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How to control spending habits

how to control spending habits

You can control spending habits by sticking to a spending plan, understanding your impulsive spending triggers, and sticking to a shopping list. But in order to start controlling your spending, it’s critical to know how much you earn and spend regularly. Once you know this information, you can start forming a financial plan.  

Impulse buying comprises 40% to 80% of all purchases!1 Spending money on unnecessary expenses is only sometimes a cause for concern. But it does drain your income, as it can get around $5,400 a year.  

If your spending habits make it challenging for you to pay your installment loans and bills, then it’s time to stop impulse spending. Learn how to control your spending habits and start saving money.   

Effective Strategies for Controlling Personal Spending

Strategy/ToolDescriptionPotential Impact on SpendingEase of Implementation
Automated Savings Transfers Setting up automatic transfers to a savings account on payday. HighEasy
Cash-Only Budgeting Using only cash for daily transactions to limit spending. Moderate to HighModerate 
Expense Tracking AppsUsing apps to monitor and categorize spending in real-time. HighEasy to Moderate 
Unsubscribe from Marketing Emails Removing oneself from retail and marketing lists. Moderate Easy
24-Hour Rule for Large Purchases Waiting 24-hours before making large purchases to avoid impulsiveness. Moderate to HighEasy
No-Spend Days/WeekendsDesignating specific days for weekends where no extra money is spent. Moderate Moderate 
Review and Reduce Subscriptions Evaluating and possibly canceling unnecessary subscriptions and memberships. ModerateModerate 
Disclaimer: The effectiveness of the strategies listed in this chart may vary based on individual financial situations and habits. It is recommended to consider personal circumstances and possibly seek financial advice before implementing these strategies.

How Much Do Americans Spend on Nonessentials?

How much does the average American spend on nonessentials? Are you spending more than most? According to research conducted by OnePoll, the average American spends about $1,497 a month on nonessential items!2 

Take a look at how much an American spends on various items each month:

  • Restaurant Meals – $209.38
  • Drinks – $188.68
  • Takeout or Delivery – $177.88
  • Impulse Purchases – $108.97
  • Gym Classes/Memberships – $72.53
  • Online Shopping – $84.11

Spending money on items you don’t need is not an issue as long as you can comfortably manage your monthly bills. But frivolously spending money can prevent you from saving for various important life goals, such as vacations, retirement, or home ownership. Take time to calculate how much you are spending monthly on nonessential items. Knowing how much you end up losing each month may motivate you to break bad spending habits.  

Signs That You Have a Spending Problem

Life is about spending money, but how do you know if you have lost control of your finances and developed a spending problem? There are various warning signs that you may have accidentally adopted bad spending habits. Learn how to spot signs that it’s time to make adjustments and stop spending money unnecessarily below.  

You Make Impulse Purchases

Impulse purchases can significantly reduce the amount of money you have each month. Constantly buying items you don’t need can add up to hundreds or thousands of dollars each year. That money would be better spent on personal loan payments, student loans, retirement, etc. Small purchases are easy to justify, but numerous small transactions can quickly drain your bank account.   

Your Available Balance on Cards Is Low

If you are using a majority of your credit card limits, then it’s time to stop bad spending habits. Carrying high credit card balances can make your monthly payments unaffordable. Many people struggle to pay off credit card debt because interest rates are typically high. Is your available balance low? It may be time to stop using your credit cards and focus on debt payments before credit card debt becomes unmanageable. Your credit score will go up if you pay off your credit card in full

Your Credit Score Has Decreased

If your credit score goes up and down, it may be time to reevaluate your spending habits. When you experience trouble managing your money, your credit scores reflect that. Unfortunately, a low credit score can make it challenging to qualify for loans, housing, low rates, and more.   

Credit scores typically decrease due to the following reasons: 

  • Your monthly payments are late
  • Your credit utilization ratio is too high
  • You apply for too many loans or credit cards
  • Your credit mix changes
  • You close an account 

If any of these situations apply to you, know that you can reverse the damage to your credit rating! Once you stop overspending and start the budgeting process, you will begin to see your credit score increase. 

It’s Hard To Afford Monthly Bills

You will benefit from a budget plan if you struggle to pay your monthly bills. Paying your debts on time is crucial for your finances and credit health. Late or missed payments will result in a late fee, decreased score, and negative credit entry report. Do you worry about being able to afford monthly payments? Then it’s time to develop better habits to improve your financial standing!    

You Don’t Save Your Money

Saving money is a necessity in order to afford unexpected expenses and avoid borrowing cash during an emergency. Suppose your car needs repairs and you have no money. In that case, you may have to apply for payday loans online. Loans can be an additional financial burden, especially if you already have existing debt. If you do not have enough money left over after paying monthly expenses, then you cannot save. But you can start to build an emergency fund in no time by organizing your finances.

How Can I Stop Spending Money and Start to Save Money?

Spending money is a hard habit to break, but don’t worry! There are tools available to help you take back control of your personal finances and stop spending money when you don’t need to. You can start a budget plan, cut costs, or adjust your lifestyle. It is possible to save no matter what income you have.

Stick to a Budget Plan

A budget plan can help you keep more money in your pocket and grow your savings. There are several ways to budget money on a low income, such as sticking to a 30 day rule to control spending

In order to start the budgeting process, you need to know your total monthly income (post-tax) and your total monthly expenses. Once you know how much money you earn and spend every month, you can choose a budget method to focus on specific goals.

These are some popular budget plans:

  • 50/30/20 Budget Rule – This budget method separates monthly expenses into three categories: needs, wants, and savings. This rule requires consumers to spend 50% on necessary expenses, 30% on unnecessary costs, and 20% on savings accounts. 
  • 70/20/10 Budget Rule – This budget plan is similar to the 50/30/20 rule, but it prioritizes necessary expenses. This budget rule is ideal for consumers who want to focus on debt payments and other recurring costs because 70% is for needs, 20% for wants, and 10% is for savings or investments.  
  • Envelope System – The envelope system is a cash budget plan that forces you to separate your monthly income into categorized envelopes. You are only allowed to spend as much cash as you have in each envelope. Suppose you want to spend $100 on new clothes this month. Suppose you are out of money from the discretionary expense envelope. In that case, you must wait until next month to spend money on new wardrobe pieces.  
  • Zero-Based Budget – The zero-based budgeting method is similar to the envelope method. However, you don’t have to use envelopes or cash. You must make a list of spending categories so you can allocate every dollar you earn. The purpose of this budget plan is to keep a detailed track of your expenses and make the most of your money. 

Understand Your Spending Triggers

Knowing the emotional and psychological triggers that compel you to impulse buy can help you stop! Spending triggers can be a situation, place, person, or emotion that tempts you to buy unnecessary things. Knowing your triggers can help you avoid them and practice self-discipline. 

Suppose you often fall prey to emotional spending. When you feel down, try turning to friends and family for support instead of retail therapy. It’s challenging to stop bad habits, so start by limiting yourself to a minimal budget or window shopping. Practicing impulse control will reduce the urge to spend overtime!     

Make a Shopping List

Making a shopping list before you go to the stores can help you save. A spending plan enables you to focus on necessities so you can keep extra money in your wallet for better things. Once you grab all the items on your list, make a beeline to the register to checkout. 

Track Your Spending

Tracking all of your monthly expenses can make it easier to limit daily purchases and save. There are several apps available to track your spending, and the best one depends on your preferences. 

Mint is one of the best free expense tracker apps. Mint allows users to track spending, set bill payment reminders, and monitor their credit scores. If you prefer a hands-on approach like the envelope budgeting method, use the Goodbudget app. Consumers with partners can benefit from Honeydue, which helps couples manage money together.    

Stop Eating at Restaurants

Eating out at restaurants is fun and convenient, but it can take a massive toll on your finances. Cooking and meal prepping can save you hundreds of dollars every year! Cooking requires commitment, but it does not have to be an arduous process. If you are new to cooking, consider starting with simple or minimal-ingredient recipes. 

Use Coupons

Coupons can help you save a lot of money on groceries and other items! Most retail stores offer an app that lets customers digitally clip coupons and see what’s on sale. You can also look for coupons online or sign up for free coupons in the mail. Planning your weekly meals around coupons can help you save money. You may even be able to try new recipes with items you don’t typically buy.   

Reduce Utility Costs

Utilities do not have to cost hundreds of dollars each month. You can reduce the amount of your monthly utility bills by simply making some lifestyle adjustments. Follow these helpful tips, and you will be amazed by how much money you can keep in your checking account

  • Take shorter showers
  • Use cold water when washing clothes
  • Replace the air filter on your HVAC
  • Use weatherstrips on your doors and windows 
  • Switch from standard to smart power strips
  • Set your thermostat back 7° to 10°F for eight hours each day

FAQ: How To Stop Spending Money Unnecessarily 

How can stopping spending money on small daily items make all the difference in my financial situation?

When you stop spending money unnecessarily on small daily expenses, it can significantly impact your financial situation. For instance, saving just $5 a day on things like coffee or snacks adds up to $1,825 annually. This amount, when saved or invested, can contribute substantially to your retirement savings or other goals. It’s a clear example of how spending less money on minor items can make all the difference in the long run.

What role does social media play in compulsive spending, and how can I manage it?

Social media feeds often contribute to compulsive spending by constantly exposing users to targeted advertisements and lifestyle portrayals that encourage spending. To manage this, consider unfollowing accounts that trigger the urge to spend, setting limits on your social media usage, and reminding yourself that social media often represents a curated, not realistic, depiction of life.

How can I differentiate between necessary expenses and impulsive purchases?

Necessary expenses are those that are essential for your basic living needs, such as housing, food, healthcare, and transportation. Impulsive purchases, on the other hand, are often unplanned and driven by immediate desire rather than necessity. To avoid impulsive purchases, wait for a set period before buying something you didn’t plan to buy, giving you time to consider if it’s a genuine need or a momentary want.

Can setting financial goals help reduce the amount of money I spend unnecessarily?

Absolutely. Setting clear goals can be a powerful motivator to stop spending so much money on non-essentials. When you have a specific goal, like building an emergency fund, saving for a vacation, or increasing your retirement savings, you’re more likely to think twice before making unnecessary purchases.

How does financial stress contribute to overspending, and what can I do about it?

Financial stress can sometimes lead to emotional spending as a coping mechanism. To combat this, focus on finding healthier stress-relief strategies, such as exercise, meditation, or talking to a friend. Additionally, creating a budget and sticking to it can also reduce financial stress by giving you a clearer picture and more control over your finances.

What strategies can I employ to spend less money when shopping?

To spend less money while shopping, always make a list and stick to it, compare prices before purchasing, take advantage of discounts and coupons, and avoid shopping as a form of entertainment. Also, consider implementing a waiting period for larger purchases to ensure they are not impulsive decisions.

How can I track where I spend the most money and identify areas for cutbacks?

Start by tracking all your expenses for a month, categorizing them to see where you spend the most money. Many budgeting apps and tools can help with this. Once you identify the categories where you spend excessively, set specific limits for those areas and adjust your spending habits accordingly. This can help you redirect funds to more important areas like savings or debt repayment.

What CreditNinja Wants You To Know About Controlling Spending Habits

Controlling your spending habits may seem impossible right now. But with persistence and some helpful financial tools, you can start being financially responsible and stop spending money unnecessarily! 

Budgeting is one of the best ways to take back control of your finances. CreditNinja offers personal finance articles on all kinds of budgeting methods so you can get out of debt and achieve financial independence. Check out the Credit Ninja Dojo today!

References:

  1. 16 Impulse Buying Statistics Retailers Should Know in 2023 │ Fit Small Business 
  2. Average American spends almost $18,000 a year on non-essential │ USA Today
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