Overspending Advice Tips

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What are spending triggers?

Understanding Spending Triggers

Everyone has his or her own unique spending triggers. Spending triggers are those hot buttons that, when pushed, lead us to spend our hard-earned money on things we don't really need. For example, a busy work-at-home mom's spending trigger may be stress. She's busting her butt to make deadline. She feels guilty that she isn't spending enough time with her kids. It's five o'clock, and she hasn't started dinner yet. She feels like she deserves a break. Eureka, she thinks! I'll order out! Fifty dollars of Chinese food later, she now has to work another hour to pay for the convenience. This busy mom's spending triggers are stress, guilt, entitlement.

Men are not immune from overspending either. Consider the career-climbing young father. He's driving a perfectly acceptable Honda Accord. Honda's are known for great gas mileage and low cost of ownership. But the parking lot at work is full of Volvos and Acuras. He's embarrassed to be seen driving his trusty ol' Honda, so he trades it in for a flashy BMW, spending money his young family can ill afford. His spending triggers are his desire to overcome feelings of inadequacy and his need to demonstrate his own importance.

Are we at the mercy of our spending triggers? Not entirely. Start paying attention to how you feel when you are considering spending money. Feeling sorry for yourself? Feeling overwhelmed? Once you identify your spending triggers, try to avoid situations that provoke those feelings. For example, during her slow periods, that stressed out work-at-home mom could cook ahead and have some easy meals ready and waiting in the freezer for her nuttier work periods. She'd save money, have more free time to spend with her family, and feel good about feeding her kids homemade, nutritious meals.

How can I control my spending better?

Mind Your Spending

People have short-term memory loss when it comes to their money. How many times have you withdrawn $20 from the ATM in the morning to find yourself later in the day down to nickels and dimes and asking yourself, "What did I buy?" One way to rein in overspending is to keep track of where you are spending money.

Most of us aren't blowing our dough on Rolexes at Kay Jewelers. More likely than not, your money is being siphoned off by small- to medium-sized impulse purchases. Let's say you whiz through the Dunkin' Donuts drive through on your way to work everyday and order the value combo No. 2. At $2.89-plus-tax a day, that's nearly $714 a year—and that's counting two weeks off for vacation. Keeping track for a few weeks can be very illuminating, but if you just can't bring yourself to do it, then pull out your bank statements.

If you live and die by your check card, all the gory details will be spelled out for you in black and white. Want tome more overspending advice? Add up how much you spent eating out, at the movies, or at the shoe store, and do it every month. Set a short-term goal, such as paying off your car loan six months early. You don't have to stop eating out, going to the movies, or buying shoes. But doing so less often will help you achieve your financial goals. Achieving those goals will be gratifying and will reinforce the notion that less is more satisfying.

How can I make better spending decisions?

Conscious Consumer Spending

In their book "Your Money or Your Life," Joe Dominquez and Vicki Robin make the argument that money equates to life energy. To help you make better spending decisions, consider the amount of life energy necessary to pay for the purchase. If you earn $12 an hour and you want to spend $48 on the latest X-Box game, the game costs four hours of your life energy. Do you want to spend four hours of your life on that X-Box game? Or would you rather spend those four hours playing with your kids, going for a walk, or taking your wife out to dinner?

When you begin to look at your spending in terms of how hard you have to work to pay for the purchase, and what you have to give up in order to work those hours, spending takes on a whole new perspective.

How can I develop better spending habits?

Developing Good Spending Habits

Developing good spending habits is something that, alas, many people have to learn the hard way. In our credit-crazy society where instant gratification and delayed consequences rule the day, it is all-too-easy to blow our hard-earned dough on empty purchases. The best way to develop better spending habits is first to just say, "No!"

Say no to zero-percent financing for the first six months. Say no to buy now, pay later deals. Say no to paying with credit cards at the burger joint's drive through. If you don't have the cash on hand to make the purchase, don't make it—at that particular moment. Instead, set a short-term goal and set up a household budget to meet that goal.

Budgets are not about denial. They are about achieving the goals we set--getting the things we want without putting our family finances in jeopardy. For a cheap, easy-to-read, easier-to-use guide to setting up a simple household budgeting, check out "The Pocket Idiot's Guide to Living on a Budget" by Peter J. Sander and Jennifer Basye Sander.

How will I pay for my kids' college and retirement?

Investing for the Long-Term

Paying for college and saving for retirement are two of the biggest financial anxieties on most American's minds. Despite this fact, consumer spending is at an all-time high and personal savings at an all-time low. But if your financial house is not in order at a very basic level, you shouldn't even begin to consider saving for long-term goals. If you are one of the millions of Americans carrying average credit card debt of more than $7,000, your first step to realizing your long-term goals is to get out of debt.

Find a certified credit counseling agency near you (check out the National Consumer Finance Foundation's Web site), and get some help setting up a family budget and debt repayment plan. Once you have your debts paid off, tweak your budget so you can build an emergency fund. Your emergency fund should be enough to cover three to six months of living expenses. Without an emergency fund, the next time disaster strikes (dead car, lost job), you'll be right back to hitting the credit cards. Once you have your emergency fund, then and only then should you consider planning for longer-term goals.

To help you get your finances in order, meet short-term, interim, and long-term financial goals, check out Suze Orman's book "The Nine Steps to Financial Freedom: Practical & Spiritual Steps So You Can Stop Worrying." It's a treasure trove of excellent advice. You can also visit SuzeOrman.com and find reams of information on all stages of financial planning.

Why do I overspend?

Understanding Your Spending Habits

If you think you have a problem with overspending, you're not alone. In our more, bigger, better society, consumer spending is reaching mammoth proportions. As much as 70 percent of the U.S. economy is driven by consumer spending. Most of us know we should be saving for a rainy day, our kids' college, and our own retirement, but thanks to the lure of easy credit at low rates—at least low introductory rates—we just can't say, "No." Psychologists have identified a handful of rationalizations we use to justify our spending habits:

• Stress relief
• Pleasure
• Entitlement
• Overcoming feelings of inadequacy
• Demonstrating our own importance

If you notice, none of these has anything to do with basic necessity. All have more to do with our emotions. Retailers understand the psychology of overspending all too well and exploit our emotions to encourage us to buy, buy, buy. Pay attention to the commercial you see on TV and the ads you read in magazines and the newspaper. All make an appeal to your emotions.

If you want to keep your spending in check, trying first keeping your emotions in check. The best thing you can do toward this end is to avoid purchasing anything—from air fresheners to airfare—on impulse. Give yourself a cooling down period when considering a purchase. Also, keep your receipts and leave the packaging in tact for at least 24 hours. That way, when buyer's remorse kicks in the next day, you can return the item.

Where does all my money go?

Budgeting Basics

If you are asking yourself, "Where does all my money go?" perhaps a better question is, "Where should all my money be going?" If you are having difficulty making ends meet, you could benefit from a simple budget. A budget will help you set guidelines for spending money on both your needs and your wants. There are a host of good online resources to walk you through the process of setting up a budget and to give you overspending advice.

FirstGov.org is a clearinghouse for state and federal personal finance and money management Web sites. Another site that is loaded with resources for household budgeting is MoneyManagement.org. Money Management is a nonprofit credit counseling agency with offices across the country. It recently acquired Consumer Credit Counseling Services, a well-respected organization that has offers classes, workshops, and publications in the area of family finance and budgeting. There is a wealth of free information available at Money Management's Web site, including a list of books and software that you can use to help you better manage your spending.

Am I a compulsive spender?

Five Signs You May Be a Compulsive Spender

According to the National Consumer Council as many as one in ten people is a compulsive spender. How can you tell if you are compulsive spender? Money gurus agree that there are certain traits shared by compulsive spenders, also called compulsive debtors: • If you are unclear about your finances… • If you don't know things about your finances such as account balances, monthly expenses, and interest rates… • If you are using one credit card to pay another… • If spending money gives you a rush… • If you feel "better" when you buy things on credit than when you pay cash… …you may be a compulsive spender. To take a fifteen question quiz to decide if you are a compulsive spender, check out the Debtors Anonymous Web site. The site also includes resources for finding help.

How can I find money to save for goals?

Saving for the Short-Term

There is a difference between saving for short-term goals and investing for long-term goals. Short-term goals are those things you want to spend money on within the next five years. Long-term goals are those you hope to achieve beyond five years.

One way to save for short-term goals is to pay yourself first. Need a new car in two years? If you get paid twice a month and stow $50 from each paycheck in savings over those two years, you'll have $2,400 for a down payment. Don't have $50 a paycheck to devote to savings? Take a closer look at your bills to see where you can find some bargains. For instance, if you belong to the Automobile Association of America (AAA) and flash your membership card at your local movie rental store, many will give you your third rental for free. Speaking of renting movies, are you constantly getting stuck with late fees? Then consider joining an online DVD service such as Netflix or Blockbuster. You pay a flat fee once a month and can keep DVDs as long as you like without incurring late fees. Plus, all postage is paid by the company.

On a more serious note, if you have one or more prescriptions that you fill on a regular basis, see if your health plan offers a mail order prescription service. At Anthem Blue Cross, for example, you can get a 90-day supply by mail for the cost of a 30-day supply at your neighborhood drug store. If you normally spend $75 in co-pays for a 30-day supply, that saves you $600 a year--or $50 a month.

Where can I get help for my compulsive spending?

Resources for Compulsive Spenders

Want some overspending advice? If you are reading this tip, then you have already achieved the first step toward getting help for your compulsive spending. That's because the first step is to be honest enough with yourself to admit that you have a problem and need help managing it. You should feel good about getting to this point. As far as getting your spending under control, there are two nonprofit organizations that offer free advice and low- or no-cost services to help you get things on track:

• Debtors Anonymous. Debtors Anonymous is a 12-step program that offers support groups throughout the country. This group does have a very strong, albeit nondenominational, spiritual aspect.

• Consumer Credit Counseling Services. This organization helps people get to the root of their financial problems, set and meet goals, and plan for a debt-free future. You can work with a CCCS counselor over the Web or in person.

You probably should consider some group or individual counseling as well. The psychology of overspending is tricky. People spend for all sorts of reasons, and only when you really grasp what is driving you will you truly be in control.

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Heidi Splete