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December 2013

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Tips on How to Avoid Overspending
Cut down on your expenses without cutting out the things you love

Creating a budget for yourself and your family is an important step toward being financially stable. One factor that can significantly impede your efforts toward financial stability can be the bad habit overspending. It can be difficult to set boundaries for your spending, but identifying the areas where you overspend and reigning in this habit will have a positive impact on your financial status. Here are some tips to help you get started.
Financial advisors often find that one of the most difficult types of clients are those that can’t see their own financial faults such as overspending.
“There are probably as many reasons why we overspend as there are reasons why we shouldn’t,” notes financial advisor Jocelyn Black Hodes of DailyWorth. “The first step in changing our behavior is to recognize the triggers and to consciously confront them when we’re tempted to give in.”
More importantly, however, is identifying the underlying reasons of why people are so tempted to overspend. Hodes offers some of the most common reasons for overspending and how to address them.
Spending what you don’t see. Using debit or credit cards instead of cash makes it easy to overspend. When you don’t physically see the money leaving your wallet, your money has a tendency to disappear much faster. Try taking out enough money at the beginning of the week to last you through your weeks’ expenses. If you happen to overspend one day, you’ll wind up having to make up for it the next; you’ll also develop a stronger sense of what is worth spending money on.
Living beyond your lifestyle. Earnings have a habit of increasing and decreasing as life goes on; if your salary has taken a hit or if your family has made a change that requires more frugality, it may be difficult to change your living habits with your finances. Set a goal for yourself now to live below your means and have adequate savings set aside (approximately six months worth) so you have a comfortable cushion should something unexpected occur.
Compensating for a poor childhood. Individuals who may have grown up feeling deprived can sometimes compensate by overspending as they become adults and are responsible for their own income. Seek out positive financial advice from trustworthy sources so that you can be a good role model for others. You can still enjoy the finer things in life, but enjoy them in moderation and within your budget.
Indulging in emotional spending. When people are unhappy, they tend to go on a shopping binge to make themselves feel better. While shopping and buying fun things can be an effective distraction, it will not solve the underlying problems that are causing you to be unhappy. Identify the reason for your emotions and deal with them directly so that your wallet doesn’t suffer as well.
Numerous websites and financial blogs offer advice on how to cut back on expenses.
“The problem with most of this content,” says Harriette Halepis of, “is that the one simple truth to overspending is never addressed… To stop overspending, you have to realize that you are overspending to begin with.”
Taking a close look at your expenses to identify where you are overspending is crucial to making a change in the right direction. So-called necessities may not be so necessary or there may be ways to still get the things you want without spending as much on them. Here are some of Halepis’ tips:
Cut the coffee. Instead of stopping for a coffee every morning on the way to work, try making your own before you leave the house. The average coffee costs between $2 and $5. If you stop for a cup every day of the business week, you’re averaging upward of $1,300 a year just on coffee.
Don’t waste electricity. If you run your air conditioner or your heat when you’re not at home, that is valuable electricity that is literally going out the window. Invest in a thermostat that has a timer so your heat will automatically go down on the days when you’re away for most of the day. This will reveal savings to both your electric bill and your oil or natural gas bill.
Limit the lavish living. You don’t have to completely cut out all the fun things in life like dining out or splurging on a new device. However, it is important to not go beyond the budget that you set for yourself. Dine out, but less frequently. Save up for something special that you’ve really been wanting instead of just buying the newest thing on the market.
Identifying the areas in your life where you habitually overspend and finding ways to reduce your spending will help you better maintain your financial stability. It’s important to remember that you don’t have to cut out the things you enjoy entirely; modifying those things to fit your budget means you can still enjoy them without putting a dent in your wallet.


Published by Avidia Bank
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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.

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