Five steps to stop overspending
There’s a feeling you get when you walk into a store for just one thing and walk out with a basketful of stuff and a lighter wallet, wondering what just happened.
It’s a classic overspending scenario and if it sounds like you, you’re far from alone. According to the Consumer Financial Protection Bureau’s first national survey on the financial well-being of U.S. consumers, about one-third of people ages 30 to 49 has more credit card debt than savings. But, take heart! With a little help and a healthy dose of discipline, the cycle can be stopped.
First, know your triggers.
Understand why you overspend. Psychology tells us there are many reasons why people overspend, from trying to keep up with the proverbial Joneses to attempting to salve emotions. Recognizing your individual triggers for overspending can help keep them in check.
Second, track your spending.
Once you’ve recognized the triggers that keep you in the red, start tracking the money you spend so that you can see where it goes. With this information, you can make smarter spending choices and cut back in the areas that are not priority. Keep in mind that small expenses can add up to big dollars at the end of each month, so track them, too.
There are tools to help you track spending - and even automate it - like BBVA Compass Financial Tools for both online and mobile banking.
Third, create a budget.
How many times have you heard how important budgeting is to a healthy financial life? If you’re like me, the answer is too many to count. But, when you’re trapped in the cycle of overspending, budgeting can feel impossible. It doesn’t have to be, though. The best way to budget is to gather your fixed monthly bills like rent, utilities, loan payments, add in savings and subtract that from your monthly paycheck. What’s left is spending money.
In addition to the wide availability of other budgeting tools like Mint, BBVA Compass Financial Tools offers budgeting both in app and online, via a chart that shows your monthly budget. Budget categories change color from green to yellow and red if you exceed set spending limits. The visual approach is designed to quickly convey targeted spending and progress toward monthly budget. You can even track spending and savings at other institutions.
Fourth, think in terms of a cash budget.
Put simply, don’t buy anything you wouldn’t be able to pay for in cash. There are reasons people may prefer or even need to use a credit card - online purchases and large purchases among them - but if you can’t be certain that you’ll pay the sum off immediately, consider whether you need to buy the item at all.
Fifth, build up a savings by living on less than you make.
Once you’ve established your monthly budget, consider whether you can live on less than your monthly take home pay. If you can, take the extra amount and put it into savings. This will help you build up your savings quicker, but also provide an emergency fund for unexpected situations. And, if you suddenly find yourself with less money each month, the impact may be easier to absorb, thanks to the practice of living on less.
To read more about BBVA Compass savings account options, click here for more information.