter your situation, if you know someone that does have an overspending problem, help them out. Being in financial trouble can cause other problems in a person's life. Helping them out could really change their life.