Do you need to stop spending so much money and start saving instead? Breaking the habit of overspending is definitely not easy.
No matter how financially disciplined someone may be, we all experience the temptation to spend money on things we don’t need, to some degree.
The cause of this temptation can be a wide range of things, from spending triggers to impulse buying.
According to Experian, the average American had $92,727 of debt – not including mortgages – in 2020!
With that said, If you want to break your bad spending habits and start saving for one reason or another, you’re in the right place.
In this guide, we’ll cover several steps you can take to stop spending money, tips to help you succeed, and much more.
How to Know if You Have a Spending Problem
To stop overspending, you should first determine if you have a spending problem.
You may have a spending problem if you answer yes to a few or more of these questions:
- Do you have no savings because you spend a large percentage of your paycheck on things you don’t need?
- Do you spend more than you earn?
- Do you have maxed out credit cards?
- Are you constantly paying overdraft fees?
- D you buy things you don’t need before paying your bills?
- Do you have no idea how much you’ve spent on “wants” in the last 30 days?
- Do you buy things and then regret it afterwards?
- Do you frequently feel guilty after buying something?
Keep in mind that I said “may” have a spending problem. Some people might answer yes to several of the questions above simply because they’re going through financial hardships as a result of losing their job, etc.
With that said, if you’re not currently going through financial hardships and still answered yes to a few or more of the questions above, you may have a spending problem and should follow the steps below.
Possible Causes of Your Spending Problem
So, you have a spending problem, but what exactly may have caused it? Unfortunately, mainly because of technology, in today’s world it’s far too easy to develop bad spending habits.
With that said, here are a few possible causes of your spending problem:
- Retail Therapy: Retail therapy is a method of relieving stress or other negative emotions that people use subconsciously or even consciously. Although some people may joke about shopaholism, it’s a very real thing.
- Social Media: Because of targeted advertising, social media marketing is able to take advantage of your traits, such as your interests. As a result, when you browse social media, you’re always seeing ads for things you’re interested in.
- Keeping Up With the Joneses: Are all your friends and family buying that new product that just hit the market? If you’re constantly buying things just because everyone else is, you may end up with a spending problem. Latest iPhone, anyone?
- Shopping Online: For the purpose of convenience, websites save your card details for the next time you make a purchase. However, purchasing something with a single click of a button makes it far too easy to overspend, which may influence an online shopping addiction.
- Using Credit Cards: Credit cards make it far too easy to spend money. They also create a disconnect with how much you’re actually spending. As a result, you probably spend more with a credit card than you would if you were using cash.
Steps to Stop Spending Money
Although breaking the habit of overspending may be difficult, with the right system in place, it is possible.
Simply follow the 7 steps below to break your bad spending habits and start saving money instead. We will then discuss tips to help you succeed.
1. Determine Your Why
Why exactly do you need to stop spending money? Knowing your “why” is the first step in making a positive change. Your reason for no longer spending money is what will keep you from giving up when times are tough.
Your “why” can be paying off credit card debt, paying off student loans, saving for retirement, buying a home, and so on.
Once you establish your “why,” write it down, make a vision board, or do anything else that will help you remember it, and then put it somewhere visible like your fridge.
2. Identify Your Spending Triggers
To stop spending money, it’s super important that you understand what your spending triggers are. Identifying a problem is the first step in creating a solution.
Simply put, a spending trigger is anything that tempts you to spend money. The best way to identify your spending triggers is to keep a spending journal.
Every time you buy something you later regret or know you shouldn’t have bought, write down where you were when you bought it, when you bought it, who you were with, what mood you were in before and after you bought it, and so on.
Not only will this help you identify your spending triggers and gain control over impulse buying, it will also help you track your spending and create a budget, both of which we will discuss next.
With that said, here are a few of the most common spending triggers:
Emotional State
Have you ever bought something when you were stressed, anxious, sad, angry, or even excited? If so, your emotional state may have influenced you to make the purchase. In fact, stress is one of the most common spending triggers.
To avoid emotional spending triggers, identify the emotional states that influence your spending behavior and avoid going shopping when you’re in these moods.
Instead of going shopping when you’re in one of these emotional states, try going to the gym or for a run instead.
Environment
Is there a specific environment that influences you to spend money? This can be anything like retail stores, fast-food restaurants, shopping malls, art fairs, and so on.
To avoid environmental spending triggers, either stay away from these environments or only bring money for what you planned to buy beforehand. You should also never go to these places without a shopping list.
Peer Pressure
Have you ever spent money when you were with friends or even family and regretted it afterwards? If so, your purchase may have been influenced by peer pressure.
If this is a common occurrence, you may need to stop going to places like stores, restaurants, and shopping malls when you’re with them.
Instead, create plans that involve free entertainment like going on a hike, having a game night, and so on.
Your Lifestyle
If you’re living above your means and constantly spending more than you earn, there’s a chance your spending trigger is simply having become accustomed to a lifestyle you can’t afford.
In this case, it’s important that you start living within your means. To do so, make sure you track your spending and create a realistic budget.
Other Spending Triggers:
- An emotional event like the end of a relationship
- The need to please others
- Holidays and special events
- Credit cards
- Social media
- Time of day
- Shopping online
3. Track Your Spending
If you have a spending problem, tracking your spending may come as a shock. Oftentimes, when we overspend, we’re simply assuming that an unnecessary purchase here and there won’t affect our financial wellbeing.
However, even the smallest purchases add up over time. As a result, by the end of the month we have overspent and have no money left over for important things like saving, and so on. Perhaps you thought you were spending less than you actually were.
With that said, tracking your spending is vital to breaking bad spending habits. By tracking your spending, you will be aware of where exactly your money is going, which will help you make wise spending choices.
Furthermore, you will also know what you’ve overspend on, which will help you identify categories you can cut back in when you create a budget.
To help you track your spending, you may want to use an expense tracker app like Mint or YNAB. An expense tracker app will help you keep track of all your transaction data.
4. Make a Budget and Stick to It
Now that you have tracked your spending, it’s important that you make a realistic budget and stick to it.
While the thought of budgeting may sound boring or even a bit stressful, it’s the primary tool that will help prevent you from overspending.
Having a budget will help you know exactly where all your money is going and help you save, forcing you to be strategic with your spending.
In other words, it will be the primary way you track your expenses, which is super important if you’re constantly overspending. It will also make you become accountable to yourself.
Once you have made a budget, you should always check it before you buy something to make sure you can afford it and that it’s within budget.
5. Set Financial Goals
Tying into knowing your “why,” you should also set financial goals, especially savings goals if you want to stop overspending.
Simply put, knowing what you’re going to do with the money you stop spending, will not only help you stay on track, but also get you excited about what the future holds.
When you set your financial goals, set specific ones that are achievable and don’t set too many. I recommend you set three at a time. Once you achieve one, you can set another.
Also make sure your goals are achievable in a year or less. You may even want to set one that is achievable within one to three months.
Make sure to write them down so you can keep track of them every single day and review your progress.
Here are several great financial goals:
- Building an emergency fund
- Becoming debt-free
- Saving for retirement
- Graduating college
- Starting a business
- Taking a family vacation
- Buying a house
6. Go Cash-Only for a Month
When you’ve just created the goal of breaking your bad spending habits, you may want to go cash-only for a month. Depending on your situation, you may even want to go cash-only as a permanent strategy to prevent overspending.
For the entire month, commit to only spending money with cash and not debit cards, credit cards, or anything else.
Once the month is over, review how much you spent and compare it a different month when you used a credit card to make your purchases.
If you find that you spent a lot less when you only used cash, going cash-only may be the perfect strategy for you to stop overspending.
Although debit and credit cards may be convenient, there’s a chance they’re the culprit of your bad spending habits.
If you do go cash-only for a month, I recommend you use the Envelope budget system.
The envelope budget system is a budget strategy in which you track your spending for each budget category by tucking away cash for each month in separate envelopes for each category.
Once cash runs out in an envelope, you can no longer spend any more money in that budget category. Not only will this help prevent you from overspending, it will also help you identify which budget categories you need to cut back in.
7. Do a No-Spend Challenge
Doing a no-spend challenge is a great way to improve your financial discipline and determine how much you’re spending on things you don’t need. It’s also a great way to get a head start on your savings or pay down debt.
A no-spend challenge, also known as a spending freeze, is a certain period of time in which you don’t spent money on anything other than essential expenses like rent, food, etc.
You cut out everything else such as eating out/ordering takeout, travel/vacation, paid entertainment, costly hobbies, and so on.
This can be a weekend, a whole week, a month, or even an entire year. However, if you’ve never done one before, you should start off doing one for a weekend.
Tips to Stop Spending Money
Now that you know the steps you should take to stop spending money, here are several tips to help you succeed:
Be Mindful When You Do Spend Money
Before you buy something, really stop and take the time to think about your purchase. Ask yourself, “Do I really need this? Can I live without it?” If you don’t need it and can live without it, then don’t buy it.
When you stop and take time to think about your purchase, you should also consider the “true cost” of making it.
To calculate the true cost of your purchase, determine how many hours you had to work to pay for what you’re about to buy.
For instance, if you buy something you don’t need for $200 and make $25 per hour, you had to work 8 hours to pay for it. Converting a monetary value to an hourly one, can really help prevent you from overspending and buying things you don’t need.
Cut Up Your Credit Cards
Is your credit card the culprit of you overspending? If so, it’s because using a credit card is much quicker and convenient than pulling out a bunch of cash and counting it.
There’s also a disconnect in how much you’re actually spending when you use plastic instead of actual cash.
While this may sound extreme, if you can’t stop overspending because of credit cards, you may want to cut them up and cancel your accounts so you have no other option than to use cash or a debit card.
However, depending on your situation, you may even want to get rid of your debit cards as well, or at least hide them away and don’t bring them with you to stores.
Get an Accountability Partner
Having an accountability partner can significantly increase the likelihood you will break your bad spending habits.
With that said, your accountability partner can be your spouse, a friend, a mentor, or anyone else who is also interested in personal growth.
In addition to having an accountability partner, you should also let family and friends know your goal to stop overspending.
As previously mentioned, family and friends can be spending triggers if they peer pressure you to spend money when you wouldn’t have otherwise.
While your friends and family may not change their own spending habits, it’s still important they know that you’re changing yours.
Don’t Store Card Details Online
Almost every online store and ecommerce website save your card details for the next time you make a purchase.
Although this may be convenient, a click of a single button makes it far too easy to buy something, which can lead to overspending.
To prevent this from happening, simply remove your card details from all websites.
Having to pull out your wallet, grab your card, and then enter your card details will give you time to think over your purchase and decide whether or not you really want to buy it.
Unsubscribe From Email Newsletters
You should also unsubscribe from any email newsletters that send you the latest promotions from your favorite places to shop.
The sole objective of these emails is to get you excited about their latest deals and subsequently make a purchase.
However, when you buy something because of a promotion, it’s most likely because it’s on sale and not necessarily because you need it.
To unsubscribe from a newsletter, there should be a link at the bottom of the email you can click to opt-out. If there isn’t an unsubscribe button, you may need to call customer service and request to be removed from their mailing list.
Use the 24-Hour Rule
If you’re overspending, impulse buying probably has a lot to do with it. If this is the case, you may want to institute the 24-hour rule on your purchases.
Simply put, with the 24-hour rule, you forbid yourself from buying nonessential items for 24 hours so you have time to think about it. This will help you gain clarity on whether or not you should actually make the purchase.
You may even want to wait three or more days if you’re going to make a big purchase.
Other Ways to Stop Spending Money
Here is a list of several other strategies to help you stop spending money:
- Plan your meals on a budget
- Make your money difficult to access
- Shop with a goal in mind
- Learn to say no to others
- Keep your bills in large denominations
- Give every dollar a job
- Never go shopping without a list
- Shop without a shopping cart
- Track weekly saving contributions
- Order curbside pickup
Steps to Take When You Stop Spending Money
You’ve done it! You’ve stopped overspending and now have money left over after every paycheck. But what exactly should you do with all of this additional money?
Don’t worry, there are a lot of great options! With that said, here are the first three steps you should take when you break your habit of overspending.
1. Build an Emergency Fund
Building an emergency fund is the very first thing you should do when you stop spending money.
According to Bankrate, more than half of Americans don’t have an emergency fund of at least 3 months’ worth of expenses and 25% have no emergency fund at all.
Having an emergency fund of 3 to 6 months’ worth of expenses will keep you afloat during a financial emergency and prevent you from relying on high-interest debt like credit cards.
2. Pay Off Your Debt
Once you have built an emergency fund, the next thing you should do with the money you’re no longer spending is paying off any high-interest debt, such as credit cards.
Depending on your situation, you may even want to make a goal to become 100% debt-free.
With that said, if you have a lot of different debts and are feeling overwhelmed, you should use the debt snowball strategy to pay them off.
Simply put, the debt snowball method is a debt repayment strategy in which you pay off your smallest debt first to gain momentum and motivation.
3. Save for Retirement
Once you’re debt-free or have at least paid off any high-interest debt, you should begin saving for retirement.
To save for retirement, consider investing into a 401(k), IRA, or even both. If your employer offers a match on your 401(k), be sure to take advantage of it.
As a rule of thumb, when it comes to saving for retirement, always invest for the long run. Disregard any short-term volatility in the stock market.
4. Invest in Yourself
With the competitiveness we see in today’s labor market, investing in yourself is more important than ever. The skills you may have needed 10 years ago, might not be as applicable today.
To invest in yourself, consider learning new skills, getting a certification to further your career, learning a trade, going back to college to get a degree, and so on.
How to Stop Spending Money FAQs
Here are a few frequently asked questions about how to stop spending money:
Is There an Addiction to Spending Money?
Yes, in fact, a spending addiction can be a very serious problem and should be addressed immediately. Although there’s not an official diagnosis for spending addiction, it is similar to other addictions.
For example, people with an addiction to spending money, not only spend more money than they should, they also invest excessive resources and time to go shopping.
What Is It Called When You Can’t Stop Spending Money?
If you can’t stop spending money even after taking the steps above, you may have compulsive buying disorder (CBD).
Compulsive buying disorder is a mental condition characterized by obsessive shopping and buying cognitions that result in adverse consequences, such as distress or even impairment. In the case of severe CBD, you may need to seek treatment.
With that said, compulsive buying disorder has many other terms, such as oniomania, shopaholism, shopping addiction, impulse buying, and more.
Final Thoughts on How to Stop Spending Money
I’m confident if you establish your “why,” identify your spending triggers, track your spending, create a budget, and utilize the tips above, you’ll become financially savvy and break your bad spending habits in no time.
Although breaking the habit of overspending takes a lot of effort, it’s definitely possible. It’s also key to building a life of financial freedom and having a comfortable retirement when the time comes.
I hope this guide has helped you identify the steps you need to take to stop spending more money than you should and start saving instead. Financial independence is right around the corner!
