This article is part two of a four-part series to help you reduce your spending this year. In part one, I shared a simple hack to help you create healthier spending habits. This week, I’ll take you through an exercise to help you identify your spending weakness.
It’s common wisdom that the way to complete a big task is to break it down into smaller parts and then tackle each task one at a time. Otherwise, overwhelm can set in, and nothing gets done. I’ll suggest a similar approach to tackling the “big task” of overspending.
What Is Discretionary Spending?
We all spend money on a lot of things, necessary and discretionary. For this exercise, we’ll define discretionary spending as spending on items you could survive without if you wanted to.
Examples may include an extensive collection of clothing, art, household knick-knacks, jewelry, shoes, accessories, make-up, books, or electronics. Alternatively, you may overspend on discretionary experiences such as excessive travel, entertainment, or dining out.
First, Identify Your Biggest Spending Weakness
Your first task in cutting discretionary spending is to identify your biggest spending weakness. For example, if you feel shame (or at least discomfort) about the amount of money you spend on something, it’s likely your spending weakness.
Most of you know your spending weakness, so choosing will not be difficult. However, for those who need more clarification, analyzing your past expenses can help you find your answer.
I encourage you to choose only one spending category at a time to keep things simple. (Breaking down a big task into smaller tasks helps get things done, remember?) That way, you are more likely to make progress. Of course, if you want to, you can add more categories or items and follow the next steps for each.
Next, Calculate How Much You Spent Over the Last 12 Months
After identifying your spending weakness, the next step is to write down how much you spent over the last 12 months on this item. While you can estimate this dollar amount, it’s better to look at your credit card and checking account statements to determine your actual spending. Otherwise, it’s easy to rationalize and make excuses when you’re guessing.
Got your number? Congratulations. I know that confronting money issues is hard, especially if it brings up uncomfortable feelings like regret, remorse, or shame. So let the feelings happen, but then let them go. Thank yourself instead for starting this journey to get back on track.
Continuing Your Journey
In the next article, we’ll go through an exercise to help you discover what triggers your overspending.
In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.
Download my FREE E-BOOK: How to Take Control of Your Spending This Year
Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.