It’s very easy for money to leave your hands soon after you lay your hands on it.
Let’s be honest it feels good to spend money when you can and no matter what your financial situation is like.
The problem is that if you don’t have some form of control over how you spend money, it can easily spiral into tons of debt.
In this post, we will look at 10 signs that show you are spending too much money and some helpful tips to help you avoid this trap
1. You don’t have a budget
The cost of living can be high sometimes, but the key to having financial stability is ensuring that the amount of money you’re making is more than that which you’re spending.
When you sum up all your fixed and variable expenses like rent, food, phone bills, and gym membership, the totals should be less than your monthly income.
Managing the money that comes in and out can be a challenge, especially for people with inconsistent income like contractors and freelancers.
Finding your baseline income by looking at what you’ve been making previously would be a great place to start, so you can decide on the limit for your expenses.
Only 32 percent of Americans keep a formal budget, which means a huge percentage is spending without a plan.
You don’t have to be very hard on yourself when making your budget just as long as you know what goes to things like grocery shopping, entertainment, and the like, you’re good to go.
A budget ensures that you’re paying your bills now and not later.
It also allows you to set long-term goals like saving for a down payment for a house, setting aside money for your kids’ college, education, or retirement.
It prevents you from overspending, as you’ve already planned for how much you can spend in each of your spending categories.
2. You’re trying to impress your friends
If you’re buying a ticket to every festival or every happy hour because your friends are doing the same then this is a sure sign that you’re spending more than you can afford.
Some of us suffer from the keeping up with the Kardashians or Jones’s affliction. It’s very likely that you don’t know what your friend’s financial situation is.
Making assumptions that you can afford something just because they can, or you’re doing this to look good in their eyes isn’t the right way to go.
It’s believed that at least forty percent of millennials overspend in order to keep up with friends and two-thirds of them feel buyer’s remorse after spending more than they had planned to on a social situation.
The tendency to overspend when hanging out with friends isn’t just limited to one generation.
Researchers seem to think that there isn’t much difference among the older generations.
Interestingly though, this isn’t just a socio-economic phenomenon. The temptation to overspend cannot be outearned.
Robert Frank wrote in his book Richistan that 20% of households with between 1 million and 10 million dollars in assets in 2004, spent all their income or more in a frantic race to keep up with their newfound friends.
Those who happen to have more money than them.
This just goes to show that, regardless of generation and net income, the temptation to overspend in an effort to keep up with our friends and their spending habits is common to all of us.
3. You don’t save
Saving for retirement and big expenses should always be a part of your budget from as early as your first paycheck.
Sometimes we convince ourselves that we can’t save. The reason being we don’t make enough or the bills are too much, but the most likely reason is we spend too much.
There’s a number of amazing apps that can assist you in analyzing, where most of your money goes and do away with or cut back on a few things.
A financial planner can also help you come up with a strategy for your short-term and long-term saving goals.
Financial advisors recommend that you should save at least 10 percent of your income, but it all depends on the goals you’ve set for yourself.
It’s acceptable to put a smaller amount towards your savings if you’re still paying off debts and more towards paying them back, provided you have an emergency fund.
It’s important to remember that nothing lasts forever. At some point, you won’t have your job anymore, and then what?
You need to have enough saved up to maintain your lifestyle and keep you comfortable.
It’s the responsibility of your current self to take care of your future self. So if you’re unable to set money aside for this, then you’re overspending.
Don’t forget that whatever you make now isn’t just for you at the moment.
It’s also for later on. if you don’t have enough saved up for later, how will you survive?
4. You always owe money on your credit card
Before taking out your credit card to pay for small purchases, think twice because you’ll be accumulating debt before you know it.
When you pull out that piece of plastic, remember you’re basically taking a loan. There’s nothing wrong with using your credit card.
But if you’re using it to pay for small things like a cup of coffee or a muffin, it’s just another indication that you’re spending too much.
You should be able to pay for such things with the cash you actually have.
If your credit card balance is more than you can pay off at the end of the month, and you’re incurring debt, you need to put off any purchases on it until it’s paid and reduce the limit on your credit card while you’re at it.
Making minimum repayments on your credit cards or loans only puts you in debt for a long time.
You should always pay more than your minimum repayments, regardless of how much that more is.
If you can’t pay beyond the minimum, then you probably shouldn’t have gotten yourself in debt, to begin with. Cut back on your spending, so you can make the extra payments
5. You’re double buying
This refers to purchasing items that you don’t necessarily need. You can’t even recall why you have them in the first place.
Re-Buying things accidentally just shows how meaningless they are and it’s very easy to continue to buy and waste when you don’t care about your purchases.
Whatever moves you to buy that shirt in four different colors is just beyond comprehension.
If you look around your house and it hits you that it’s filled with stuff, you don’t even need, that’s yet another sign that you’re spending too much.
Just because the product is on a discount doesn’t mean you need to purchase more of it.
If it’s not something that you’re in constant need of, then you’re overspending.
A lot of people have this mindset that, because something’s on sale, they have to buy more of it.
But the thing is if the product’s on sale chances are it’ll be on sale again later.
So don’t try to grab as much as you can thinking it’s the only chance you’ll get. Simply buy what you need.
6. You’re always anxious about money
You shouldn’t worry about finances all the time. Whatever issues you have, try to meet them head-on.
Make a plan and get whatever help you’ll need perhaps through credit counseling.
It might seem impossible to get on track with your finances, but you can always get assistance with the right tools too.
If talking about finances makes you anxious, then you probably have a lot of negative feelings towards money based on your past experiences with it.
And if money is something you’re always anxious about, then you’re probably spending a bit too much.
The best way to handle financial anxiety is to learn how to gain control.
It’s just money at the end of the day and controlling it is possible. Put as much energy as you can about personal finance, how to manage your money and how to budget.
Then once you have the hang of it, put it all into practice and you might end up changing your mindset about money.
7. You don’t have an emergency fund
Just to set the record straight, your emergency fund is neither your savings account nor your credit card.
It’s your safety net. It’s there for you to use in the event of an emergency, and you need the money right there and then.
Emergency funds reduce stress and anxiety around money and let you rest easy, knowing that you’re covered.
If something comes up, if you don’t have one, put a stop to your frivolous spending and set one up.
If you haven’t yet set aside some emergency savings, it may be because you’re overspending.
It’s known that women tend to have less saved up than men. On average women save two thousand dollars, while men save up to seven thousand dollars.
A figure that varies widely based on factors like age, race, and income.
If you have yet to get started begin with a manageable goal for you to hit your first milestone, anything can happen and you need to have enough in case of an emergency
8. You borrow from friends and family
If you constantly need to borrow money from family and friends or rely on someone else to pay your bills, you need to cut back on your spending and start paying them on your own.
This is just like living from one paycheck to the next.
It’s all about getting smart with your finances and not hiding from them.
It might seem good to borrow a loan without having to pay interest. But if you’re unable to pay back, the loan tensions rise and your relationship could be ruined.
If you think about it, how would you feel if you gave a friend or family member a few hundred dollars, but never got your money back?
Don’t risk your relationships because of a spending problem.
9. Bills are paid late
One thing to keep in mind when it comes to late bill payments is that they incur late fees and charges which are additional costs to pay for.
If you’re mature enough to have bills, then it’s only right that you should pay for them on time.
If this proves to be a challenge, why not set up automated bill payments so that you’re never late and ensure you have enough cash in separate bill accounts to pay them.
Otherwise, you’ll end up with overdrawn fees on the account as well.
According to an urban institute report that was released in 2014, roughly one out of every 20 people with a credit file are at least 30 days late on a credit or a non-mortgage account payment.
Paying bills late because you don’t have the cash to cover them is a sign you’re overspending and it sends a red flag to your credit issuers, which could raise your interest rates or lower your credit limit.
According to the National Foundation for Credit Counseling, you’ll also be hit with fees, and several late payments will damage your credit score.
If you’re late on your payments by more than 180 days, your debt is automatically assigned to a collection agency or debt collector.
Having debt in collections can lower your credit score and will generally remain on your credit report for seven years.
What’s worse is that your creditors or debt collectors can sue you and are allowed to take your wages to pay the debt you owe, according to the Federal Trade Commission.
10. You have no idea what’s left in your account
You won’t know the balance in your bank account if you’re always spending money on something.
It’s also quite possible that you’re living in denial about how much you really have.
Some people are even scared of checking as they don’t even want to know what’s left. But checking helps you limit your spending.
Some people argue that bank balances can be misleading.
They don’t show you the whole picture, like the fact that your rent is due in a few days or the monthly internet bills around the corner.
They don’t warn you that the paycheck you just earned has to cover you for the next two weeks before the next one arrives.
This means that every payday, the big number in your bank account, makes you feel rich, and you immediately begin on a high, ordering stuff online and taking your friends out.
Only to finish off eating cereal for dinner and instead of doing something about it, the cycle continues.
The best thing to do would be to check your account balance occasionally.
At the same time deduct all your necessary bills and expenses to see how much you have leftover to spend on other things. You shouldn’t be afraid of looking at it.
It’s important to be able to manage how you spend your money and this is not a habit that is hard to cultivate.
Which of the above points do you feel applies to you and which tip did you find most useful.
Let us know in the comments below.